Do You Know Where to Invest Your Money?

I'm into investments nowadays. Lately, I have been investing in mutual funds (MFs) and unit investment trust funds (UITFs). Basically, both are forms of collective investment schemes that pool money from different investors and invest it in stocks, bonds, short-term money market instruments, and/or other securities. There ends their similarity. As to their differences, I took the liberty of reposting the comprehensive explanation found at a financial blogsite (www.pinoymoneytalk.com), which I have been avidly following.

• Offerer. Mutual Funds are offered by investment companies independently registered as such. Therefore, when you buy a mutual fund share, you become a stockholder of that company and you acquire the rights of a regular stockholder, including right to vote and right to receive dividends, among others. UITF, on the other hand, is a trust product of banks. When you buy a UITF, you buy investment units, not shares of the company. Therefore, you do not acquire shareholder rights in that bank. A UITF, although a bank product, is not a deposit product which means it is not covered by the Philippine Deposit Insurance Corporation (PDIC).
• Fund Manager. In mutual funds, money is entrusted to a full-time professional fund manager appointed by the investment company. In UITFs, money is managed by the Trust Group of the bank.
• Price. The price of an MF share or a UITF unit is measured by its current net asset value (NAV). The NAV is simply the difference between the values of the fund’s assets less total liabilities. This total NAV is divided by the number of MF shares or UITF units outstanding. In the case of mutual funds, this is called NAVPS (Net Asset Value per Share) and in the case of UITFs, is called NAVPU (Net Asset Value per Unit).
• Fees. Investments in mutual funds are charged sales loads, which may be in the form of entry or exit fees. Entry fees are outright expenses charged prior to opening a mutual fund account. Exit fees, or redemption fees, are charged when shares are redeemed and converted to cash. UITFs don’t have entry or exit fees, but are charged a management or trust fee, which is usually a certain percentage of the invested amount.
• Applicable Law. A specific law called the “Investment Company Act of the Philippines” governs mutual fund companies. UITF products, on the other hand, are not governed by any specific law at present but since they are offered by banks, they are still under Philippine banking laws.
• Regulatory Body. Mutual funds are registered companies, therefore, they are regulated by the Philippine Securities and Exchange Commission (SEC). UITFs, as bank products, are regulated by the Bangko Sentral ng Pilipinas (BSP).
• Sales Agents. To be able to sell mutual fund shares, a person must be a Certified Investment Solicitor, a license given by the SEC to people allowed to sell mutual funds. UITFs, on the other hand, are offered by people who may or may not have the SEC license. These are usually staff in bank branches.

I know I should have started investing on these ventures. But it's never too late. I am optimistic that in the next two to three years, I shall reap the fruits of my investments.

If you are looking for venues to invest your hard-earned money, try these two investment products. Of course, knowledge is power.  You have to do your own research before going into any of the two because there are inherent risks involved in it. You have to assess first your appetite for risk before you decide to part with your money. As for me, I'm a moderate risk taker, meaning I can take some loses in some months hoping that I can recoup my investments in two to three years. And I know I can.