More than 3 years ago, I learned how to invest in the stock market. At first, I was hesitant to pour in my money into my broker’s account (COL Financial) to directly invest in stocks. I did it slowly because in my mind it could be a scam and besides I don’t even know somebody who invests in stock market. In short, I was really scared.
Since I’m comfortable with the banks, I decided to move some of my cash and buy UITF. So I told myself “It’s just a test”. Actually I really don’t know UITF back then because I asked the bank’s counter for mutual fund. They told me that banks don’t offer mutual funds but UITFs. By the way, the bank’s representative I asked is from BDO.
So what are UITFs?
UITFs are investment products where investor’s funds are pooled and invest in government bonds, stock market or a combination of both. The funds are being managed by professional managers so you don’t have to worry about them.
In UITF, you buy NAVPU (Net Asset Value Per Unit) based on current market price which is also a fluctuating value based on the market performance. This is similar to “shares” in stock market. So when stock market is down, this NAVPU is also lower.
Types of UITF
When I asked for UITFs, the banker offers me four types which are described below:
- Balanced fund – investment is mixed with equities (stock market) and fixed-income securities (bonds)
- Bond fund – an investment in fixed-income securities such as government bonds or a giant corporations such as Ayala
- Equity Fund – an investment fund primarily in stock market. If you are going for a long-term investing, this is the best choice. For example, I choose this for my daughter’s college education.
- Money Market Fund – investment fund in short-term which has a maturity of one year or less
Today, when I visited BDO website, there are a total of 9 different types of UITFs available. Some of them are in dollar denomination. BPI is also offering UITFs. Probably the main advantage of BPI UITFs is the removal of the holding period.
So how do you invest in UITFs?
Investing in UITFs is pretty much easy I would say. In my case, I just drop by to the branch where I opened my savings account and told them that I want to invest in UITF. I was assisted and my fund was moved from savings to the appropriate fund of my choice and that’s it. The minimum fund to invest in BDO UITF is 10,000.
Take note, BDO UITF has holding period. In case of Equity Fund, the holding period is 30 days. If you decide to pull your money out within the 30 days holding period, 1% of original amount will be deducted. If you are a long-term investor, you can ignore this policy.
How do you earn in UITF?
Below is my BDO Equity Fund certificate. I invested 20,000 pesos with a total of 84.5944 units and a NAVPU of 236.4221. It’s easy to do the calculation if you want to know how much you earn. To compute for the current market value of this investment, multiply the total number of units (84.5944) by the current market value of NAVPU. The value of NAVPU is updated daily and available in BDO’s website.
At the time of this writing, the NAVPU for BDO Equity Fund is equivalent to 414.6993. So the current market value of my investment is already 35,081.23. Wow! That’s a profit of 15,000 pesos after 3 years which is around 75%. That’s a huge amount of earnings compared to savings or time deposit.
So if you’re comfortable investing your money in the bank and you’re tired of being a saver, start investing in UITF now!
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