What is Mutual Fund and How to Open a Mutual Fund Account

A mutual fund is a type of investment wherein your money and other investors’ money are pooled together to be invested in a particular financial venture.

It’s suitable for those who don’t have much experience yet in investing. Once you’ve paid for everything, you no longer have to do anything.

However, it’s a good idea to continuously and consistently invest in mutual funds since this is ideal for long term investments.


Wealthy people are still attracted to mutual funds because it allows them to grow their money even by just making few but important decisions that help navigate where their fund direction is going.

Looks good?  You too can open a mutual fund account.

Here’s how you can open your very own mutual fund account, together with other factors you need to consider.


How to Open a Mutual Fund Account

The process of opening a mutual fund account isn’t that complicated as it may seem. All you need is to prepare the necessary documents, and you’re good to go!

The very first thing that you need to do is to choose which mutual fund company you want to open an account with. You may check the list of mutual fund companies and their historical performances to help you decide which one to choose.

Then follow these steps:


  • Fill out a form about yourself.

The mutual fund company would want to know more about you. They’ll need basic details about you, your co-investor (if you’re opening a joint account), or your company/ institution.

Like a bank account, you also might need to sign the signature cards to provide further security for your account.


  • State your investment objectives.

You’ll also be asked to provide your investment profile to understand what kind of investor you are.

Are you risk tolerant? Do you believe in the saying ‘the higher the risk, the higher the return’? Are you after capital preservation, or growth of funds?

Provide those information so that your fund manager will know how to treat your investment.


  • Provide the order ticket for the initial investment.

Treat this as the bank account’s ‘deposit slip’.

This part will now ask you to hand over your initial investment so they can start managing your money. Usually the funds will also be discussed, as well as the fees associated with it.


  • Submit other necessary documents.

You’ll then also be asked to provide other supporting documents.

These documents include a photocopy of your government issued photo-bearing ID and the ID of your co-investor in case of joint accounts. If you’re opening a trust account, then you may also be asked to provide a copy of the minor’s ID and birth certificate.


Investing your money in mutual funds is different from placing them on a savings account.

Investments often come with a reasonable amount of risk that you should only go for if you’re ready.

Mutual funds aren’t insured in the Philippine Deposit Insurance Corporation (PDIC) because it’s neither a deposit nor a savings account.


Don’t be disheartened, though, as there’s the risk-to-reward ratio, where you could better maximize your earnings.

Investors use risk/reward ratios to compare an investment’s expected return to the risk taken to capture those returns. It’s calculated by comparing what the investor stands to lose to the amount by which the investor expects to profit when she closes the position. (Source)

After all, it’s on the hands of professional fund managers who have studied and have been trained to do what they’re doing.

Once you’ve settled all the fees and provided all the documents, then you’re on your way to opening that mutual fund account.


If you’re not yet ready to invest in mutual funds yet, click the link below to read:

What you need to know before Investing in Mutual Funds

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