When you should sell your mutual fund investment

I received a  question  in one of my comments from a certain Albert Awat from Tarlac City, Philippines in my post entitled “Questions and answers on the Philippine stock exchange”

The question does not directly pertain to the Philippine stock exchange but it is with regards to his mutual fund investment. The question is as follows:

“ . . . good day sir, am an investor of (Names of mutual fund withheld) which are now doing well as far as navs are concerned. sir, am now thinking of selling all my shares from the said mutual funds since my investments are now negative16.38%,plus2.65% and negative23.40%, respectively from almost 24% to 29% dated March 17, 2009. please guide me to understand the market since the stocks are now soaring?further, pls help me where should i find the philippine stock exchange index (PSEi)from 2005 to present to help me understand the stock market and/or mutual fund.

thank you very much and more power.”

I love to answer questions from readers of this blog. Makes me not run out of blogging ideas. 🙂 So here is my answer to the above question:

Dear Albert,

Thank you for question. You have once again given me an opportunity to write about mutual fund investment, which of course is considered as an alternative vehicle of investment for those who are interested to invest beyond the traditional vehicles of investments.

I know you understand what a mutual fund investment is; otherwise you would not be investing in one. At first I was tempted to write an introduction on mutual funds, but I decided that I will just develop it into another post.

Hence I have decided to answer your question directly. First of all, as I understand it, you want to know if it is advisable to sell your mutual fund investment since the value of your investment is now in negative territory.

Personally, I do not putting my money in a mutual fund investment. However I do recommend investing in a mutual fund whose investment managers follow value investing principles. I also recommend investing in an “index” fund. I have explained this in great detail in the later part of the post entitled “What is the best Portfolio diversification strategy”. I will further expound on this in another post.

With regards to your question, even if generally I do not believe in putting my money in a mutual funds, I would however not recommend that you sell your mutual fund investment at this time. Of course if you badly need the money for an emergency, then you have no choice but to liquidate your position. But if you do not need your money as of now, I strongly suggest that you keep your money there.

The reason why this is my advice to you is because there seems to be no point in selling at a loss if you don’t need the money anyway. The fundamental rule of “Buying low and selling high” still applies even in mutual fund investments. If you liquidate your position now that your mutual fund investment is in negative territory you are exactly doing the opposite.

Once you have at least at the minimum recovered your capital then you can sell your mutual fund investment and perhaps invest it in the stock market directly that is if you have already learned to be a value investor. Never forget Warren Buffett’s two basic rules in investment that is “.Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”


Besides, the mutual fund companies you have mentioned seem reputable. I’ve read somewhere that the first mutual fund company you have mentioned is one of the best performers in the mutual fund industry. However as I have always emphasized, nothing beats investing directly in the stock market if you know exactly what you are doing.

With regards to your second question, I believe you are asking if “Philippine stocks are soaring” ? Did I read this right?

Well, not exactly, Philippine stocks are still being battered as of now. The good news however is that most Philippine stocks are very cheap. Now is actually a good time to buy Philippine stocks. Times like these are when Warren Buffett says (Forgive me for the language) that he feels “Like an oversexed guy in a whorehouse.” He further continues . . “. . . Now is the time to invest and get rich.” If you know exactly what you are doing right now, you would see compounded rates of return ranging from 20 to 30 % within 10 years time. (It’s like doubling your money in 5 years or less) However be the price you pay determines your rate of return, so you must know exactly what to buy and at what price. (I will be writing about this soon in another post)

I really do not understand your third question. It seems to me that you are asking data on the Philippine stock market and data on mutual fund investment companies from 2005.

Unfortunately the Philippine stock exchange website only provides data good for two years. To go back to 2005, you will have to ask that from the companies you are wishing to study. I lamented this problem on the lack of data in the post entitled “Questions and answers on the Philippine stock exchange.” The good news is I have a copy of the “Corporate handbook” which contains data of Philippine companies from 1997 to 2002. However, if you want the handbook yourself, the bad news is that they are not selling this book anymore and it seems they not providing any replacement for it. To get your hands on this “Corporate hand book”, you have to physically go to the Philippine stock exchange library to photocopy the book.

With regards to data from mutual fund investment companies, you could from the Investment Company Association of the Philippines (ICAP). I do not know if how far their data goes back, but you could always email them and ask them if they could provide such data.

I hope I have answered your questions satisfactorily. Do drop me an email or a comment if you have further questions.


The Guerilla Blogger-investor 🙂

zmd Hi ! my name is  Zigfred Diaz, Thanks for visiting my personal blog ! Never miss a post from this blog. Subscribe to my full feeds for free. Click here to subscribe to zdiaz.com by Email

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6 Responses to When you should sell your mutual fund investment

  1. Emman says:


    I just saw a book called “top 5000 philippine corporations of 2008” a browsed and saw corporate performance for the year. Its around php 2000 at a very famous bookstore.

    I hope im talking about the same book

  2. zigfred says:

    Emman: I’ll check it out.

  3. Hello Zig,

    Read your post and lots of information. SO curious, coz I just invested some of my money in mutual funds. In reference to the PSE site, I invested in Phil equity.

    Just got my license as a broker (thanks to IMG), and making use if this opportunity to participate in stock trading, buying/selling.

  4. zigfred says:

    X: Hi X ! Glad you could drop by ! Wala nako ka attend sa atong CBS meeting da. I had been very busy lately. Anyway, I will find time to attend some day. IMG sad diay ka ? That’s great IMG sad ko.

    With regards to mutual fund investing, I prefer investing directly in the stock market instead of investing in the mutual fund. I feel that I could do better than the mutual fund managers when it comes to managing my own. I invested in two mutual funds before, but I was dissappointed with the result. I already terminated one of them, and I will be terminating the other one this week.

    In fairness to mutual funds, Phil Equity is a good mutual fund, one of the best in the country. However I strongly suggest that you invest in Phil Equity’s index fund, in the long run as it yields a much more better result. However, it is still best to do the investment decisions in the stock market yourself, that is if you know what you are doing.

  5. Hello Zig,

    Thanks for the suggestions. Hope you could find time to meet with us again as we have lots of fun stuff with the group.

    BTW, yeah, IMG sad ko! Hehehe.. But I need a financial adivser now. Hehehe…So far, Phil Equity is what IMG is suggestig. Anyway, I’m doing the portfolio diversification of my investment. I’ve read that in one of your posts.

    Do you have any idea which stocks in the market you could recommend?

    I’m thinking with Globelines. What you think?

  6. zigfred says:

    X: Hi ! I’m sorry I do not give specific stock recommendations (This is just observing Buffett principles heehehhe) but I do give good advice on stock market strategies. Just drop by from time to time and hopefully you can find some nuggets of wisdom hehehehe 🙂

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