People nowadays aim for a way to have financial growth smartly. You can invest in banks by buying stocks from our country’s biggest companies, not as a time deposit. You will learn about investing in UITF or Unit Investment Trust Fund. It is one of the good sources of your passive income. As a result, it 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 in increasing the value of their money. Also, it is considered open-ended, meaning you can invest and get your money back any time.
Trusted banks manage UITFs Philippines. In addition, it is regulated by the Bangko Sentral ng Pilipinas (BSP).
Credit: https://hpa.vc/
Types of UITF
Before investing in UITF, here are four types of funds that you have to know. Afterward, 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. Also, they are “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. In addition, they can invest in companies that are not in the index. Also, they trade stocks that may exceed the returns of the index.
Bonds Fund
The bond fund trades bonds that are from debts. Governments and companies borrow these debts. The fund collects interest and redeems the full amount of money when the debt matures.
Balanced Fund
A Balanced Fund is a combination of bonds and stocks. This is ideal for moderately aggressive investors. Also, this is for those who want 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 investing in the best UITF Philippines, 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. Also, they are 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 allows you to open a trust fund. For example, 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. However, you should invest regularly.
Management Fee
This is the amount of money you pay to operate the fund. Moreover, 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
- Trusted and the best bank for UITF entities offer it. (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.
- Furthermore, it is diversified and 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. Also, you can manage your deposits and investments through online access.
Disadvantages of UITFs in the Philippines
Also, there are some risks that you may experience when you invest in UITFs.
- Returns may vary and are not guaranteed. There might be risks for capital loss in equity. The Philippine Deposit Insurance Corporation may not insure it.
- 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.
- In addition, they do not give shareholder rights because the participation units are not stocks.
How does UITF Earn
UITFs invest in stocks and bonds by trading. The fund manager usually does trading. 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 earnings that is given back to the shareholders. Companies can either keep all earnings and put them back into business or give their shareholders some dividends.
Stock Price Increase
When many investors get attracted to the company or business, shares in stocks could increase.
Interest
Interests paid by the government and companies that are indebted to the UITFs. When the debt reaches its full maturity, they pay it 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 on investment of 39.07%
- Union Bank (UnionBank Long Term Fixed Income Portfolio – Bond) has a return on investment of 22.12%
- Union Bank (UnionBank Tax-Exempt Portfolio – Bond ) has a return on 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 on 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 you can look for in landing an ideal UITF.
- They should have a reputable trust entity.
- Also, they offer good customer support.
- In addition, they pose a promising performance. You can check their rates. But take note that their past performance does not reflect their future performance.
- Most importantly, 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 for getting an ideal UITF:
- Ask yourself about your goals. This will help you land the best type of investment that you need.
- Also, ask yourself if you are financially prepared and secure before investing.
- In addition, assess the likelihood of you getting your money back after you have invested it in the fund.
- Moreover, 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
Investing in UITF could be as easy as opening your bank account. Here is the most applicable UITF investment strategy you can try.
- Choose the ideal trust entity by searching for the most reputable companies. Take their reputation, history, fees, customer service, and market performance to determine which is good for you.
- In addition, check if there are branches of banks or entities of your choice near you. You can research their location on the Internet. Also, you can locate the branches’ locations.
- Furthermore, talk to an expert or representative who will give you the details you need to learn. Ask them questions. It would be helpful to gather your questions before visiting the branch.
- You must complete a list of documents. Prepare valid IDs, billing proof, and minimum initial UITF investment Philippines.
- You will be asked to fill out application forms when opening your account. 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 want to ask them further questions. It will be a good way not to 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 think 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.
- Banks and/or entities sometimes offer new funds, so keep yourself updated. And if ever there are good offers for you, don’t be hesitant to try investing in UITF.
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