Choose: Mutual Funds vs. UITFs


Mutual Funds and Unit Investment Trust Funds (UITFs) are both open-ended pooled funds managed by an expert fund manager. This means that your money together with the money of all other investors in the fund will be invested by the fund manager in a diversified portfolio of investments. Both types of investments have holding periods.

The fund manager will then invests it in four main types of funds named Money Market Fund, Bond Fund, Balanced Fund, and Equity Fund classified by the risk tolerance of the investor.

Money Market Funds are for investors who are very very conservative. These funds are invested solely in short-term investments and are very safe. It invests in short term fixed-income government and corporate instruments, certificates of time deposit, and the like. The risks associated with this fund are very minimal. This is the safest among the four main types of funds. But don’t expect it to be the one with the highest yield.

Bond Funds are for investors who are risk averse. This is the fund next to Money Market Fund in terms of conservativeness. It also invests in government and corporate fixed-income instruments but it’s both short-term and long-term. Risk factors associated with bond funds are the rise and fall of interest rates due to market conditions. There is an inverse relationship between bonds and interest rates. That is, if interest rates fall, bonds generally rise and vice versa. Why? It is because a bond offers a fixed interest rate. We can view the following example below.

A corporate bond is issued for Php100,000 for five years with a 3% coupon or interest rate, paid every 6 months. Let’s say that interest rates went up to 5%. If you want to sell this bond, who will buy it when it is paying just 3% as compared to the market interest rate of 5%? So if you want to sell it, you will then be forced to lower your selling price, the bond price.

Balanced Funds – This type of fund are for the medium risk taker investors. It invests in a basket of investments such as bonds, money market, and stocks. It is called balanced fund since the fund manager do some balancing act here when it comes to capital appreciation and conservatism against capital loss. When the stock market is battered, then he can adjust it and allocate it into the safer types of investments. Consequently, when stocks are doing good, then he can adjust it and allocate more into the risky stocks.

Equity Funds – This type of funds are for high risk taker investors. It is for investors who desire long-term capital appreciation since bulk of it was invested in stocks with a little portion invested in fixed-income. The risk associated here is connected with the movement of the stock market particularly with the changes in stock prices where the fund is invested. However, history shows that returns in stock market consistently outpace the effects of inflation with the average earning at least 10% per annum.

Both mutual funds and uitfs have these kinds of funds. Now we go to the differences to assess which between the two you prefer the most.

UITFs are the evolution of the Common Trust Funds offered by banks long ago and so these are bank products. Therefore, you can only avail these types of investments by going to a bank and are being regulated by the Central Bank. On the other hand, Mutual Funds are products offered by investment companies. And these products are regulated by the Securities and Exchange Commission.

Mutual Funds have entry and exit fees while UITFs does not have them. Entry fees are fees that will be deducted to your investments upon investing in the fund. This entry fees will then become the comission of the mutual fund agent. Exit fees are fees that will be deducted to your investments upon withdrawal of your investment. You can’t have both entry and exit fees. You have the option which one you prefer. Either you will be deducted instantly upon investment or you will be deducted upon withdrawal. Consult your mutual fund agent.

Mutual Funds are like corporations where each shareholder are the investors. The CEO and the President will then be the fund managers and directors of the fund where they get a per diem fees everytime they have a meeting. UITFs are just simply funds handled by the trust department of the bank acting as the fund manager.

Since you are a shareholder in a Mutual Fund, you have the power to nominate, elect or designate a fund manager depending on the number of shares you own. In UITFs, investors does not have this power.

In UITFS, you buy units and the value of each unit is called Net Asset Value Per Unit or “NAVPU”. In Mutual Funds, you buy shares and the value of each unit is called Net Asset Value Per Share or “NAVPS.”

As a shareholder in Mutual Funds, you get to receive dividends commonly in the form of stock dividends or additional shares credited to your account on an annual basis. In UITFs, you don’t have this.

So are you decided which one to choose? Mutual Funds or UITFs? They are almost similar but they have differences. For further information and for comparison of historical yields, please visit:

Philippine Investment Funds Association for Mutual Funds and

Trust Officers Association of the Philippines for UITFs

Here are some considerations to help you decide:

  • Minimum capital needed to invest in the fund
  • Holding period of the fund
  • Historical yield of the fund
  • Fund Manager or directors of the fund (the company or bank handling the investment)

Good luck in your investments!

As a starter, you might want to view my article on how to invest in mutual funds.


Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

29 responses on “Choose: Mutual Funds vs. UITFs

  1. Hi! i previously listened to rich dad’s audiobook…

    wow! you’re an inspiration to me too… a really good information in continuing
    our journey to be succesful and wealthy …

    kaya update mo ko lagi dude, thanks

  2. Thanks Chardy. Readers like you keep my drive in writing quality articles. Rest assured I will continue updating this blog.

  3. Hi Darnel,
    For UITFs of banks, you can go to http://www.uitf.com.ph and choose the bank you prefer. After that choose the “fund profile” and all the details of the fund can be found there including the minimum amount of participation.

    For mutual funds of investment companies, it can be as low as P10K only. You can go to http://www.icap.com.ph, go to “mutual funds 101” at the right, and “facts and figures” on top. There is a list of all mutual fund companies there. Choose the investment company that you want and you can inquire directly from them or visit their website directly. I hope this helps.

    • For UITFs of banks, you can go to http://www.uitf.com.ph and choose the bank you prefer.

      For mutual funds of investment companies, it can be as low as P10K only. You can go to http://www.icap.com.ph, go to “mutual funds 101″ at the right, and “facts and figures” on top.

      ————————-

      Those two links today Jan. 18, 2013 are not working anymore.

  4. Hi

    your blog entires are amazing for those who want to improve their financial situation…
    I actually liked your articles about mutual funds…they’re very informative
    hope you can posts more about mutual funds. I’m very interested in mutual funds..
    I’d like to ask how was your experience with mutual funds? was it positive? Or did you experience setbacks ? hope you can reply to my questions… thanks!

    • Hi Chessy,

      First of all thanks. In my case, I am more invested with UITFs than mutual funds. I just have my mutual fund invested with Sun Life (Equity Fund) with a minimum amount. I prefer UITFs more because they don’t have entry or exit fees as discussed above. But UITFs don’t give dividends.

      With my mutual fund investment with Sun Life, they are very professional. They have quarterly mails to you reflecting how much the value of your investment (just in case you don’t check it online). Added to that, they deliver an annual report which is in glossy type to all of their mutual fund investors. They also allow up to 4 free transfer from one type of fund to another (i.e. transfer from Bond Fund to Equity Fund which I did before).

      With my UITFs, I invested aggressively before. The first time was a bond fund that earned me around 4% in 6 months. After redemption, I invested again into a riskier balanced fund. Since the stocks are rising before (2006), I got huge earnings of 17% in 6 months. Because of that earning, I got more excited and invested into a riskier equity fund.

      Now, because of the global financial crisis, I am experiencing losses. I bought some of my remaining UITF investments at a high price when the Philippine Stock Index was at 3,000 points level (I am invested in an Equity Fund).

      Nevertheless, I am holding on into it.

      Just in case you have further questions, feel free to post your comments here.

      P.S. I edited my post above and placed a link on how to invest in mutual funds.

  5. Hello,

    I’ll be planning to invest in UITF probably this coming April 2010 I checked the BDO Peso Balance fund NAVpU it seems that its rebounding now after the financial crisis. Would it be possible for the UITF to monitor the status of you investment online and also to automatically transfer lets say from blanace fund to equity fund?

    • Hi Jerone, for UITFs, you can definitely monitor the value of your investments through UITF’s website at http://www.uitf.com.ph.

      Unfortunately, you cannot do automatic transfer from one fund to another in UITF. However, you can withdraw your money from one fund and reinvest it into another fund within the same bank provided you meet the initial minimum requirements of the fund you’re trasferring into.

    • Hi Tyrone,

      Another question, if i invest in UITF let say Balance Fund from BDO for 100K would it be possible to deposit some of my money into this account? Let us say I would like to put at least 5000 pesos per month also can i withdraw anytime fund anytime I want or there is a certain period before i can pull out my account. Please advise… thank you…

    • What do you mean “deposit some of my money into this account?” A UITF account is different from a savings account. However, they are interconnected because your savings account is linked to your UITF account.

      There is a certain period of time before you can pull out your money as each type of UITF account has its own holding period. You can put 5,000 pesos per month if that’s what you want. That would be better for peso cost averaging.

  6. I’m sorry for the confusion actually what i would like to do is link my savings account to the UITF account and manage my portfolio online. Since I am working abroad and i don’t have the flexibility to visit the bank. My purpose is to deposit my cash in my savings account and do the money transfer online from savings to UITF account.

    • I am not sure if that’s possible. I guess you need to talk to your bank where you have your UITF investment on how do you go about it. Perhaps they can probably allow a representative of you provided you issued that person an authority to represent you.

      What I think is possible is to have an auto debit agreement with the bank. They would be debiting your savings account on a monthly schedule to credit and invest it in UITF product that you availed. I just don’t know how can you monitor it online. You really need to go and coordinate with them directly to ask these questions.

    • Hi Rinco, if it’s for equity funds, I suggest to wait until the index goes down. At 4,200+ index, it is riped for any major correction. Personally, I would start investing only after it goes down the 4,000 level. For other types of funds, I think it’s safe to invest because they have less risks than equity fund.

    • You can go to Philippine Stock Exchange’s website at http://www.pse.com.ph and on the upper right top corner, you can see the stock index by going to the “Market Information & PSEi Intraday”. After that, a graph will pop up and you will see the movement of the stock index. As of now, I don’t have any idea when will it go down. As long as our country and the individual companies are performing well, I think it would sustain in that level.

  7. Tyrone, I’m planning to invest in BDO Dollar Bond Fund this July. What do you think? Is it the best time or not with regards sa trend? I heard that USD is expected to dive. In that case, then sa Peso na lang.

  8. Mutual Fund vs UITF

    Mutual Fund:
    -tax-exempt
    -managed by investment companies
    -has common shares (people are called investors/shareholders) w/ voting power
    -monitored by SEC (secirities & exchange commission)
    -has independent custodian to hold assets
    -with full disclosure
    -without reserve requirements
    -with prospectus to verify its assets and company profile.

    UITF:
    -with tax (20% withholding tax???)
    -managed by Trust department
    -units of participation (no voting power)
    -monitored by Bangko Sentral ng Pilipinas
    -Bank itself holds assets
    -has NO full disclosure
    -with reserve requirements
    -NO Prospectus

    Mutual Fund vs Insurance (Friends or Foes?)

    Mutual Fund:
    -tax exempt
    -returns are Not guaranteed (fluctuating)
    -monitored by SEC
    -Liquid (3-7 days)
    -Flexible returns

    Insurance:
    -with tax
    -Returns are guaranteed
    -monitored by insurance companies
    -not liquid (wait for maturity of your policy)
    -has fixed returns

    • “UITF:
      -with tax (20% withholding tax???)”

      ——————–

      This point has to be cleared up with the uitf operator you are putting your money with (them).

      What I have read is that an influential accounting firm like Punongbayan something says no. etc.

      But I have not come across any mention from any uitf operators that state clearly that: no, they don’t withhold 20% for tax from your gain when you redeem your gain.

      Let us ask Tyrone whether he has any information coming from any bank or non-bank uitf operators, that is the way to get to the fact of whether and in what sense or way there is or there is none withholding 20% tax, etc.

  9. More people are still financially illiterate… tsk…tsk…tsk…

    They associate and understand RISKS literally. They don’t know how to manage the RISKs. People should also understand the RISK-REWARD spectrum. LOW RISK has LOW RETURN; but in reality, HIGH RISK equals HIGH RETURN! We should learn first the RISK-RETURN Trade-OFF. Know your RISK appetite in investing. Investing is more on long term. Investing is a habit of put and put and let it grow for millions after 5-10 years or more with a minimum of Five Thousand (P5000-) opening account and minimum of One Thiusand (1000-) additional every month or depending on availability of your fund to practice Peso Cost Averaging strategy. Time deposits are also good for your emergency fund but this should be done more on short term. If you want a LOW RISK but LOW RETURN investment, you can invest in BOND FUND or BALANCED Funds. But take note, they cannot outpace INFLATION! Inflation rate increases every year. In the Philippines, its between 6-7 %. So, if you invest with a rate of return LOWER THAN the inflation rate, YOU LOSE in the MONEY GAME!

    Financial literacy is NOT just about numbers; its about MINDSET.

  10. It is very frightening about when you want big gain you must be ready to suffer big loss, so that possible big gain = possible big loss.

    Wherefore if you don’t want to suffer big loss then just hold to your money as you have it now, don’t aspire after big gain whereby you may suffer big loss.

    That is the wisdom in a way: If you don’t want to lose your money at all, don’t invest, period.

    But if you think that your money will stay as good in buying power as before, then you are being naive, meaning, simplistic: because your money even though it is still numerically the same amount year in and year out, it is losing buying power (that is what money is good for: to buy anything at all that is buyable — and that is plenty plenty plenty of things and even humans, period).

    For example, if you have 1 million pesos and you still are alive with the 1 million pesos in 10 years time, you are going to discover to your horror that your 1 million pesos by then is only going to buy you a second-hand motorcycle, whereas 10 years ago it could buy you a very good still brand new but second-hand car.

    So, invest now because it will contribute to the neutralizing of inflation, that is better than nothing.

    The rule to observe is this: if you have excess money and you are still going to live another say 15 years, and you have a regular paying job or a regular earning business, then be ready to make big money or lose big money i.e. the big money that makes up your excess and idle money.

    Think about that, but it is only money that you may lose, not an eye or a hand, and definitely not your life.

  11. what is the significance of the psei when it comes to investing.
    what level should you invest in uitfs what level should you invest
    in mutual finds. what level should you invest in stocks

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