People who have been introduced to stock market investing recently have started to be exposed and be curious about other financial instruments available in the country for ordinary citizens today. Among these investment vehicles, the mutual funds and UITF’s (unit investment trust funds) have garnered the most popularity.
[Do you want to start investing in mutual funds but worried because you’re based abroad? Let me assist you. Click here]
It’s the other way around for me since I invested in mutual funds first before deciding to put my money directly in the stock market years back. It is actually the “cornerstone” in my current mission to help people achieve their financial goals and eventually become financially independent in the near future.
Let’s go back to basics once more and see if mutual funds or UITF’s are the best investment vehicles to ride in to achieve your financial goals.
What Are Mutual Funds and UITF’s?
Mutual funds and unit investment trust funds are both classified as “pooled” investments or funds that are contributed hundreds or even thousands of individual and corporate investors.
Unlike investing directly in bonds or the stock market, putting your money in mutual fund or UITF somehow lightens your responsibility and lessens your time in studying the market since that area has been transferred or delegated to the fund managers of the investment company (mutual funds) or the bank (UITF’s) in hope that they will strive to give higher returns for your investment.
Mutual funds and UITF’s are great investment vehicles to reach your financial goals. Are you looking forward to your child’s college education? How about your retirement years? Probably a brand new house or your first car? Or your dream business perhaps?
Here’s a very simple and comprehensive illustration from our partners Lenddo and Colayco Foundation for Education showing the types of mutual funds with details on where they are invested, the average annual returns, their respective risk levels, and the timeline or investing horizon. See for yourself which one fits your goals and your investing profile the most.
Which mutual fund or UITF fits your needs and personality?
To give you further understanding, here’a a video (only) shortie lecture from Investools for you to determine which mutual fund (or UITF) is best for your investing profile.
What are the differences between mutual funds and UITF’s?
Here are the differences between mutual funds and UITF’s as clearly illustrated by our friend celebrity blogger Fitz Villafuerte:
Where to invest
- MF: A mutual fund company. They are sold by licensed mutual fund agents. Here’s a list of Philippine mutual fund companies.
- UITF: Commercial banks, particularly their trust, investment or treasury department. They are sold by authorized bank employees. Check out the BPI Investment Funds and BDO UITF Products.
Who regulates these companies
- MF: Securities and Exchange Commission (SEC)
- UITF: Bangko Sentral ng Pilipinas (BSP)
What you are buying in a fund
- MF: Common shares in the investment company
- UITF: Units of participation in the fund
The price of the fund is expressed in terms of
- MF: Net Asset Value Per Share (NAVPS)
- UITF: Net Asset Value Per Unit (NAVPU)
Investment fees and their usual range
- MF: sales charge (1% – 5%), redemption fee (0.5% – 3%), investment advisory, distributor and administration fees (1% – 2.5%)
- UITF: sales charge (0% – 2%), redemption fee (1% – 2%), trust fees (1% – 1.5%)
The illustration below shows how much you would have earned on December 23, 2014 from your stock fund or equity fund if you invested your money in January 1, 2014.
As in any type of investment, it’s always recommended to study about mutual funds and UITF’s further before deciding to put your money in them. Don’t invest in anything just because everyone else has them in their portfolio.
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