Are UITFs right for you?
September 28, 2006
You've learned what UITFs are and how they are different from mutual funds. You've decided to invest in UITFs. But are they really right for you?
By now you should have known that UITFs are not risk-free instruments and are not considered deposit products either. As such, UITF investors are not covered by the Philippine Deposit Insurance Corp. (PDIC). Loss of capital is possible, although ideally losses are turned into gains in the long run. If your foremost concern is the protection of your principal, UITFs are not for you.
UITFs are also not generally structured for those looking to make a quick gain. As seen in the UITF crash this year, taking out funds as soon as you invested it can cause drastic losses on your part. If you're looking to invest in UITFs, you should have the patience and resources to ride out its day-to-day volatilities.
In short, UITFs are suitable for investors who can part with their funds for the mid- to long-term, are not bothered by the day-to-day fluctuations of the unit price, and have the financial capability to absorb losses.
So asses yourself prior to jumping on the UITF investing bandwagon. And always remember the golden rule of investing: do not invest what you can't afford to lose!
Discuss this in the UITF Philippines thread in the PMT Forum.
[tags]UITF, UITFs, Unit Investment Trust Funds, UITF philippines, UITF primer, Bangko Sentral ng Pilipinas, PDIC, NAVP, NAVPS, NAVPu, UITF NAVPu, Net Asset Value per unit[/tags]
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