What are Mutual Funds and UITFs?
Money from various investors are pooled together by professional fund managers to make up "baskets" of cash, bonds, stocks, and/or other investment assets. As an investor, your ownership is represented by the number of shares or units you hold in the fund. As share/unit prices (NAVPS or NAVPU) increase, so does your investment's value.
Mutual funds and UITFs are similar such that a fund manager buys and sells securities on behalf of the investors. Basic differences are as follows:
What are the different types of mutual funds and UITFs?
| Fund Type | Composition | Risk Level |
Money Market Safest Investment with the lowest return | Time deposits, treasury bills, other short-term bonds | Very Low |
Bond Provides stability and moderate income | Debt instruments with fixed interest rates issued by the gov’t or private corporations | Low |
Balanced Combines the stability of bonds and the growth of potential stocks | Government securities, corporate bonds, stocks | Medium |
Equity Highest risk with the highest potential over the long term | PSE index, dividend yielding and/or growth stocks | High |
Why invest in a mutual fund or UITF?
You can rely on expert fund management
Low minimum investment. Invest for as low as Php1,000
Reduce risk through automatic diversification
Always liquid. Buy or redeem anytime
What is the difference between Mutual Funds and UITFs?
| Mutual Fund | UITF | |
| Offered by | Investment Companies | Banks and Trust Corporations |
| What you own | Shares in the investment company reported in NAVPS (Net Asset Value Per Share) | Units of participation in the Trust Fund reported in NAVPU (Net Asset Value Per Unit) |
| Voting Rights | Yes | No |
| Regulated by | Securities and Exchange Commission (SEC) | Bangko Sentral ng Pilipinas (BSP) |
How Net-Asset-Value Per Share is computed?
NAVPS = Total Assets - Total Liabilities
Number of Outstanding Shares
How Net-Asset-Value Per Unit is computed?
Underlying securities of the fund are the assets while expenses such as management, custody, brokers’ fees, taxes, and other costs form part of the liabilities.