Pinoy Fund Runners

Part time investors still dwell on the aspect on where to place their hard earned money that would yield higher returns.

Those who would like to invest on corporations are thinking of two methods: either to invest personally on stocks through a broker OR to invest on Mutual Fund.







Before we compare, there are two ways on investing on stocks through a broker:

• Traders or Day Trading – Requires extensive monitoring market. Profits by buying cheaper shares and sell it at a higher price.
  
• Long Term Investing – Fixed and periodic investing on corporate stocks.

For Mutual Funds, there are three common types:

• Bond – Government Loans and Corporate Securities
  
• Balance – Mixture of corporate stocks and Government Loans
  
• Equities – Corporate Stocks

For the purpose of comparison, we will be comparing only:

    Day Trading VS Long Term Investing VS Mutual Fund(Equities)

Market Monitoring

• Day Trading requires extensive monitoring on the market. Even though trading period only last 3 hours, missing this period could cause high investment loss or opportunity of gain
  
• Long Term Stocks investors require moderate monitoring in the market.
  
• Mutual Fund investors require low or no monitoring the market.
  

Company profiling

• Day trading – Extensive. Aside from the numbers provided to you on their assets and liabilities, you even need to consider several factors that could affect the company. i.e. Changing of CEO, weather affecting commodities, government policies etc.
  
• Long Term Stock Investors – Looking at their numbers (assets and liabilities) and historical performance should suffice for a successful long term investment on stocks.
  
• Mutual fund Investors – They only need to profile the investment company (Managing the mutual funds), not the companies being invested by the investment company.

Overall Risk/Return

• Day Trading – Highest risk, highest potential return. There were some stories of traders who was able to profit 50%-300% I just one trading day. Of course, there were also traders who lose their bet on stocks. One story came from recent recession; a Stock Trader killed himself when the recession came. The return if investment is highly dependent on the skill, knowledge and experience as an investor.
  
• Long Term Stock Investors – Moderate to high risk. Moderate to high return. The longer your investment stays, the higher the probability your investment will provide higher return. Investors under this category usually mitigated the risk by diversifying their investment to different companies. One advantage of choosing Long Term Stock investing is the freedom to choose which company to invest to.
  
• Mutual Fund – Low to moderate risk. This investment simulates an experienced Long-term Stock investing. The investment also is highly diversified which further mitigates the risk. Due to several mitigated risks, it also provides the lowest return among the three. Based on 10 year historical returns on mutual funds, it averaged around 15% p.a.
  

Overall verdict: That depends on your financial objective and risk profile as an investor.

If you have the luxury of time to study the company profiles, monitor the market religiously and completely understand the risk/return principle on investing, I highly recommend go for Day Trading.

If you wish to think long term and would like to have a freedom to choose which company to invest to, go for Long Term Stock Investing.

If your financial objective is long term and doesn't like to worry about the day-to-day fluctuations in the market while it is being managed by a professional fund manager, proceed for Mutual Funds.

My Personal Choice

Mutual Funds. Why? I love my job and my 9 AM to 12 PM schedule is my most productive time of the day. Also, I do not have the luxury of time to review or to worry about company profiles and market fluctuations. I love the idea that my investment is being managed by an experienced fund manager and knowing that my investment is diversified.