What are the Differences and Similarities between Mutual Funds and UITF

by Gily Tenorio on October 31, 2012

in Mutual Funds, UITF


Do you know what is the difference between mutual funds and UITF (unit investment trust fund)? Maybe you have notice that both ends in the word “funds” meaning it involves sum or pool of money.

I think it would be better to make a list on the differences between mutual funds and UITF so that my explanation would be clearly understood. But for now, you should know that both are investment products.

1. Both as an Investment Product

As an investment product, the profit that you can get from these two are not guaranteed. Let me give an example. If you have a savings account, the bank guarantees that you will receive a certain amount of money in the form of interest when your account balance have enough money to earn interest.

It is usually given in monthly basis and the interest rate is on per year basis. The bank guarantees you as their client that you will receive this interest no matter what happens to the economy.

On the other hand, UITF and mutual funds work in the other way. The “interest” or profit that you can get from these investments has no guarantee. Meaning, you may lost money when the economy is bad or when the fund manager made poor investment decisions about the fund.

Normally, both of these investment products are invested in the stock market, bonds, debt securities, as deposit in banks, treasury bills, money market, and several other types of investments.

You should realize that both are investments, not a deposit accounts which are insured by the Philippine government through PDIC. You may lose money during investing but it should not hinder you from venturing out to the world of UITF and mutual funds. As a rule in investing, knowledge drives away fear. Study thoroughly before you invest!

2. Who Manages the Fund?

Mutual funds and UITF are managed by different entities or companies. In case of MF, an investment company or commonly called as mutual fund company manages and taking control of the funds.

Each company has its own fund managers who study and the one responsible for making investment decisions. Some of the popular mutual fund companies in the Philippines today are First Metro Asset Management, Inc., Philequity Management, Inc., Philam Asset Management, Inc., ATR KimEng, ALFM and Sun Life.

On the other hand, UITF are being offered and managed by banks. Not all banks have UITF products, only those who are approved by the Central Bank of the Philippines.Though, some banks also offer mutual fund investments like BPI.

Normally, these banks are universal banks with many banking and investment products in their portfolio. In the Philippines, the popular banks that offer UITF are BPI, Banco de Oro, Metrobank. RCBC, PNB, PSBank, Security Bank, China Bank and Land Bank.

3. Which is Better?

I would say that past performance is the key factor when deciding which one is better investment. Also, there are many kinds of mutual funds and UITF plus the companies offering such kind of investment.

However, you must be very careful when choosing which one to give a shot because though past performance is a good indication about the “goodness” of a particular fund but it is not a guarantee that it will do well in the future. You should also check the background of the company and the people behind that company.

To give you easier options, look for a fund that is doing good in the last 5 years based on their performance and the one manages by the top investment companies or banks. It should be the better choice.

In my opinion, I would rather choose mutual funds than UITF if I have only one choice. Most mutual funds outperform UITF based on the data from Philippine Investment Fund Association (PIFA) and websites of banks offering UITF.

On the other hand, for diversification purposes, I will suggest you invest some portion of your money in UITF. I am looking this thing for some time but I have limited time to study which one to invest. One of my friends invested in BPI UITF while he’s working abroad so I think the investment process is not hard to do.

A Comparison Table for Better Understanding

Here’s the comparison table between UITF and mutual funds so you can have better understanding about its features, benefits and other essential information before you invest.

Criteria Mutual Fund UITF
Where to Invest Mutual Fund Company Bank
How to Invest Walk-In or Online Application Walk-In or Online Application
Minimum Initial Investment
Regulated by Securities & Exchange Commission Bangko Sentral ng Pilipinas (BSP)
Invested in Stock Market, Government Bonds, Treasury Bills, High Yield Deposit Account, Debt Securities Stock Market, Government Bonds, Treasury Bills, High Yield Deposit Account, Debt Securities
Sales Load (Fee when Buying the Fund) 1% to 5% of the Principal Amount you used to Buy the Fund 0% to 2% of the Principal Amount you used to Buy the Fund
Early Redemption Fee 0% to 1% (less than 6 months) 1% to 2%
Price of the Fund (expressed in) Net Asset Value Per Share (NAVPS) Net Asset Value Per Unit (NAVPU)
Proof of Investment Official Receipt/Statement of Account Official Receipt/Statement of Account


Final Word

As I have always said in this blog, the first rule before investing is study and understand first before you invest. Don’t be on a hurry or rely on the information feeding on you by some people. Take some time to study which kind of investment is better for you. Mutual funds and UITF have its own advantages and disadvantages so you should be careful when choosing which one to go.

In addition if you want to join my newsletter about making money, saving, and investing and download my Free eBook about How to Start a Blog and Make Money from It! You can get it for free by filling out the form below. Thanks!

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About the Author:

GilGil Tenorio is a blogger, a husband, a father, and an active Christian. He likes playing guitar, C.S. Lewis, Plants and Zombies and NBA. Follow him at Facebook, Google+, YouTube and Twitter. Thanks!


Comments on this entry are closed.

Maureen November 23, 2012 at 03:47

These two types of investments can be confusing for those who are new in the investment field, and I am one of them. A friend of mine recommended that I invest in UTIF, but I have not decided on it yet. I guess I need to do more research about UTIF before I invest my hard earned money.

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