Unit Investment Trust Funds: What You Need To Know About Them

Where do people put their money for safekeeping? Aside from piggy banks, people open bank accounts. But didn’t you know that there is more to banks than just safekeeping? Today, a lot of banks offer investment products called as Unit Investment Trust Funds (UITF).

What is a UITF?

A UITF is a collective investment wherein the money invested are pooled together and used to invest in the stock market and treasury bonds  as well as other forms of investments. Just like other investments, you are entitled to own units that correspond with the amount that you have invested in. UITFs are similar to mutual funds. If UITFs and mutual funds are the same, how can they be different? This definitely deserves a post of its own.

Types of UITFs

Similar with mutual funds, there are four types of UITFs in the country and these include the following:

a.)    Equity funds- also called stock funds, the money pooled from the investment is used to buy shares from public companies. Those who wish to invest in this fund needs to invest long term (5 years minimum). For this particular investment, the risk is higher but the returns are also higher.

b.)    Bond funds- great for moderate investors, the money pooled is invested in fixed-income securities from the government as well as large corporations. Those who wish to invest should keep their money for 3 to 5 years minimum.

c.)     Balanced funds- the money is invested in both equities and fixed-income securities. Similar with bond funds, this investment is great for moderate investors and the investment should be kept for 3 to 5 years.

d.)    Money market funds- invested in short-term securities, the investment can mature within several months to a year. This is great for non-aggressive investors or for those who want to use their investments after a short period of time.

Given that there are different types of funds that people can invest in, it is crucial for would-be investors to know  their objectives and risk profiles to find the appropriate fund that will suit their needs.

The benefits of investing in UITF

Meanwhile, people who have invested in UITFs benefit from the expertise of their fund managers. Just like mutual funds, the money pooled through this investment is handled by a capable fund manager who will be the one to make market research analysis and recommend investment decisions. They will also be the one to diversify the funds in the stock market and other types of investments. For this reason, individual investors do not need to track the market all the time.

Are there risks involved in investing in UITF?

So are there risks involved? The answer is yes. Just like other types of  investments, there are risks involved in investing in UITFs. Returns are not guaranteed and the money is not insured by PDIC. Although this may be the case, investors get higher gains than the current market inflation.

How to start investing?

Almost all banks today offer UITFs and if you are interested, all there is to it is to go to a bank of your choice. However, deciding which bank can be a bit challenging considering that different banks offer their UITFs at different prices and yields. For instance, Bank A might offer their units at higher price than Bank B.  For this reason, it is important to compare banks before you decide to invest. As soon as you have decided which bank and what type of fund you want to invest in, you can start investing right away. Don’t worry, you don’t need to open a bank account with them if you want to invest in UITFs. Some banks allow investors to invest for as little as 10,000PhP.