How to Invest in UITF (2019)

Pinoy Money Talk

Interested to discover other investment outlets aside from stocks and mutual funds? Consider Unit Investment Trust Funds or UITFs.

Check out our easy-to-understand guide below to learn more details about this investment option!

What are UITFs?

UITF or Unit Investment Trust Fund is a collective investment scheme offered by banks and trust companies in the Philippines. As a “collective investment,” this means money from a variety of investors are pooled together into one fund to achieve a specific investment objective. The investment objective could be: capital appreciation, capital preservation, or current income, among others.

UITFs are good investment vehicles for people who do not have the time or expertise to do actual trading, since the funds are entrusted to full-time professional investment managers who will manage and make decisions about the fund on a day-to-day basis.

UITFs seem to be similar with Mutual Funds. How are they different?

You’re right, these two investment options are similar to one another. There are some differences still, though. We have discussed these differences in a previous article.

Read more about it here: Differences between UITFs and Mutual Funds

Which one then is better: Mutual Funds or UITF?

We’ve constantly tracked the performance and rate of return of Mutual Funds and UITFs here at Pinoy Money Talk, and what we’ve seen is that, on average, the two appear to have comparable returns. For us, then, based on returns alone, there is no standout fund.

Still there are a few UITF or Mutual Funds that perform better than their peers, and you can check the top performing funds in these Performance Rankings:

We’d still like to remind you that the choice of fund should depend on your individual risk profile and investment objective. Conduct due diligence and assess your risk tolerance before choosing the fund to invest in.

What are the benefits of investing in UITFs?

Investors of UITF generally benefit from “professional fund management” and “asset diversification”, among others.

Professional management means an investor can make money by investing without the need for expertise or experience since professional fund managers will be the ones making investment decisions. An investor also does not have to track the market daily, which, in that sense, makes UITFs a passive investment. Relying on the professional management of dedicated fund managers make investing in UITF simple and convenient.

As for asset diversification, by investing in pooled funds such as UITFs, investors get to invest in assets that may normally not be accessible to them. For example, expensive stocks may not be affordable to a low-budget investor or high-yielding corporate bonds will typically be offered only to institutional investors. As an investor of a pooled fund such as a UITF, the investor gets to take part in these investments as part-owner of the UITF fund.

What are the risks associated with investing in UITF?

Of course like any typical investment product, UITFs are subject to market risks and other investment-related risks. Returns are not guaranteed and loss of capital is a possibility.

What are the types of UITFs?

There are four types of unit investment trust funds (UITF) in the Philippines:

  • Equity or stock funds, which invest in the shares of publicly-listed companies;
  • Bond funds, which invest in fixed-income securities issued by the government and large corporations;
  • Balanced funds, which invest in a mixture of equities and fixed-income securities; and
  • Money Market Funds, which invest in short-term securities with maturities of one year or less.

What is the appropriate UITF for an investor?

This should depend on an investor’s investment objective and risk tolerance. If an investor wants capital appreciation (therefore, high returns), he or she can choose to invest in Equity Funds but must be willing to part with their money for several years and must be ready to absorb potential losses in the short run.

If, on the other hand, a person is not willing to take some losses or might have a need to get money back in 2 or 3 years, he or she is better off investing in Money Market or Bond funds instead. Balanced funds are a middle choice for investors torn between Equity funds and Bond funds.

OK, I’m decided. How do I start investing in UITFs?

Potential investors need only drop by branches of local banks and trust companies in the Philippines. Staff would typically assist you by introducing various investment offerings of their company.

You would also most likely also be asked to fill out a Client Suitability Assessment form or a Risk Profile Assessment form. Once the appropriate fund is chosen, you can now start investing. In the Philippines, one can invest in UITFs for as low as P1,000.

How about withdrawing my UITF investment?

Buying and withdrawing units of UITF is easy. Just go to the bank or UITF provider where you opened your UITF investment and request for a withdrawal. Your money will be credited to your settlement account after just a few days.

Where can I learn more about UITFs?

Where else but here in PinoyMoneyTalk (PMT) — for free!

Here are some resources we have about UITFs:

Happy smart investing!

Pinoy Money Talk is an educational website about money, banking, investments, and personal finance which started in 2005. Its group of five writers consists of one equity research analyst, one fintech startup owner, one finance educator, and two investment professionals.