Friday, 15 November 2013

MONEY MATTERS : WHY WE SHOULD INVEST IN UNIT INVESTMENT TRUST FUNDS (UITFs)?


Mr. A: What shares of stocks should I buy?

Mr. B: Do you have a money in any bank?
Mr. A: Yes I do! Majority of my money is in this bank.
Mr. B: Is your bank listed in Philippine Stock Exchange (PSE)?
Mr. A: I believe so. Yes.
Mr. B: If you have placed all your hard earned money in your bank for a tiny interest income, you might as well invest in them via stocks. After all, the trust issues have been taken care of.


Bottom Line: You have a deposit in your bank. So, it goes without saying that you have a TRUST in that bank. Challenge question: Why not invest some of your money in the same bank (with a different financial product)?

It's natural to think that maybe the bank will just fold up and take away all our money, but I dare you to KNOW THE FACTS first then decide :) There are so many ways to make your money work for you (no matter how big or small it is at the moment), and UITF is one of them. 

WHY YOU SHOULD INVEST IN 
UNIT INVESTMENT TRUST FUNDS (UITFs)?

Source: Bloomberg

Interest rate is much higher than savings deposit account.
Don't get intimidated by the chart.  What I want you to focus on is the trend is going up for the last 5 years. That's it :) How does it work? 

2010: Say, you bought 1,000 shares at Php 164 per share.
2013: The market value of your 1,000 shares is now Php 385 and you want to sell it today.

So your cash outflow is Php 164,000 but when you sell it today your cash inflow is Php 385,000. That is Php 221,000 gain. And that is only for a period of 3 years approx! That is what passive income is all about. Sadly, most of us only know about savings and time deposit account and nothing else :( I encourage you to know your options because there are so many investments to choose from.


Your bank does the investment trading for you.
There's no such thing as free lunch, so the bank imposes a fee for this one. However, the fee is so tiny compared to the gains and in the end, it's still a better option compared to your savings account interest income. 

This is perfect for people who has a stable job, are busy and don't want to know the charts and graphs and all. You still get the benefit of partaking the gains with no hassle (except, of course, for a fee). I think the standard fee ranges from 0.5% to 2%. Note that when you see your market value (at least for BDO UITFs), all the taxes and fees have already been deducted. So if you see Php 1,000 gain, that's all yours.

UITFs are being regulated by the Bangko Sentral ng Pilipinas (BSP).
To put more emphasis on public interest, major banks like BDO, BPI, Metrobank, etc. are being monitored by Bangko Sentral ng Pilipinas (BSP), among many others.

They are also being audited by an external auditor (if you'll notice on the left side, their auditor is Punongbayan & Araullo). Auditors are third party entities that provide opinion on the fairness of the bank's financial statements.

You can also monitor your investments online. I've mentioned the detailed steps on that topic, HERE.





They are also listed in BLOOMBERG.  
This is actually new to me! I thought only stock market codes are listed in Bloomberg. However when I looked in their brochure see the photo above, it says: BLOOMBERG TICKER: EPCIPBEQ Maybe because BDO acquired Equitable PCI Bank and my type of investment is Equity. Hence, EPCIBEQ ☺ But that's just me over-analyzing :)

Going back, you notice the year to date return? It means that if you have been invested from January 2013, your money has earned roughly 11.09%. How cool is that?

NOTE: There are different investment products to choose from. Say you want a BDO UITF. There are 3 types:
a. Money Market - low risk, low return
b. Balanced Fund - medium risk, medium return
c.  Equity Fund - high risk, high return  If you are still young (20-30's), it's best to get the equity fund type.


Why not? The choice is yours.  
Make time and information your best friend. God has given us a huge brain to accommodate information this world can offer. Save for the older and happier you.

Final words: BDO is my choice and I'm writing based on my own experience. Among all my investment portfolio, BDO UITF Equity is among Top 1 (sometimes Top 2, next to Sun Life Mutual Fund) performing investment. I'm very much happy with the investment return. Except for the fact that I'm lining up (personally at BDO) every single top-ups, I only have good words for this bank :)
Feel free to let me know if you have something to share about UITFs from other banks. I'd love to hear from you! -CMK
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