23. Swabeng Dilemma: UITF of MF

Now that I've share a little on both Unit Investment Trust Fund (UITF) and Mutual Funds (MF), which of these two would be better to invest in?


Mutual Funds?

OR

Unit Investment Trust Fund?


While the two may have some similarities, they do have their own differences.

Let us count the ways.


1. Types of funds and investments. 

Practically, both offer the same types of funds to their clients. Ranging from Money Market Fund, Bond Fund, Balanced Fund and Equity Fund. There would be some difference in the types of funds that one or the other offer like Dividend Funds, Dollar Funds, Index Funds and the like. Regardless of the list, there is once fund that I'm sure that is tailor-made for you.

For the list of mutual funds, you may check their official website here, while for the list of unit investment trust funds, you may check their official website here.


2. People who handles the funds. 

Seasoned professional fund managers are the ones who handles the funds. Speaking of which, they usually handle not just millions of pesos but billions of pesos. Which means they have to trade very meticulously to avoid possible losses.

Imagine the fund manager has 100 Million pesos and Risk of 2 to 3 percent, this means that the fund manager can only lose 2 to 3 million pesos. That's a huge amount for a retail investor like you and me.

The difference is that Mutual Funds are regulated by The Securities and Exchange Commission (SEC) while UITFs are regulated by The Bangko Sentral ng Pilipinas (BSP).


3. Procedures in opening an Account

Each Bank or Mutual Funds have their own specifics when it comes to how to open an account for them and how to top-up your account on a time basis. Just the same their respective sets of procedures will actually help you understand better regarding their type of fund you have chosen.

Definitely, their forms will be different but what needs to be filled-up like your name, address, contact number, email etc are the same across all forms.


4. Funding and Maintaining your account

All funds require a minimum amount to open (from as small as 5000 pesos) and a certain period of time for holding them (from as short as 30 days). Once you were able to fund your account initially, you may add-up accordingly (from as low as 1000 on most accounts) on a timely manner. When you feel that you were able to reach your targets, you may sell it at a profit.

The price of the fund are either expressed in Net Asset Value Per Share or NAVPS for Mutual Funds while for UITF, it is expressed in Net Asset Value per Unit.


5. Fees and Charges. 

Also remember that there are corresponding fees on this investment. But there are times that the longer you hold on to your investment, exit fees are usually waived. Annual fees usually is within the 1 to 2 percent of your portfolio as well as there are also sales fee.

While Mutual Funds are Tax-Exempt, UITF's comes with a 20% withholding tax on capital gains. At the same time, management fees are higher for Mutual Funds compared with UITFs.


For now, these are the comparison between a Mutual Fund and a Unit Investment Trust Fund. Let me know in the comment section if there are other similarities or differences between the two.