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Investment funds offer less risk to those who are not familiar with investing. It offers less hassle to those who don’t have the time to monitor their investments. These funds provide professional management of your investment for a minimal fee.

Fund Options

There are basically three kinds of funds you can invest in the Philippines, Unit Investment Trust Funds, Mutual Funds, and Variable Unit Linked Insurance. These funds are invested in various asset classes with varying risks and returns. These investment products might look the same at first glance, but each has its own advantages and disadvantages.

 
  Unit Investment Trust Fund Mutual Fund Variable Universal Life Insurance
       
 
Description An open-ended pooled trust fund denominated in pesos or any acceptable currency, which is operated and administered by a trust entity and made available by participation. An investment company that pools the funds of many individual and institutional investors to form a massive asset base. The assets are then entrusted to a full time professional fund manager who develops and maintains a diversified portfolio of security investments. People who buy shares of a mutual fund are its owners or shareholders. A type of life insurance wherein the cash value built up can be invested in a wide variety of separate accounts, the choice of which to use is entirely up to the contract owner.
 
Minimum Participation Minimum initial investment can be as low as Php 10,000 and minimum additional contribution can be as low as Php 1,000 Require a minimum initial investment amount of only Php 5,000.00 and minimum additional investments of Php1,000.00. Premiums can be paid monthly, quarterly, semi annual, annually or one time payment. Monthly premium can be as low as Php 1,800.*
 
Minimum Holding Period Majority of UITFs have a holding period of 0-30 days. Early Redemption fees are charged if funds are withdrawn before the lapse of the minimum holding period. Minimum holding period is 90-365 days. Redemption before the lapse of holding period will be charged a redemption fee. Minimum holding period applies depending on the product. Usually subject to exit charges after insurance/premium coverage has been paid from the account value of the client.
 
Fees Sales Load Fee (depends on what bank)

Audit Fee (depends on the bank)

Annual Management Fee ranging from 1% to 3.5% depending on the type of the fund and the company.

Sales Load fee  is fixed at 3.5% only (can be reduced depending on the investment value. rebates applies normally to investments that ranges 10m up that are usually being done by Institutional investors and various corporations with excess cash float) Upfront Fees

Insurance/Premium charges (0% to 90% depending on what kind of product and what company)

  Early Redemption Fees (Depending on what bank) Annual Management Fee 1% to 1.5% depending on the type of fund. Fund Management Charge (1% to 2.5% depending on what type of fund and company)
   Custodian Fees Early Redemption Fees
(If before Lock-In period)
Early Redemption Fees (Usually 1% to 5%)
 
Tax Pros and Cons Subject to Estate Tax if the investor dies. Subject to Estate Tax if the investor dies. Income tax free death benefits
  Subject to withholding tax or 20% tax on profit. Exempted from withholding tax or tax on profit as per PHL law. No estate tax
  Income tax free policy loans.
 
Regulatory Board Bangko Sentral ng Pilipinas
(BSP)
Security and Exchange Commission
(SEC)
Insurance Commission (IC)
Where to Invest Banks that is regulated and complying with BSP. Mutual Fund management institutions registered and regulated by SEC through a Certified Investment Solicitor (CIS) Insurance Companies through a licensed Insurance seller by IC.
 
Ways to Compute Earnings Net Asset Value Per Unit Net Asset Value Per Share Unit Price
 
Pros/Cons Convenient Convenient Tons of paper works!
 
  • Easy access because you can open an account in any branch of the bank near you
  • They offer wide variety of funds you can choose from
  • Less transparent than Mutual Funds.
  • Sellers sometimes are just focused on closing the transaction rather than explaining vis a vis the pros and cons vs MFs and VULs.
  • They are usually better regulated since companies really focused on their funds and their performance. Reports are more transparent since shareholders need to know fund performance, reporting, portfolios, dividends etc.
  • May give the investors dividends and other shareholder’s rights
  • Tax exempt in terms of Capital Gains – That’s up to 20% instant savings/earnings!
  • Conducts Shareholder Meeting where you can personally ask the Chairman and the BOD.
  • Only a Certified Investment Solicitor (CIS) can sell you this product and they are trained to handle professionally all your concerns.
  • Reasonable Sales Load fee,
  • Easy access because you can open an account in any branch of the bank near you
  • They offer wide variety of funds you can choose from
  • Costly exit fees
  • Usually 5 year lock-in period subject for 5/4/3/2/1% exit fees.
  • Expensive insurance/premium cost that sometimes doesn’t fit your current set of requirements.
 
 
Websites www.bsp.gov.ph www.sec.gov.ph www.insurance.gov.ph
  www.uitf.com.ph www.pifa.com.ph www.plia.org.ph
 

My Investments

I personally have investments in UITF and VULS. VUL provide protection and tax advantages on my investment while UITF maximizes my investment for my retirement. I invest regularly in Equity Funds and have a small portion of my portfolio in Bond Funds. Which ever product you choose, always do your research before investing.

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For every 1 peso invested in PhilEquity Fund,Inc. last 1994 is currently equivalent to 37 pesos vs For every 1 peso invested to PSEi during the same year is just around 4 pesos to 5 pesos now. UPDATED : July 5, 2015
INVEST IN MUTUAL FUND NOW!
INVEST IN MUTUAL FUND NOW!

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Closing Note from the Editor-In-Chief of Think Philippines!

We believe that there is no 100% correct answer to this question. Why? Because it all depends on someone’s preference, risk appetite and financial goals and requirements. However, Think Philippines! is just here to be one of your many online sources of information regarding the difference of UITFs, VULs and Mutual Funds. We highly suggest to consult your personal accountant, financial advisor, accounting lawyer and certified investment solicitor (CIS) for better comprehension of the things you may not clearly understand by just conducting your personal research or due diligence online.

We adhere always to the principle that in investing, an informed choice will always be better than an emotional choice. Investing is all about numbers, something that is quantifiable and not a rocket science. People always tend to see investing as something that is complicated when it should be not.

To end this article, we from the Think Philippines are more than happy to share with you this good video from the PhilEquity Management,Inc.’s 2013 Investors’ briefing.

WATCH. LEARN. INVEST NOW!

We also recommend to the prospective investors to email your inquiries regarding financial instruments (UITF,MF,VUL) at princetonphilippines@gmail.com by Princeton Business Initiative and be guaranteed of an unbias and pragmatic response for they are carrying more than 25 prime mutual funds in the market today.

Happy Investing!

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Edwardo Miguel Guevarra Roldan

Lead Convenor

Isang Samahan, Isang Pilipinas (ISIP) and Think Philippines!

0927 646 0088 – GLOBE

edwardomiguelroldan@gmail.com

isangsamahanisangpilipinas@gmail.com

http://www.fb.com/ThinkPhilippinesBlog

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5 thoughts on “UP CLOSE! UITFs vs Mutual Funds vs VULs | Think Philippines!

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