I was asked earlier by a forum member to give tips or words of wisdom regarding UITF investing, based on my 9 years of experience in investing in UITFs. I would like to post my reply here also.
1. Bond Fund vs. Balanced Fund vs. Equity Fund
One thing I've realized after years of investing in UITFs is that, it's either you go conservative (subscribe to bond funds) or go aggressive (subscribe to equity funds) when investing. Stay on the conservative side during bear market (e.g., recession) and be aggressive when the market is bullish.
If you will choose balanced fund, there's a high chance that you'll also incur big losses if the market is really bad, since a large portion of a balanced fund is invested in equities (i.e., stocks). Compared to the losses of an equity fund, you may feel that the difference is not that significant, hindi rin masyado nagkakalayo. However, in a bullish market, the return from an equity fund can be much higher compared to that of a balanced fund. For example, the 2014 ROI of Security Bank's Peso Equity Fund is 48.29%, while the 2014 ROI of their Asset Variety (Balanced) Fund is 28.84%. If you invested 100K in 2014, you'll miss 19,450 Pesos in profit if you chose the balanced fund, sayang din, di ba? My opinion when investing on a bull market, susugal ka na din lang, sagarin mo na.
2. Past performance is not an indication of future return
You will often see this disclaimer in ads, flyers or websites offering UITFs and mutual funds. I would like to confirm that the statement is true. Let's take BPI Odyssey High Conviction Equity Fund as an example. In 2009, it gained 104.56%! Then in 2010, it ended the year with a 61.90% return. In 2011, it finished with a 22.28% return, followed by an 8.49% return in 2012. Then in 2013, it finished with -35.49% return! That's not a typo error, you read it right, 35.49% loss. Ouch! To be honest, I invested in this fund because of the good performance in 2009 and 2010. Good thing I pulled out my investment from that fund in 2013 (still with significant profit) because I needed money for my wedding. :P Talk about blessing in disguise. :)
3. It's so much easier to invest now
Investing in UITFs is much easier and more convenient now. You can even subscribe to funds and monitor prices online! Minimum investment amount has become more affordable too, so there's no reason why you should not try (unless the money you have is just enough for emergency fund).
MYPG will also be here to assist you in your investment decisions, by giving you weekly updates on Equity UITF Performance (published every Tuesday). I'll also share tips from time to time so make sure to always visit my site. :)
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