If you’re looking for a way to grow your money but don’t want the hassle of picking individual stocks or bonds, then a UITF might be something worth considering.
Many Filipinos have heard of UITF, especially when visiting banks, but not everyone fully understands how it works. In this guide, we’ll break it down in simple terms so you can decide if it’s right for you.
What is UITF?
UITF stands for Unit Investment Trust Fund. It’s a pooled investment offered by banks, where your money is combined with the money of other investors. Professional fund managers then invest this pooled money in different assets like:
- Stocks (equities)
- Bonds (fixed income securities)
- Money market instruments (short-term placements)
- Or a mix of these, depending on the type of UITF
Think of it like joining a paluwagan, except instead of a rotating payout, your pooled money is invested in financial markets to potentially earn higher returns.
How Does a UITF Work?
- You invest money with a bank offering UITF.
- Instead of getting a passbook, you’re issued “units” of the fund.
- The value of these units is called NAVPU (Net Asset Value per Unit).
- If the NAVPU goes up, the value of your investment increases. If it goes down, your investment decreases.
- You can redeem your investment anytime, but the value depends on the NAVPU on that day.
Example:
- You invest ₱10,000 in a UITF with a NAVPU of ₱1.00. That gives you 10,000 units.
- If the NAVPU grows to ₱1.20, your investment is now worth ₱12,000.
- If it drops to ₱0.90, your investment is only ₱9,000.
Types of UITFs in the Philippines
UITFs come in different flavors depending on your risk appetite:
- Money Market Fund – Short-term placements, low risk, low returns.
- Bond Fund – Invests in government and corporate bonds, moderate risk.
- Balanced Fund – Mix of stocks and bonds, moderate to high risk.
- Equity Fund – Invests mainly in stocks, high risk, high potential return.
- Index Fund – Tracks the PSEi (Philippine Stock Exchange index), high risk, long-term growth.
Pros of UITF
- Professionally managed – Experts handle your money.
- Diversification – Your money is spread across different investments.
- Accessible – Some banks allow starting for as low as ₱1,000.
- Transparent – Daily NAVPU updates let you see performance.
Cons of UITF
- No guaranteed returns – Unlike time deposits, your capital can lose value.
- Management fees – Fund managers charge fees (deducted from the fund).
- Market risk – Value fluctuates depending on the market.
- Not insured – Unlike savings deposits, UITFs are not covered by PDIC.
Where Can You Invest in UITF in the Philippines?
Most major banks offer UITFs, including:
- BDO
- BPI
- Metrobank
- Security Bank
- UnionBank
- RCBC
You can usually open an account through the bank branch, their mobile apps, or online investment portals.
Who Should Invest in UITF?
UITF might be a good fit if you are:
- Someone who wants to invest but doesn’t have the time to study stocks or bonds.
- Willing to accept short-term ups and downs for the possibility of long-term growth.
- Looking for diversification with a small starting amount.
It may not be for you if you want guaranteed returns or if you panic when the market dips.
Blogger’s Corner
Personally, I think UITF is a good way for beginners to dip their toes into investing. Unlike direct stock trading, you don’t need to pick companies yourself. You just ride along with the market while professionals do the work.
But remember, UITF is not a get-rich-quick scheme. It works best if you stay invested long-term (at least 3 to 5 years, especially for equity funds).
So if you have extra money you won’t need immediately, UITF can be one way to let your money work harder for you.