From a blog inquirer: “Interesado po ako na mag-invest sa sinasabi ninyo na UITF sa bangko. Pero madami na po akong nabalitaan na mga bangko na nagsarado. Hindi po ba ako mahirapan na kunin ang pera ko kung sakaling magsarado ang bangko na pagkukuhanan ko ng UITF?”
One of our favorite investment vehicles in the Philippines are the UITF’s or unit investment trust funds. This type of bank product that allows the bank’s clients and other investors to avail of affordable pooled funds that are invested in various financial instruments. However, these are not insured by the Philippine Deposit Insurance Corporation or PDIC.
So if and when a bank goes bankrupt and its owners decides to close it down, your investment in their UITF product will also become part of the history, right?
Wrong.
Circular No. 653 of the Bangko Sentral ng Pilipinas states that trust assets are kept separate and distinct from the Bank’s.:
Section 1. Amendments to the Manual of Regulations for Banks (MORB).
(1) Section X421 Books and Records and Subsection X426.2 External Audit of the MORB are hereby amended to read as follows:
(a) Section X421 Books and Records
“The bank’s trust department or investment management department shall keep books and records on trust, other fiduciary and investment management accounts separate and distinct from the books and records of its other businesses and shall follow the Financial Reporting Package for Trust Institutions prescribed by the BSP.”
Therefore, in the unlikely event that a bank closes, UITF assets, cannot be touched by its creditors. Investors like you will still be able to withdraw the market value of your entire investment in UITF’s.
But having a big bulk of your cash invested in UITF’s is better than leaving them all in a savings or time deposit accounts as PDIC can only guarantee up to P500,000 of your savings.
Well, you should be thankful to your previous President GMA for raising the maximum deposit insurance for bank deposits from P250,000 to P500,000 back in June 1, 2009 under R.A. 9576. 😉
Again, you will not lose your investment even if the bank closes. However….
Is the return in UITF investments guaranteed?
Of course, before redeeming your proceeds, make sure that the market is up and jumping, especially if you invested in an equity/stock type UITF. Otherwise, you will either be redeeming less than what you invested or your profits not maximized.
Investment in a UITF does not guarantee a rate of return. The NAV per unit or unit price of the UITF changes daily depending on the movements in the prices of the underlying investment that the fund is invested in. As the NAV per unit of the fund increases or decreases value of the units bought increases or decreases as well.
The actual rate of return will depend on the performance of the underlying investments of the fund and the skill of the people managing the investment securities of the fund. Remember the differences and similarities between UITF’s and mutual funds?
As a final reminder, investors should always take a closer look first and analyze the investment vehicle being offered to them before entrusting their money to brokers or fund managers.
Study first before investing.
Rock your way to abundance!
#moneyliferockandroll
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Thanks for the info. I have been interested with the UITFs.
Hi Robin. Check out with major banks about affordable investment programs for their UITF’s. I’ve posted several of them in previous articles (BDO EIP, BPI RSP, etc.)
In my opinion, its better to invest in Variables from Insurance Company, like Prulife, because your investment is covered by life insurance. .
Hi Tita Erly! Variable insurance products are really great vehicles for those who have no idea/knowledge about investing directly in financial instruments like mutual funds, UITF’s, stocks, etc. I encourage investors to get a much cheaper “term life insurance” instead from reputable companies like Pru Life, Sunlife, etc. if they are to invest directly in those instruments.
I have a license to sell Variable, kaya sila Jojo pina invest ko sa Prulife ( PRULINK EXACT 5 PLUS) payable within 5 years, ngayon tapos na sya, meron pang coverage na 1 M life insurance, at nag earn pa ng dividend ang investment nya. Medyo mahal nga lang ang premium annually=P40,379.xx.
Ok na din for a starter Tita. Pwede siguro i-try next time ang term life after 5 years. Around 6k to 10k lang kase ang premium annually pero 2M to 3M na rin ang coverage. Tapos invest na lang directly regularly sa equity mutual funds or blue chip stocks (as low as 1k) para regular din ang dividends either quarterly, semi-annually or yearly (depende sa bibilhin na stocks like Jollibee, Meralco, Ayala Corp., PLDT, etc.).
I also started sa Variable pero sobrang expensive. So when I learned about mutual funds and stocks (that’s where insurance companies invest our money), I went for a cheaper term insurance. BTID: Buy Term, Invest the Difference.
Discuss tayo soon, Tita.
yes you will have bigger coverage when you get a term life, but my question to you how long are you going be protected, every 5yrs it increases your premium and it is only upto 65yrs old. if your going to look on VUL it is the combination of term life and mutual funds, because your premium stays the same and you can enjoy the protection upto 88 y/o.
@Mark, if you are following my blog, i only recommend term life insurance to those who are already investing directly in the stock market or pooled funds. An investor’s term life insurance will only be used by the heirs as settlement of estate/transfer taxes so there is no need for them to get a VUL.
But for those who have no direct paper asset investments, then yes, they can go for VUL’s.
Bro burn,
I checked the prulife insurance and looking for a good insurance.. I’ve invested in the stocks market.. what do you mean by getting just term life insurance.. thanks
Jerome, ilagay ko na lang ang definition from Wikipedia para mas madali. 😀
“Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar (peso) basis over a specific period of time.”
http://en.wikipedia.org/wiki/Term_life_insurance
Jerome, mas mura ang premium ng mga term insurance. Usually, less than 10k lang ang bayaran mo every year at covered ka na ng 2M to 3M benefits for that particular year. Meron term life insurance ang Pru Life.
ano nman po mangyayari kung yung mutual fund company ang magsara o ma-bankrupt?
Unfortunately, when a mutual fund company closes down, I believe, tapos na ang lahat pati pera ng investors. 😀
However, IMO, since ang concept ng mutual funds ay galing sa mga investors ang pera, ang risk ay natural na nakapasan sa investors at hindi sa mutual fund company. Kung maganda ang performance ng fund, ibig sabihin kahati ang fund company sa profits mo. Ibig sabihin may pera sila. Kung bankrupt sila, ibig sabihin at malamang ay wala nang mga investors na willing ipagkatiwala sa kanila ang kanilang pera for investing.
I have a question regarding the stock market. What happens to your stocks when your stock broker closes? Will it affect your stock portfolio? Thanks in advance.
Hi Jay. I already answered that question in this post: http://burngutierrez.com/what-happens-to-my-stocks-and-cash-if-my-stockbrokers-gone-broke/ Cheers!
Thanks!
Sir,
Ang VUL ba pwede mawithdraw anytime mayroon kasi ako sa AXA na honey peso five at college plus…
I’m not familiar with AXA products but generally, you can not withdraw “anytime” because they are invested in various financial instruments. Kung down ang market, for sure wala kang makukuha or mas mababa sa naipasok mong pera. It also depends sa policy mo. Discuss it with your agent/advisor then kwentuhan mo ko kung ano ang sagot nya. 🙂
Sir,
Nakakuha na ako ng VUL 3 years ago, di ko pa alam noon na mas practical kumuha ng term insurance then invest yung difference sa MF . Though may MF na rin ako, So do I still need yung term insurance na yan or ok n yung VUL ko since nasimulan ko na?
Okay naman ang mga VUL pero check mo sa policy mo kung ma-protect/cover ba ng insurance proceeds nito ang assets mo, basic needs, and living costs ng beneficiaries/dependents mo in case mawala ka na forever?
anu po ba ang ok na insurance company na nag ooffer ng term life insurance?advisable po ba un sa ofw?
ok ba ang cockfighting kaysa stocks?dahil dalawa la ang pipiliin mo?
Hi Burn,
If the Bank closed where do I go to withdraw my investment? You said its a separate asset from bank’s asset but where do I go to claim it?
Thanks.