Soldier’s Investment 101: UITF (Unit Investment Trust Funds)

BDO UITFNormally, most soldier investors in the Armed Forces of the Philippines fall in a category of being a conservative type of investors. Due to lack of time to increase their financial literacy, they are not very much willing to take risk to get higher returns for their investments. Aside from limited time, they are not exposed to various types of investment instruments especially those members of the Philippine Army who are usually assigned in remote areas where commercial banks are out of reach. It seems that most Filipino soldier investors are already comfortable investing in military financial institutions that are always available to them such as AFPSLAI, PAFCPIC, CWSLAI, AMWSLAI, etc. through share capital and capital contributions. On the other hand, there are also Filipino soldiers who are able to secure their emergency funds and some even reached their investment limits for their SC and capital contributions. As a result, these successful soldier investors opted to put their money in a more risky investment. However, due to lack of financial awareness, some of them become an easy prey to easy-money-making-scams like networking or pyramiding schemes. Unfortunately, they’ve invested almost all of their life savings in it. It’s very sad to know that a lot of soldiers became victims of these big time swindling groups like the Aman Futures. In this connection, let me share to you other option where you could invest your money which is a lot safer and wiser.

What is a Unit Investment Trust Fund?

A UITF is basically a type of ready-made investment that allows pooling of funds from different investors who share similar objectives. This pool of funds is managed by a Fund Manager/Trustee of a bank. He/She will be the one managing these funds and has the authority on where, when and how to invest the funds through various financial instruments such as bonds, equities and money market securities. If you invest to UITF, you became a Trustor and you’ll be buying units rather than shares. By the way, investing in a UITF is a lot easier compared to investing in a stock market especially if you don’t have the luxury of time to monitor every trading day. In UITF, you let the Fund Manager/Trustee do his stuff and you’ll just constantly monitor the daily Net Asset Value per Unit (NAVPU) of the fund as posted in the bank’s website. It will be your guide to subscribe for additional units or just redeem your investments.

How to Invest in a UITF?

UITF

Before deciding to invest in a UITF, you should already have your investment objectives. You should make some assessments on how much you’re willing to invest and for how long you will invest. You should also consider what kind of risk you are willing to take. After assessing your financial capabilities, your objectives will be your guide especially deciding the right UITF for you.

In order for you to start a UITF investment, you should visit a bank where you like to invest. I recommend either BDO or BPI since they are the best performing banks in the Philippines. Approach any of the bank employees then tell him/her that you are planning to invest in a UITF. Usually, they will go to the bank manager then the manager will be the one giving the details about UITF investments to you.

Before you could open a settlement account and UITF account, you will have to accomplish the investor’s profile questionnaire (IPQ) so that the manager will know what UITF is suited for you. There are no right or wrong answers for that. It would just evaluate what type of investor you are. Moreover, risk profiling will let you know what type of investments suited for you considering your investment objectives and risk appetite. You will know if you are moderately conservative, moderately aggressive and aggressive investor. In my case, I turned out to be a moderately aggressive investor after answering their IPQ but since I really want to invest aggressively, they let me signed a waiver to invest in their funds designed only for aggressive investors. Usually, the minimum investment is P10, 000.00 and after having your initial investment, you could subscribe any time for additional fund for as low as P1, 000.00 per subscription. In BPI, you could subscribe or redeem through BPI Express Online. That’s the best advantage of BPI compared to BDO. In BDO, you need to visit the bank to either subscribe or redeem the fund.

Moreover, you should also consider the trust/management fee, early redemption fee and minimum holding period of the fund. This is the way how the banks earn from these pools of funds. Well, aggressive funds usually have higher trust/management fees compared to moderate funds.

After taking the IPQ, you could already open a settlement account which the amount of the contribution to be made shall be debited and the proceeds of redemption shall be credited. In BDO, they will issue a certificate of confirmation for participation for every subscription. If you want to redeem your investment, just go to the same bank where you invested then return the certificate. While in BPI, you don’t need to visit the bank after the initial investment. Subscription and redemption can be done online without the burden of traveling to the bank.

Choosing the Best UITF for you

BPI Investment FundIf you are moderately conservative or moderate risk investor, you are suited for short term funds maximizing returns with minimal risk of losses. You will invest in Money Market Funds of their UITF. The setback for investing to this fund is that you’ll be expecting slow and low returns. The positive side is that you could easily redeem it without the fear of having losses considering its safety and liquidity. The objectives of this fund are mainly for capital preservation and income generation from low-risk-fixed income securities.

If you are a type of investor who is moderately aggressive, you are suited for longer term investment horizons. This type of fund is invested in fixed income and bonds that has a higher yield compared to Money Market Funds. You have to invest for a minimum of three years in order to maximize its earning potential. In BDO, they offer BDO Peso Fixed Income Fund, BDO GS Fund and BDO Bond Funds (Peso and US Dollar) while BPI offers ABF Philippines Bond Index Fund. The objectives of these funds are also for capital preservation and generate higher income through investments in low and medium-term bonds including similar fixed income securities.

If you are aggressive type of investor, then the best fund for you will be the Equity Funds. It actually mimics the stock market’s performance so if the stock market is doing well then you’re going to enjoy higher returns. The setback for this fund is definitely the risk of losing your capital. You are vulnerable to large amount of capital losses especially when the stock market falls continuously. On the other hand, it is also the fund that could generate the highest yield compared to other funds.

On the positive side, a falling stock market is the best time for you to avail for Equity Fund units. The lower the price, the higher units you are going to buy. When the price triples after waiting patiently, you could now redeem your investment and enjoy high yield. Still, this is not suited for those investors who easily discourage when the NAVPU’s fall for a longer period of time. This is totally suited for investors who are willing to place their money in the fund for at least five years without considering early fund redemption. However, with a lot of improvements happening to the Philippine economy, taking the risk to invest in this fund is a very wise decision. Actually, BPI is offering a lot of aggressive trust funds like BPI Equity Index Fund and BPI Balanced Fund while BDO offers Peso Balanced Fund and BDO Equity Fund. The objective of these funds is mainly for capital growth that is invested in selected equities that is well studied by the Fund Manager.

Philippine Army 48IBIn the conclusion, it is really a necessity for us to increase our financial literacy because it will give us more avenues to improve our investment portfolios. Also, diversifying our investment portfolio is still the best practice and proven to have a lot of advantages. As soldiers, it is our dream to give our family a decent living and make life easier for them so let’s continue learning how to invest productively and wisely.

This entry was posted in Money Matters and tagged , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to Soldier’s Investment 101: UITF (Unit Investment Trust Funds)

  1. Pingback: Shocking PAFCPIC Updates CY 2014 | A WISE FILIPINO SOLDIER

  2. arnel says:

    I’m appreciated that I found your blog about investment matters, actually I’m searching for AFPSLAI address but hooked by your http address.

    Keep it up!

    Regards,
    Arnel

Leave a Reply

Your email address will not be published. Required fields are marked *