In the Philippines there are four types of mutual funds: stock Equity (commonly known as Stocks), bond, balanced, and money market.
- A Stock or Equity fund invests in shares of stock of listed Philippine corporations in the PSE (Philippine Stock Exchange). This fund offers the highest growth possibility among all mutual fund types, but they also have a corresponding high amount of risk.
- A Bond fund primarily invests in fixed-income securities. This includes treasury notes or bonds issued by the Central Bank and commercial papers issued by reputable Philippine companies. The possibility of loss is very low since these bonds are guaranteed by the Philippine government. This is an absolute choice if you are aiming for moderate growth and capital preservation.
- Balanced fund is a mixture of equity and bond funds. This features the high potential growth of equity investments coupled by the conservative growth of fixed-income securities. The return may not be as high as the stock fund but there is still the guarantee of a minimum risk.
- Money market fund is an open-ended mutual fund that invests in short-term debt securities. This is similar to bond funds because they also invest in fixed-income securities; therefore, the return of investment is also conservative. The investment terms of Money market funds is usually one year or less (short-term).
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