Recently, I posted about how disappointed I am with mutual funds. And how these funds suck money away due to fees and commissions. And today, I just finished deploying my cash to mimic the index.
The total cost of it (tax, broker commission) is a one time cost of 1.1% of my cash total. Management fee per year would be 0%. Exit expense would of course be influenced by broker commissions and tax. But I could care less about that since I won't be selling anytime soon. But I could guess that it would also be a one time cost of 1.1%.
To create your own index fund, you just need to copy the PSEi composition. That is, to buy the stocks listed in here.
Pay good attention to the weigh %. For example, 11.48% should be for TEL. If you have P1 million to invest. 11.48% of that money should be used to buy TEL shares, which is P114,800 or 42 shares of TEL. Just do that with the remaining stocks and you will have your own index fund with no management cost. And I'm sure you'll be beating 90% of the mutual fund managers in the Philippines by doing so.
There's also an alternative, recently, there's FMETF. Which tracks the index. So instead of buying 30 companies individually, you can just buy FMETF and be done with it. I haven't bought FMETF yet, I'm not sure exactly if dividends would be paid out as well so I'm still on the fence with it.
I like dividends and its one of the main principle of this blog, to have passive income thru investing.
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