Author Topic: Differences between Mutual Funds and UITFs  (Read 1770 times)

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Differences between Mutual Funds and UITFs
« on: May 27, 2012, 09:23:22 PM »
I am a new bie in investing. While researching some investment strategies, i stumbled upon Mutual Funds and about UITFs... and i thought asking kasi medyo confuse lang... may differences ba ang mutual funds sa UITFs? Diba parehas lang yun? | Your smart guide to money matters and entrepreneurship.

Differences between Mutual Funds and UITFs
« on: May 27, 2012, 09:23:22 PM »

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Re: Differences between Mutual Funds and UITFs
« Reply #1 on: May 27, 2012, 09:33:46 PM »
Just sharing this table for you to understand.... here are some of the differences between the 2

Mutual FundsUITFs
Offered ByInvestment CompaniesBanks
Fund ManagerAppointed by the investment companyTrust Group of the bank
FeesEntry Fee; Exit FeeTrust Fee
Applicable Law“Investment Company Act of the Philippines”No specific law although banks are governed by the “General Banking Law”
Regulatory BodySECBSP
Sales agentsMust be licensedNo license necessary
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Re: Differences between Mutual Funds and UITFs
« Reply #2 on: June 23, 2012, 06:17:12 PM »
The major difference is that UITF is a bank product managed by the treasury department. Unlike in mutual fund where you buy shares, you buy investment units in UITF. Therefore you do not have shareholders right when investing in the latter.

Although UITF is a bank product, it is not covered by Philippine Deposit Insurance Corporation (PDIC). This means investors bear the risk of losing their money. Additionally, UITF is not governed by any specific law but since they are offered by the banks, they are still under Philippine banking laws regulated by the Banko Sentral ng Pilipinas (BSP).

On the other hand, mutual funds have strict regulations from Investment Company Act of the Philippines which are highly regulated by the Securities and Exchange Commission (SEC).

So what is a mutual fund? Many people still don’t understand what it is.  Well, struggle no more. Mutual Fund is like a cooperative where you put your money together. It does not matter how much each member initially puts in. Some can put in minimum required amount which is P5,000.00 in most cases; and for additional investment,  as low as P1,000 pesos. This money is then handled by a Fund Manager who is responsible for fund allocations. The Fund Manager chooses which stocks or bonds to invest on. However, he is limited by certain guidelines of investments as promulgated by Securities and Exchange Commission.

Mutual Funds are offered by investment companies independently registered with SEC. Therefore, when you buy a mutual fund share, you become a shareholder of that company and you acquire the rights of a regular stockholder; including right to vote and right to receive dividends, among others.

Types of Funds

Financial goals and risk appetite will determine which fund is most suitable for an individual. The more popular funds one can get into are:

Bond Fund

This fund primarily invests in government-issued securities. It’s like giving your money to be used by the government with the promise that the government will pay it back with interest. In short, this is your money lend to government.

It is considered risk-free because the government has two ways of paying investors: print more money and raise revenues through tax collections. On the average, Bond Fund performs four to six percent a year.

Money market fund

Similar to bond funds, money market fund also has a conservative stance since they invest in fixed income securities. These securities mature in one year or less hence, the term money market. Money market fund performs two percent a year on the average.

Stock fund or equity fund

Equity fund primarily invests in shares of stock of listed companies. The bigger allocation of equities within the portfolio allows the fund to attain a more aggressive growth rate. Thus, this is riskier, more volatile, and can result to either higher gains or high losses. Since equity fund tracks the index, the rise and fall on a daily basis is reason for the volatility of the fund.

In 2008, Philequity Fund, one of more popular mutual funds lost 41 percent.  In 2009 however, it recovered and recorded a high of 65 percent! A lot of those who knew how to invest in the mutual funds earned a lot.  For the past 16 years though, Philequity Fund grew at an average of 20 percent despite the ups and downs of the market.

Balanced fund

Balanced fund invests in both bonds and equities. It combines the low-risk-low-gain of the bond fund and the high-risk-high-gain of the equity fund.

Instead of having the money allocated on the risky equity funds, or on the conservative bond funds, the money pooled together is invested by the fund manager on both giving investors the best of both funds. Balanced fund performs 12-15 percent on the average.

Today, there are a total of 42 mutual funds listed in the country. 20 of these are bond funds, nine are equity funds, eight are balanced funds while the remaining five are money market funds.

On the other hand, there are 78 UITFs listed in the country.  32 are peso bond funds, 21 are dollar bond funds, 10 are peso money market funds, five dollar money market funds, nine peso equity funds and one dollar equity fund.

Now that we know what mutual funds are, I challenge you now to transform this knowledge to action and reap the harvest later. If you invest on a fund that can earn a rate of 12 percent a year for the next 25 years at P1,000.00 pesos a month, you will be able to accumulate P1.8 million (P105,881 in present value).

Make that P5,000.00 per month and you’ll have P9.4 million after 25 years (P552,939 in present value). So who says, it’s difficult to accumulate millions?  Continue investing ten years longer and you’ll accumulate P32 million (P606,064.97 in present value)! The higher the rate of return, the higher your money will grow in the long run to meet your needs for retirement, child education and cash fund.

So there you are! It does not take you much money to accumulate millions. What you just need is the financial literacy how and where to invest; and the discipline to put in small amounts on a regular basis that will soon accumulate to millions.

Now that you know what are pooled funds, don’t delay. Start investing NOW!


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Re: Differences between Mutual Funds and UITFs
« Reply #3 on: May 16, 2014, 09:59:48 AM »
Mukhang marami ng napost related here about the difference between the 2 but just to summarize and give you examples, here are some differences between Mutual Funds  and UITFs with examples:

      1.       Initial Charges

When you buy shares of a certain Mutual Fund, a so-called Sales Load or Charge will be deducted from your investment amount during the initial purchase thereby, as a result lowers the size of your investment. A sales load is a commission or sales charge awarded to the sales agent of the mutual fund.


I am planning to invest P100,000.00 in an Equity Fund offered by ABC Assurance Company with a prevailing NAVPS of 1.25. A front-end sales load of 4% is required at the time of initial purchase (exclusive of Value Added Tax). How much number of shares do I expect?


P100,000.00 less 4% Sales Load equals P96,000.00

Total shares purchased equals P96,000.00 divided by 1.25 NAVPS of the day
Total shares purchased equals 76,000 shares.

Please do note that aside from the Sales Load, most mutual fund companies charges exit fees when you redeem your mutual fund investments.

Banks, on the other hand, don't charge sales load as well as exit fees. Just take note about the UITF's Minimum Holding Period so that you will avoid not be charge with an ample amount in case you wanted to pull-out your investments within the minimum holding period I mentioned.


I am planning to invest P100,000.00 in an Equity Fund offered by XYZ Bank with a prevailing NAVPU of 1.25. How much units will I be able to buy out of this capital?


P100,000 divided by 1.25 NAVPU of the day.
Totals units bought equals 80,000 units.

      2.      Accessibility

Due to numerous branches a bank has, investing with the bank’s UITF products is accessible. Major Banks operates mostly on major locations. Therefore, it is more advantageous to do business with the bank since you won't be going away near your comfort location.

Most mutual fund companies require submitting your documents (Investment Application Form, Account Opening Form, Signed Signature Cards, IDs, etc.) in their head office or main branch where you need to travel out of your way just to place your mutual fund investments.

      3.       Simplicity

Your bank account with the bank is link with your UITF investment account as your settlement account. Putting additional investment funds or doing redemption is very easy since you are dealing with the same bank. You can also perform this activities online if your account is enrolled with the banks online facilities.

Most mutual fund companies don't enjoy this privilege since they are separate company or entity from the bank.

     4.      Online Performance Tracking

Monitoring your funds’ performance is easier for UITF since the funds Daily NAVPU is posted on a daily basis with the bank’s website. Most banks website, also, has an online investment returns calculator to compute your gain (or loss) anytime you wanted to know your investment’s performance.

Although a few mutual fund companies have this feature in their websites, most informations are not  up-to-date or their URLs are hard to find unlike bank's websites which are very easy to find and navigate. | Your smart guide to money matters and entrepreneurship.

Re: Differences between Mutual Funds and UITFs
« Reply #3 on: May 16, 2014, 09:59:48 AM »


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