Last Updated on October 12, 2019 by Marie Bautista
Do Mutual Funds really give the same opportunity to small investors as the big investors have in the stock market? Are Unit Investment Trust Funds the same as Mutual Funds?
You’re right! Mutual Funds (MF) and Unit Investment Trust Funds (UITF) provide small investors the same opportunities as they offer big ones. The difference in the possible returns to the investor lies in the investment policy and strategy employed by the Fund Managers. This is why it is important to read and understand the information memo issued by each Fund, and examine the names of the Board of Directors. Reputable people will not allow their names to be used by a fund or a bank that is not reliable. In any investment, talk directly to the people in charge of the companies you’d like to invest in. Understand how they have performed over the years and what their plans are.
Mutual Funds vs. Unit Investment Trust Funds
Mutual Funds are handled by a private investment company. It raises investment funds from selling ownership sales to institutional and/or individual investors. The funds received are then invested in either Equities (Stock Market) or Fixed Income Securities (Bonds ) or in both (Balanced Funds). A Mutual Fund is managed by an independent and professional management company. Read more on mutual funds like this alliabcebernstein funds results.UITFs are trust products of the trust division of a bank with a trust license. It is also managed by professional investment managers. Trust institutions are not part of banking operations. Thus, UITFs are not insured by the Philippine Deposit Insurance Corporation (PDIC). Trust institutions earn only through management fees and they have to give the client everything that the fund has earned. This is why trust funds usually perform better than bank investment, like savings accounts and time deposits.
- The entrance and exit fees of each kind of Mutual Fund and Unit Investment Trust Fund are different. You need to understand the fee structure so that you do not lose money unnecessarily. You may possible even increase your earnings. In most cases, funds held for two years or more do not have exit fees. The lowest initial investment for some Mutual Funds is P5,000. For UITFs, it is P10,000.
- Mutual Funds and Unit Investment Trust Funds have different types of investment option classifications. You can choose from equity, balances, and fixed-income funds. There are peso or dollar funds. each type has different rules, so it is important to ask the fund manager or the bank. An Equity Fund is mostly invested in the stock market, and therefore offers higher gains, but is also riskier. A Fixed-Income Fund (bonds or money market) is mostly invested in government securities and other fixed-income securities and therefore offers modest returns because it is less risky. A Balanced Fund is invested both in the stock market and in fixed-income funds. The returns here are moderate, but so is the risk.
- The customer service of each MF and UITF is different. The investor must ask and understand how they operate.
If you want to
- Learn how to create your personal retirement fund through the stock market .
- Learn to invest in the stock market wisely.
- Plus, read the 4 rules of making millions in the market.