Read the Tagalog Version of this article: Ang Pag-i-invest sa UITF

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We have already discussed about different investment instruments in my article “Know How To Invest Your Hard Earned Money”. Now, we are going to explore in detail a good bank product where we can invest our money, and it’s called a “Trust”. Perhaps you will say: “Hey, Green Stickman ™, you have not mentioned of Trust from your previous article. But actually, I do and there was!

Maybe you did not just notice it immediately. What I’m talking about is the UITF or Unit Investment TRUST Fund which I mentioned under Stocks and Equity section of my last English article. I am not really sure if other countries have this type of bank product, but in the Philippines many people including me participate in the said fund.

U … I … T … Wait, what is it again?

Before, when I was still naive in the world of “Finance”, I am always remembering this bank product the wrong way. I have always expressed “IUTF” instead of UITF (yeah, it’s true, because I really do not care about it before … LOL …). What is UITF? Before we discuss and go deeper on the contents of UITF, let us first clear what ‘T’ stands for in UITF … T stands for “Trust”. And what will you be trusting? It’s your money, of course. In this Bank product, there is no commitment of “Fixed Income” or fixed rate of return from the bank. But they will make it to grow and make sure everybody is happy. Once the money you invest earned an interest, of course you’ll be happy. And the group who’s working for your money will also be happy from their commission. And of course, the bank will also be happy for they will benefit from your profit too. And it will come from the given “trust” to the investor like you.

Wait, are you somewhat confused? Why have I quoted of group that would help to grow your money? Yes, you read it correctly. While you are talking to the bank, there within the bank, is what we called the “Trust Group”. They are the group within the bank that takes care and makes your money grow well. Just like in a company, this Trust Group is a department within an institution.

Difference of TRUST from an ordinary Savings or Time Deposits

A Trust bank product has no fixed interest rate like in a savings account and Time Deposit. There is no guarantee how much interest you will get. You will entrust your money without any guarantee of profit. Just TRUST. But do not worry because if the people within your bank’s Trust Group are good, especially the Fund Manager, they can make your money grow and earn as much as 30% or even more. Not bad right? This figure is huge compared to the interest rate of a savings account of 0.25% per year.

And because there is no fixed rate, the bank can simply provide quotes or their “historical returns” where you can see your money or its equivalent unit is growing or not.

Additionally, unlike to a savings or a time deposit, a trust account has no maturity date. It means that you can have or take your money anytime you need it. But it would require for 2 to 3 banking days for you to redeem your certificate.

And since it is not covered or insured by PDIC. And so if they lose money, you are losing too. But it’s fine, because the fund manager or the holders of money, with all his might, would never let your money lose because they will also earn from it. So he will make your money grow. Because while your fund is earning bigger, the higher the fees they can get from the service they did for you. Apply for Trust banking if you do not have time to invest in the stocks market, and let them handle the rest for you. Cool isn’t it? All you need is trust.

Technically, UITF or Unit Investment Trust Fund is an “open-ended” fund where an investor like us can buy units of that fund. The more participants, of course, the more fund can be used to invest also in other various investment instruments (better if you read my article “Know How To Invest Your Hard Earned Money” for you to know what I’m talking about). From the said “pooled funds”, 3 different types of UITF where formed.

UITF ad 1

The types of UITF

There are 3 types of UITF or Unit Invetment Trust Fund that can be offered by the bank:

  1. Fixed Income Fund
  2. Balanced Fund
  3. Equity Fund

UITF- Fixed Income Fund

The fund will mostly be invested in a Fixed Income investment instruments such as T-Bills, FXTNs, bank deposits and other financial instruments that offers investment of regular income with prevailing interest.

This type of UITF is subdivided into 2:

  1. Money Market Fund - This fund is being invest in instruments with short term (1 or less than a year)
  2. Bond Fund - This fund is being invest in these instruments over a year.


All funds are invested in stocks. From the 3 types of UITF, this has the greatest ROI or profits, but it also has the highest risk of losses.


The fund will be invested in “half-half”. Half will be invested to a money market and bond funds and the other half in stocks or equity. It seems like a 2-in-1 coffee. So if you are in the “moderate” type of investor, meaning you do not turn be so conservative and so aggressive, then UITF-Balanced-Equity is for you.


These 3 types of UITF are available to an investor who wants to buy units of such fund depending on his risk profile and his short term and long term goals. An example of investment is the tip I provided in the article “Building Your Emergency Fund “, if your money on a saving account reached 20,000 pesos, you can withdraw the half and transfer to a bank product like UITF-Fixed Income. In this product, your money will definitely grow and can be easily redeem if needed. But be reminded, it requires 2-3 banking days before you can liquidate or get its currency equivalent.

The Advantages of UITF

A UITF have 2 major advantages. These are:

  1. It has no Holding Period – A biggest advantage of UITF is not having a holding period. You can take your investments through your trust account whenever you like or when you need it. And you again buy if you have money later on.
  2. Diversification – this is a plus or bonus to investors to gain higher profits or returns. Why? This is because, for example you have Php 100,000 and you will invest it by buying a security (not the security guard ok? LOL) such as Treasury Bill (T-Bill). The whole money will then be concentrated in just one type of security. Unlike in UITF, if you bought the unit or units of the Fund, Your Php 100,000 being handled by the Fund Manager can bought 20 to 40 different securities. What is its advantage? Great advantage because with this, your money now have a greater chance to earn bigger. Since the focus is not on a security alone, the risk of loss for your money also decreases.

What is bought by the Fund Manager?

If you are busy people, probably you do not care what the Fund Manager bought with your money. But just in case you are curious to know where the Fund Manager is taking your money, then you have to go to the bank and ask for performance Fund Report. In this report you’ll know what does your fund manager bought, how long the investment is and what is the “historical returns” of such investment. Through this report you will have the idea where the money goes to. We are so lucky that we have internet nowadays. With the technology we have, you can instantly find some of this information online just by a click of a mouse button.

How do you know if your money is earning?

In case you buy the units of a trust, a Trust Certificate will be issued as a receipt. Others call this as COP (Certificates of Participation). For example if you buy Php 10,000 worth of units of the fund, you will see from the certificate how many units is the worth of your money. So if the value of the unit trust fund is Php 2,000, you will find 5 units equivalent in your certificate. And you will also see the NAVPU or Net Asset Value Per Unit. By NAVPU, you will know how profitable the fund you buy or not. To find out how much is the worth of your investment, you get the NAVPU for the day (today or yesterday is available but not tomorrow. It’s never a future date) you want. Then multiply this number of units indicated in your COP. So if you have 5 units from the COP that you bought last year, and today’s NAVPU for this fund is sold 2,300.00 per unit, the amount of your money will be: 2,300.00 x 5 = 11,500.00. Thus within a year, your earning is Php 1,500.00 just by passing time and doing nothing. Awesome isn’t? Let the money work for you. But in technical, you use the services of the Fund Manager and the entire Trust Group to earn the money.

Risks of investing to UITF

Same to every other business, there are also risks in investing to UITF. These are:

Interest Rate Risk – There is a possibility that the money will earn nothing if there had changes in interest rates. The interest rate is inversely proportional to NAVpu. So if interest rate of the fund skyrocketed, for example, it was being used to a security Bond, where there is a great chance to decrease the NAVpu, Therefore, the value of the unit will be low.

Market / Price Risk – UITF is affected by changes in the market price like the price in stocks market. The fluctuation of prices is caused by the changes in economy status of the country. Other reasons for fluctuations are occurrence of disasters, elections, etc. These events that can cause an increase or decrease of your NAVpu to either earn or lose your money.

Liquidity Risk – can decrease the amount of money you have in the time you pull it up to. For example you purchased units of the fund in the amount of 2,000 pesos per unit; there may be time that its unit price can be just Php 1,900 on the day of “redemption”. This usually occurs in short term investments.

Credit Risk / Default Risk - this can be experienced when there is a delay in payment from the party where the bonds, loans, and other forms of security where yhe money is lent. The non-payment of this money will also affect the price and have result to a Market / Price risk that will lower the worth of your earning.

These are only some of the risk that an investor can experience. But like to any other business, we sometimes have to take the risk to get “better returns” or income from our investment.

UITF ad 1

How to apply for UITF investment?

Now if you’ve decide to invest and you want to transfer your emergency fund, then just go to your chosen bank. But wait before you leave, make sure to have at least 2 valid IDs, ID pictures (2 × 2 and 1 × 1 sizes to be sure), and of course the money. Usually the bank will require you to open a savings account with them before you buy for investment units. That would be fine, as other bank product may offer you an “auto-debit” investment to help you preserved your investment. The minimum amount per units of a Trust Fund ranges from Php 5,000 to Php 10,000 depending on the bank. So when you buy, make sure to check the minimum maintaining amount or balance to open a savings account. There are banks with maintaining balance of Php 10,000. So if you plan to buy an investment worth 10,000 pesos units, you will need to bring at least Php 20,000 for you to avoid going back and forth.

If you buy units of a trust fund, you need to undergone the risk profiling. You will be given questionnaires to find out what your financial life goals are and what kind of investor you are. They will know your risk profile; either you’re a conservative, aggressive, or “moderate” investor. I discussed this in my article Know How To Invest Your Hard Earned Money.

Why do they need to know it? So they can put or invest your money where you will not worry and still able to sleep better. :)

Because if you’re the type of people who fear of losing money and restless by thinking of your investment, do not put your money in a UITF-Equity. You might have a heart attack once you’ve seen the ups and downs of the value of units you purchased. That is why it is necessary to know what kind of bank investor are you beforehand.

UITF Tips by Green Stickman™

A UITF-Equity will be effective if you just let your money for at least 5 years. Whether there is an increase or decrease of its unit price, do not pull out your investment. Within 5 years, you will see that even at a lower worth per unit price, you still gain and collect the amount of principal or capital with a better interest.

If you have saved an emergency fund in your Savings Account, withdraw a part of it and partially invest to UITF-Fixed Income Funds at lower value and numerous certificates. For example you have Php 50,000 part of your emergency fund; you buy 5 UITF certificates worth Php 10,000 each. Why? So if you might only need 20k for an emergency, you only need to pull out 2 certificates. While if you bought a single certificate worth Php 50,000 then it turns out that you need to pull out the whole investment, which will affect even the Php 30,000 that are supposed to be still profitable.

Of course, this still depends on the worth you want per certificate. If you are earning greater, you can have a better value of certificates.

And why do we need to transfer our savings? Just return to the basics that we need to be able to beat inflation (inflation is discussed in my article Know How To Invest Your Hard Earned Money)

Hope your knowledge on finance had level up after you read this article. In my next article I will discuss about Investing in a Mutual Fund.

And always remember, the harder you work to earn a certain amount, the hardest for it to save, invest and multiply.

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