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Beginner’s Guide to Investing in UITF in the Philippines

People nowadays are aiming for a way of having financial growth, in a smart way. You can invest in banks, not as a time deposit but by buying stocks from our country’s biggest companies. 

You will learn about UITF or Unit Investment Trust Fund as one of the good sources of your passive income, which would boost your financial growth.

Here are things you need to know about the Unit Investment Trust Fund (UITF):

Table of Contents

What is UITF?

Types of UITF

Stocks Fund

Bonds Fund

Balanced Fund

Money Market Fund

Features of UITFs in the Philippines

Unit of Participation

Net Asset Value per Unit

Initial Investment

Additional Investment

Management Fee

Tax

Advantages of UITFs in the Philippines

Disadvantages of UITFs in the Philippines

How does UITF Earn

Dividends

Stock Price Increase

Interest

Top 10 UITFs in the Philippines

Qualities and Tips on Investing in an Ideal UITF

Ways to Start Investing in UITFs in the Philippines

Ways to Optimize your UITF

What is UITF?

UITF which stands for Unit Investment Trust Fund is almost the same as Mutual Fund. The only difference is that in UITF, banks are the ones who manage your money. 

The money from the public is gathered and invested to increase the value of their money. It is considered open-ended, which means that you can invest and get your money back at any time. 

UITFs in the Philippines are managed by trusted banks and it is also regulated by the Bangko Sentral ng Pilipinas (BSP).

Types of UITF

Before investing in UITF, here are four types of funds that you have to know in order for you to choose the best fund that you prefer. 

Stocks Fund

The stock fund is invested in stocks of companies included in the Philippine Stock Exchange. Stock Fund is further divided into two. 

  • Index Fund: It is a type of fund that copies the stock index. Stock Index is a group of companies included in the top 30 biggest companies in the Philippines. They are also considered as “Blue Chip” companies. The fund’s objective is to copy the stock index returns.
  • Equities Fund: It is a type of fund made up of stocks. The fund’s objective differs and they can also invest from companies that are not included in the index. They trade stocks that may exceed the returns of the index. 

Bonds Fund

The bond fund trades bonds that are from debts. These debts are borrowed by governments and companies. The fund collects interest and when the debt matures, they redeem the full amount of money. 

Balanced Fund

Balanced Fund is a combination of bonds and stocks. This is ideal for moderately aggressive investors. This for those who want to get a high return, while avoiding the risks of stocks. 

Money Market Fund

Money market Fund trade securities in the money market. The short-term debt of governments is bought and sold in this market. Aside from that, in this fund banks can borrow from other banks. 

Features of UITFs in the Philippines

When you are investing in the UITFs, there are features that you need to be familiar with.

Unit of Participation 

The trust company issues units of participation when someone invests. This serves as proof that the individual is invested in the trust fund. They are also entitled to gains and losses. 

Net Asset Value per Unit

The net asset value per unit is the worth of UITFs. This is the value of the entire trust fund. It is determined by adding all assets minus all debts. Whatever the result is, you divide it by the number of units. 

Initial Investment

This is the least amount of money that gives you the chance to open a trust fund. Some even start for as low as PHP5,000. 

Additional Investment

This is the amount of money that you want to add to your investment. You can reinvest for as low as PHP1,000. There is no rule or deadline, but you are recommended to invest regularly. 

Management Fee

This is the amount of money you pay for the operation of the fund. It is a percentage of your investment. 

Tax

All of your earnings are subjected to a 20% withholding tax. According to the Trust Officers Association of the Philippines, the proceeds are net of tax. 

Advantages of UITFs in the Philippines

Here are the advantages when you invest in UITFs in the Philippines: 

  • NO front-end fee or sales load
  • It is offered by trusted banks and entities. (You can look for trusted companies that offer UITF)
  • Small Capital. You can even start with your investments for as low as PHP 1,000.
  • It is diversified which acquires securities from various companies and industries.
  • The fund will approve it if you want to get your money back.
  • You can earn passive income
  • Experts. You can take advantage of the fund managers who can help you maximize your investment. 
  • Convenience. You can track the performance of your investment. You can also manage your deposits and investments through online access. 

Disadvantages of UITFs in the Philippines

There are also some risks that you may experience when you invest in UITFs. Here are some of the disadvantages: 

  • Returns may vary and are not guaranteed. There might be risks for capital loss in equity. It may not be insured by the Philippine Deposit Insurance Corporation.
  • Your expectation for gains may depend on the condition of the general market. 
  • The fund manager decides which bonds to buy. You do not have full control over the actual assets. 
  • They do not give shareholder rights because the units of participation are not stocks. 

How does UITF Earn

UITFs invest in stocks and bonds by trading. Trading is usually done by the fund manager. Stocks are acquired through the Philippines Stock Exchange. This serves as proof of ownership in a business, while bonds are debts of the government and companies. 

Here are ways for investors to earn in UITFs.

Dividends

It is a portion of earning that is given back to the shareholders. Companies can either keep all earnings and put back to the business, or they give some of the dividends to their shareholders. 

Stock Price Increase

When many investors get attracted to the company or business, shares on stocks could increase. 

Interest

Interests are paid by the government and companies that are indebted to the UITFs. When the debt reaches its full maturity, they pay the debt in full. 

Top 10 UITFs in the Philippines

Here is a list of top-performing UITFs in the Philippines. 

  • Atram  (ATRAM Global Technology Feeder Fund – Bond) has a return of investment of 39.07%
  • Union Bank (UnionBank Long Term Fixed Income Portfolio – Bond) has a return of investment of 22.12%
  • Union Bank (UnionBank Tax-Exempt Portfolio – Bond ) has a return of investment of 19.82%
  • Security Bank (SB PESO BOND FUND – Bond) has an ROI of 19.29%
  • BPI (ABF Philippines Bond Index Fund – Bond) has an ROI of 18.67%
  • BPI (BPI Fixed Income Portfolio Funds-of-Funds – Bond) has an ROI of 17.61%
  • China Bank (CHINA BANK FIXED INCOME FUND – Bond) has an ROI of 17.13%
  • BPI (Odyssey Peso Bond Fund – Bond) has an ROI of 16.96%
  • BPI (BPI Catholic Values Global Equity Feeder Fund – Equities) has an ROI of 16.86%
  • Manulife (Manulife Dragon Growth Equity Feeder Fund – Equities) has an ROI of 16.73%

Here is  a summary of the performances of UITFs in the Philippines:

  • Equity Index Fund: BPI Philippine Equity Index Fund  has an ROI of 5.63%
  • Equities Fund: ATRAM Global Technology Feeder Fund has an ROI of 39.09%
  • Balanced Fund: Odyssey Diversified Capital Fund has an ROI of 12.66%
  • Bond Fund: UnionBank Long Term Fixed Income Portfolio has an ROI of 22.12%
  • Money Market:  UnionBank Peso Short Term Fixed Income has an ROI of 6.33%

NOTE: ROI means Return of Investment

Qualities and Tips on Investing in an Ideal UITF 

The best UITF depends on how it addresses your needs and preferences. Here are some qualities that you can look for in landing the most ideal UITF.

  • They should have a reputable trust entity.
  • They offer good customer support. 
  • They pose a promising performance. You can check their rates, but take note that their past performance does not reflect their future performance. 
  • They update their clients regularly. You can ask them how you will be updated. It could be through online access, messages, or email. 

Here are some tips in getting an ideal UITF/ 

  • Ask yourself about your goals. This will help you land on the best type of investment that you need.
  • Ask yourself if you are financially prepared and secured before investing. 
  • Assess the likelihood of you getting your money back after you have invested it in the fund.  
  • Determine if you will be a passive or aggressive investor. This will help you be ready for possible results. Condition yourself to be ready for risks.   

Ways to Start Investing in UITFs in the Philippines

Starting your investment in UITF could be as easy as opening your bank account. Here are some ways you can start your UITF investment. 

  • Choose the most ideal trust entity by searching for the most reputable companies. Take their reputation, history, fees, customer service, and performance in the market to determine which one is good for you. 
  • Check if there are branches of banks or entities of your choice near you. You can research their location on the internet or you can also locate the branches’ locations.
  • Talk to an expert or a representative that would give you details that you need to learn. Ask them questions. It would be helpful if you already gathered your questions before visiting the branch. 
  • You will be required to complete a list of documents. Prepare your valid IDs, proof of billing and your minimum initial investment. 
  • When opening your account, you will be asked to fill out application forms. It will be used to determine your source of income, risk profile, and other necessary information. It would usually take days for your application to be completed. 
  • Make sure that you get the company’s contact details just in case you wanted to ask them further questions. It will be a good way to not lose contact with them. 

Ways to Optimize your UITF   

When you have completed your application and are ready for your investment venture, here are some things you should do to optimize your UITF. 

  • You can start right away with your investment. 
  • You can start with a small amount of money and expand it later on. 
  • If you are thinking of transferring the ownership of the trust to your kids, it is ideal that you go for the “in-trust-for” (ITF) arrangement. The transfer is only possible once your kids reach the legal age of eighteen. 
  • If you want to expand your investment, you can reinvest anytime. Investing every month is great. 
  • For you to be updated with the performance of your investment, try to track the fund regularly.
  • Sometimes banks and/or entities offer new funds, so keep your self updated. And if ever there are offers that are good for you, don’t be hesitant to try and invest in it. 

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