Personal Investments: Making Worthwhile Decisions
September 17, 2015

Saving is good, but you can do better. Here are the basics you need to know about investing.

One’s personal acumen for investment bank­ing is often overrated. What’s more con­cerning is that majority of Filipinos are not equipped with the proper knowledge to take care of their hard-earned savings.

When you are unsure about your investment and sav­ings strategy, the usual recourse is to do nothing. In fact, according to a recent Bangko Sentral ng Pilipinas (BSP) survey, only one out of four Filipino households say that they have savings for that proverbial rainy day. Troubling is the fact that this BSP survey found out that only 60 percent of this number actually deposit their savings in banks or in any kind of investment vehicle.

It’s a no-brainer that everybody should at least make an effort to save some cash. Unexpected things can hap­pen and they often happen during inconvenient times. So first things first. Everybody should save. Cut back on some non-essentials to free up some cash.

MUTUAL FUNDS VS. UITF: THE BASICS | Mutu­al funds and Unit Investment Trust Funds (UITF) are excellent ways of preserving and growing your sav­ings. These funds are perfect for those who do not have the time or expertise in investing different types of investment vehicles.

Mutual Funds and UITF’s are often spoken about to­gether because they are very similar in nature. Basically, these funds are investment vehicles where other inves­tors, big and small alike, form a much bigger fund han­dled by professional fund managers. These managers have the expertise and experience to reinvest the fund in a diversified portfolio of stocks, bonds, money market instruments, and other financial instruments that will grow the overall investment. Mutual funds are offered by investment companies while UITFs are offered by banks.

As mutual funds are offered by investment compa­nies, you become a stockholder when you buy a mutual fund share. You have the rights of a regular stockholder, including the right to vote and the right to receive divi­dends. UITFs are bank instruments offered by banks, and you’re buying investment units, not shares.

The price of a mutual fund share or a UITF unit is mea­sured by its current net asset value, or NAV. The NAV is the value of the assets of the funds after all expenses and liabilities are subtracted. The NAV is then divided by the number of shares or units to get the net asset value per share (or unit).

There are several advantages that come with investing in these funds. These funds are managed by profession­als who know what they’re doing, and managers whose daily concern is achieving the best possible returns to the fund and its investors. Mutual Funds are managed by a professional fund manager appointed by the invest­ment company, while UITFs are managed by the bank’s Trust Group.

Most offer a small necessary investment of less than Php10,000. This low initial investment entitles you to be­come part of a much bigger fund, with diversified invest­ments to minimize risks, managed by professionals. Funds are highly liquid, meaning investors can re­deem or liquidate their shares quickly. Coupled by their higher earnings potential, funds are also safe because of government regulations. Mutual funds are regulated by the Securities and Exchange Commission, while UITFs are monitored by the Central Bank.

Possibly the only disadvantage of investing in funds are the fees charged by its proponents. An entry and exit fee is levied by mutual funds, while UITFs are charged a management fee, which is a percentage of the invested amount.

TIME TO CHOOSE | Now that you know the basics, it’s time to finally invest your hard-earned savings in a fund that will help grow your money for future use. There is literally a plethora of funds and UITFs available on our local market. How to choose? While it seems a daunting endeavor, having a basic understanding of how these funds work will make choosing and deciding easier for the amateur investor.

Fortunately, information and past data about shared funds are easily available. A quick and painless trip to your banks would yield various literature on their avail­able investment instruments, and their staff would be more than willing to answer any questions and concerns that you might have.

The internet even has websites which report on lo­cal funds and their track record for the past few years. A word of warning though: some funds will boast of su­perior annual returns for the past year, so check their average returns for the past three years, at least. You want to choose funds with consistently above–average returns, not some fund whose returns look like Richter scale charts.

Consistent excel lence is what you want. You worked hard for your savings. Now it’s time to make it work for you. — (DG)


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