Course Code and Title : FINE-4 –Mutual fund

Lesson Number : 1

Topic : Introduction to Mutual Fund &Mutual Funds – Concept

Professor : Prof. Romualdo S. Del Agua

 INTRODUCTION:

A mutual fund is a company that pools money from many investors and invests the
money in securities such as stocks, bonds, and short-term debt. Investors buy
shares in mutual funds. Each share represents an investor's part ownership in
the fund and the income it generates.

LEARNING OBJECTIVES:

1. Discuss mutual fund and its concepts.

2. Develop a positive attitude towards mutual fund investment.
 3. Conduct research on the different company that is successful in encouraging
costumers to invest in their mutual fund.

PRE-ASSESSMENT:
Direction: Write the word True if the statement is correct and False if its not. Write
your answer on the space provided.
_________1. Each share represents an investor's part ownership in the fund and the
income it generates.

_________2. The combined holdings of the mutual fund are known as its portfolio.

_________3. A mutual fund is a pool of money from the public that is invested with an
expectation of a profit.
_________4. A stock represents part-ownership of companies such as PLDT, Ayala,
SM, Jollibee, etc., and it can be bought or sold in the Philippine Stock Exchange.
_________5. mutual funds issue a fixed number of shares to the investing public and
usually trade on the major exchanges just like corporate stocks.

LESSON PRESENTATION:

A mutual fund is a type of financial vehicle made up of a pool of money collected from
many investors to invest in securities like stocks, bonds, money market instruments,
and other asset

A mutual fund company is an investment company that receives money from

investors for the sole purpose to invest in stocks, bonds, and other securities for the
benefit of the investors. A mutual fund is the portfolio of stocks, bonds, or other
securities that generate profits for the investor, or shareholder of the mutual fund. A
mutual fund allows an investor with less money to diversify his holdings for greater
safety and to benefit from the expertise of professional fund managers.
 Philippine mutual fund for beginners: How to start investing

A mutual fund is a pool of money from the public that is invested with an expectation of
a profit. Because of the way it invites people to invest, it is also called pooled
or managed fund. The money that is gathered is used to buy and sell (trade) securities.
Securities are assets that have the potential to grow such as stocks or bonds.

A stock represents part-ownership of companies such as PLDT, Ayala, SM, Jollibee,

etc., and it can be bought or sold in the Philippine Stock Exchange. By investing, you
can actually share in the potential earnings of Philippines’ biggest corporations.

According to Rampver, mutual funds allow you to be part of the earnings potential of the
country’s biggest companies while a bond meanwhile is a proof of debt. The debtor,
which might either be the Philippine government or companies, pays interest regularly
and settles the debt in full when it matures.
Fund Manager
So if there is a need to buy and sell stocks and bonds, who does the trading? It’s the
fund manager that does all that. Fund managers are experts in securities and do the
trading in behalf of all the investors they will. In exchange, investors pay annual fees
and other charges to cover for the operation of the fund.

Investment Objective
Fund managers however cannot trade just any way they like. They are bound to follow
the investment objective found in the prospectus.

Prospectus
A prospectus is a document that shares information about the investment, its objective,
risks, costs, shares being offered, and other policies. So for an example, a bond fund
can only purchase bonds. It is not allowed to hold stocks. Likewise, a stock fund may be
limited to buying only stocks that are traded in the Philippine Stock Exchange.

Earnings of Mutual Funds

They earn depending on securities that they have invested in. A bond fund can earn
from interest. Remember that a bond is a proof of debt and it works just like any other
debt where you receive interest when you lend someone money. When it buys stocks,
the fund earns in two ways: dividends and stock price gains. Dividends are a part of the
earnings of companies that they decide to give to their stockholders.

Mutual Fund Shares

A mutual fund is itself a company and all investors are shareholders of the company.
Upon investing, you become one of its owners and you obtain rights and privileges such
as getting invited to the annual shareholders’ meeting, being entitled to vote, etc.

Most importantly, a number of shares that correspond to the amount you’ve invested is
going to be issued to you.
Net Asset Value Per Share

But how many shares will you receive? This is where the net asset value per share or
NAVPS comes in. The NAVPS is the total worth of the entire mutual fund company
divided by the number of shares it has distributed to all investors. It is determined by by
getting the sum of all its assets minus all debts and expenses, and then divided by the
number of shares.

So for example sometime in 2017, I invested ₱5,000 in a stock fund. At that time, each
share of the fund was valued at ₱0.8115. This is its net asset value per share (NAVPS).
So 6,161 shares were issued to me.

GENERALIZATION:(Thoughts of Ponder)
At this point, the students should have learned about the importance of mutual
investment as a beginners’ and conceptualize Mutual funds the earnings potential of the
country’s biggest companies.

REFERENCES:

https://www.youtube.com/watch?v=ngfKXvfzC74(short Video watching)

https://www.slideshare.net/sameer7719/what-is-mutual-fund-and-types-of-mutual-
fund(ppt)25 cover or pages.