Reader Mail #17: Analyzing The BDO Peso Balanced Fund

Posted by Fitz Villafuerte under Investing on September 16, 2010

For today’s Reader Mail, I will answer one of the comments left by a reader in one of my posts about the BDO: Unit Investment Trust Funds.

“MANROJ”, told me about his BDO Peso Balanced Fund investment and asked for advice on what he should do.

I am certainly not a certified financial analyst nor a wealth management adviser, but I hope that my take on his concern, which is purely based on personal opinion, could help in some way.

And of course, in the end, one should always seek professional help when it comes to such money matters.

With that said, let me now share what he wrote:

I invested P400k last Nov. 2007 at the BDO Peso Balanced Fund. It steadily declined as time passed and it is only now that I am starting to see satisfactory results. The NAV at that time was 2,470.47, and as of Sept. 13, 2010, the NAV of the Peso Balanced Fund is already 2,610.84. This means I already earned a little over P22K.

My question is, how do you see the trend for the BDO Peso Balanced Fund? Do you think this will steadily increase in the months to come, or should I already pull out my investment while I am still at a gain?

First of all, I would like to congratulate him for the courage and patience he’s shown in his investment. Seeing the NAV go down with each passing month can be nerve-wracking and I know some people who would have pulled out of the investment with that scenario.

With medium to high risk investments, having a long investment horizon is really important. Having the ability to “ride the market” increases your risk tolerance and it’s something that everyone should remember when going into paper investments.

Now, let me go into detail to MANROJ’s concern, without getting too technical for the benefit of those who are not familiar with how UITF’s work.

In November 2007, the NAV for the BDO Peso Balanced Fund 2,470.47. This means with P400k, he was able to buy 161 units which cost him P397,745.67.

On September 13, 2010 – the NAV is 2,610.84; if he sold those 161 units back then, he would have received P420,345.24. This means he would have earned P22,599.57 from the investment.

Because of his “bad” experience with the fund performance from the past 3 years, he is tempted to sell those units now that it has finally, earned. Do you think it’s a good idea for him to really sell now?

The very first question he needs to answer is what is his investment objective. Where is he planning to use the money? Is it to buy a car? For a vacation? Downpayment for a house?

Knowing this would really help determine if the BDO Peso Balanced Fund is the right investment to achieve those goals. And assuming that it is, then having a specific amount in mind will help in determining when to “cash out”.

For example, if his objective is capital appreciation to start a business with a determined capital of P500k, then he should cash out when the NAV reaches 3,105.60.

And that brings us to the next question, when will it reach that value?

The answer is, nobody can tell for sure, sorry. It can be in the next year, in a couple of years or more.

But in any case, let’s take a look at how the BDO Peso Balanced Fund has performed since 2004 (source):

bdo peso balanced fund Reader Mail #17: Analyzing The BDO Peso Balanced Fund

MANROJ bought into the fund during it’s peak, perhaps after seeing that it has continuously gone up for the past years, he thought it would continuously go up. But unfortunately, the price has gone down and it was only after January 2009, that the NAV has continuously gone up again until today.

And as you can see, it is now approaching resistance to its previous high of 2,627.61 which occurred last October 2010. If the price goes higher than that, then it would most likely continue to go up.

If it doesn’t, then it will go down to around NAV 2,000.00 (green line) – afterwhich, the direction could possibly go up or down, which will largely be dependent on the “emotion” of the investors to the economy.

So what should MANROJ do?

  • Define an investment objective, then possibly talk to a BDO wealth manager to determine is his objectives can be achieved by the fund.
  • Assuming that the BDO Peso Balanced Fund can meet his investment objectives, then he should monitor its NAV to see if it will break 2,627.61 or if it will hold above 2,545.33.
    • If it goes higher 2,627.61; then stay with the fund for it would most likely go up more.
    • If it goes lower than 2,545.33; then he should pull out the fund. Why 2,545.33? Because that will give him around the same income if he just put the money in a regular savings account with 1% annual interest.
  • Study peso cost averaging.

The last piece of advise is something MANROJ should consider. In my opinion, the best way to invest in paper assets is to do it little by little, on a regular basis. Putting all the 400k in one go was a bad decision (sorry).

If he invested only 10k with the BDO Peso Balanced Fund but did it every month from November 2007 until August 2010, then he would have earned more than P135k if he cash out at September 2010 with NAV 2,610.

But that’s in the past now, the lesson here is to learn from that mistake and focus on the future. icon biggrin Reader Mail #17: Analyzing The BDO Peso Balanced Fund

Again, I am not a technical analyst and this is just based on my opinion and a personal strategy I use to look at investment performance.

To my readers, please feel free to give your own interpretation of the graph, point out mistakes in my calculation and dispense your own advise so we can have a healthy discussion about this. Thanks!

Learn more investing strategies, specially more articles detailed about cost averaging by subscribing to Ready To Be Rich.

Recommended Reading:
Mutual Funds and Unit Investment Trust Funds, What’s the Difference?

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30 Responses to “Reader Mail #17: Analyzing The BDO Peso Balanced Fund”


  1. SoNn says:

    In hindsight, he should have cut his losses when his investment went down (say, 10%) and then reinvested (via cost-averaging) the proceeds.

    MANROJ would have made a killing had he invested additional funds during 2008 & 2009. But as wise men say, “look at what you have, not what you had”.

    Moving forward, MANROJ should prolong his profits until he meets his investment objective or target price. Should a downtrend like that in 2008 happen again, then he should take the profits and cost average the proceeds.

    That’s what I would have done or what I would do if I had that much funds. my 2 cents =)

  2. Pia says:

    Just to share what I would do. How I will invest my Php400K will depend on my investment objective. Assuming that the money is for my investment fund then I would: Put 50% in an equity mutual fund. Since the stock market is on an uptrend, I would do cost averaging. Invest my Php 200k monthly and wait for my money to grow in the next 5, 10 years or even longer!

    Php 100k I would invest in UITFs like the peso bond fund or money market fund for short-term investments while the remaining Php100k would be invested in a mutual bond fund which is also long term.

  3. Pia says:

    Hi Fitz!

    My first time to visit your blog and I am truly inspired by your story. I hope that I can achieve even just a little of your success towards financial freedom.

    It’s an honor knowing people like you. So cheers to your success!

    Pia

  4. MANROJ says:

    Thank you so much for this detailed analysis and advice, Fitz, and also to SoNn. This will definitely help a lot in my decision regarding this investment. Will keep you posted if ever I decide to pull out and tell you how much I earned.

    Cheers!

  5. Fitz says:

    @SoNn, long time no see friend! Top 10 EIB 2008 pa ata tayo huling nagkita. Hehe. Anyway, thanks for the advise – I found that helpful as well.

    @Pia, welcome to my blog! And likewise, very good suggestion – yeah, diversifying investments is also a great way to minimize risks.

    @MANROJ, glad we were able to help! All the best always. :D

  6. SoNn says:

    Hey Fitz, yep, it’s been a long time. Wala na ung ibang blog ko. I just keep a personal blog na di ko rin masyado naa-update. About the advice, I can relate kasi I got burned din. Tapos di ako nag-cost average during the recession days. I would have made a lot of money too if I did. hehe. lesson learned. experience is the best teacher talaga. =)

  7. I just would like to share my experience in investing in BDO UITF. I started investing in the BDO Equity Fund September 2009. I then placed additional investments last January, February and May of this year. The total amount I invested is only Php 60,000.00 which bought me a total of 365.560 units. Lucky for me because the NAVPU keeps on rising since I invested and as of today NAVPU is at 239.3796, meaning my Php60,000 is now worth P87,506.62.

  8. dyeni13 says:

    Hi to everyone,

    It’s my first time here, i found your articles inspiring..i also noticed that most of you are into investing, just want to share you my thoughts on investment, it will depend on your investment horizon (let’s say you need you money back within the next 3-5 yrs or 7-10 yrs), and also consider whether what kind of an investor are you? ( risky, moderate or conservative) if your investment horizon is too short you better just put your money in bank for short term goals, but if your willing to invest it in a long term basis, then why not try investment link life products, in which you are hitting 3 birds with one stone – savings, investment with protection benefits (critical illness, death & disability), it works like this , a certain portion of your premium will used in buying units such as equities, govt bonds, stocks,or a mix of both,
    but you will be the one to choose which fund you like, and you can even switch from one fund to another,there said partial and withdrawable amounts at lowest is 4%, current 8%, and highest is at 10% compounded interest, what’s beautiful about it is that you have sickness and death benefits, unlike with mutual funds there’s none and its estate tax free

  9. MANROJ says:

    hi pinoy wealth builders! thanks for sharing your experience with bdo’s uitf.

    if i may ask, why did you choose the equity fund and not the balanced fund or any other kind of uitf? at the current state of the bdo equity fund, would it be wise to invest in it right now?

    thanks and kind regards.

  10. Cris says:

    Fitz,
    Thank you, I really love to read your post..
    Keep it up!

  11. silent_investor says:

    MANROJ – I too had a similar experience but with a mutual fund. I invested in November 2007 and saw my investments go down over the next two years. What I did was to forget all about it, didn’t even read the statements. Today, it’s up around 50%. I’m still invested because I have earmarked it for my child’s high school education which is a good 10 years away. Having lived through the ups and downs of the market, I’ll definitely pull out my investment the next time we have downturn then use cost averaging to get back in as many here have suggested.

    With regard to the BDO Balanced Fund versus Equity Fund, though both are high risk due to having stock components, I find the Equity Fund to rise faster than the balanced fund. Thus, its either I go bond fund for safety or equity for bigger gains. The balanced fund does not suit my needs because it seems to drop fast but rise slow. So, for the same amount of risk, go for the one that can give you the bigger potential gain.

  12. MANROJ says:

    hi silent investor! thank you very much for the great insight.

    i actually am interested to also invest in bdo’s equity fund. right now, i have some funds (350k) that is deposited in bpi’s special deposit account, and i only earn something like P700 a month. i’m thinking of putting this spare fund in bdo’s equity fund. i’ve reviewed the performance and the charts and it seems like the fund is on a steady rise. but do you think the bdo equity fund is at a very high level right now and it is not a good time to invest in it right now?

    i am still keeping my bdo balanced fund and am still monitoring the daily nav. you’re right, the equity fund is growing faster that the balanced fund. i will probably pull out when i get a 10% return.

    hi fitz! what do you think about this? thanks and i’m really learning a lot from your articles. you’re such a big help!

    kind regards.

  13. Hi!

    Great insights. I would just like to add that given the current bull market and the positive prospects (according to analysts) for the Philippine Stock Market for 2011, it would be wise to stay invested in the Balanced Fund. By the very nature of the fund, part of it is invested in Fixed Income instruments (T-bills, Corp Bonds) and part is invested in the Philippine Stock Market. Therefore, if the Stock Market continues to perform well then well-managed Balanced Funds should rise with it as well. (Citiseconline has projected the PSEi to reach the 5,000 level by the end of 2011.)

    The difference between a Balanced Fund and an Equity Fund is the percentage of the total fund amount that is invested in the Stock Market. For an Equity Fund, almost all of the funds are invested in stocks, therefore making this type of fund riskier. As for a Balanced Fund, the fund managers are not allowed to invest more than 60% of the funds in stocks. Therefore, theoretically, if the stock market plunges, the fund is less affected compared to an Equity fund. Check your fund’s “Portfolio Mix” to see where your fund managers have chosen to invest your money in. I’ve included the link for the BDO Balanced Fund below.

    BDO Balanced Fund

    *Upon checking, I was surprised to see that BDO actually invests around 70% of the fund in equities. I don’t know if this is a violation or if the limit has been increased by the TOAP UITF council.

    I’ve written about the different types of UITFs as well. If you’re interested, please check out this link.

    Happy Investing! ^^

  14. Hi Manroj!

    BTW, you mentioned that you have a BPI SDA. Instead of investing in BDO, you might want to check out the ALFM funds in BPI. ALFM funds are Mutual Funds and they usually rank among the Top 10 performers in terms of return. The corresponding Balanced Fund is called ALFM Growth Fund while the corresponding Equity-Based fund is called Philippine Stock Index Fund. I think Mutual Funds generally perform higher than UITFs because they have more capital to invest.

    I’m not from BPI btw, I just prefer their mutual funds based on my own experience.

    Good luck with your investments! Hope you achieve your financial goals.

  15. Hi Money Magnets!

    I’m so glad to finally meet someone who acknowledges that mutual funds are great investments. You’re right, I invested in ALFM growth fund last year and my return is already 57% to-date. My other mutual fund investments are up by at least 50% as well. I am also doing monthly cost-averaging.

    Need your opinion on my MF investments.  I  started investing last year in Philequity fund, Philam Strat Growth fund, ALFM Balanced Fund. Plus small investments in Bond fund and Fami balanced fund. I have a game plan which is long-term investment. These investments are part of my retirement fund – at least 10 years.  I mean no one knows what’ll happen in the future but have you been investing longer than I did? If so, are you satisfied so far?

    Your thoughts please.

  16. MANROJ says:

    Hi Money Magnets!

    Thank you so much for valuable advice. I would just like to ask if you could provide me the link to the BPI site where I can monitor the ALFM Growth Fund. FYI, I monitor my BDO placement thru the Bloomberg site: http://www.bloomberg.com/apps/quote?ticker=BDOPBAL:PM

    Also, is now a good time to transfer my money from BPI’s SDA to the ALFM Growth Fund?

    Thank you very much and I really appreciate your help!

    Cheers,
    MANROJ

  17. Hi Pia! Hi Manroj! Hi Fitz!

    Fitz, sorry to be using your site as a discussion board. I hope you don’t mind. Thanks.

    Hi Pia! I’ve been investing in Mutual Funds since 2004. I started with the less risky Fixed Income types and then ventured into Balanced funds and Equity-based funds. I’ve invested in UITFs as well. I’m very much satisfied with how the funds performed over time but right now though I’m concentrating on trading and investing in the stock market. It’s good that you’re practicing cost averaging. It definitely works! Invest for the long term but don’t forget to monitor the economic climate as well so you can withdraw your funds and transfer them to less risky investments in case another worldwide economic crisis occurs. Some analysts have said that the bull market will likely last for 5 years! But like you said, nobody can really be sure as to how the future will turn out. So it would be best to be prepared at all times. Happy investing! I hope you achieve your retirement goals.

    Hi Manroj!

    ALFM Growth Fund links:
    http://www.bloomberg.com/apps/quote?ticker=ALFMGRW:PM
    http://info.bpiexpressonline.com/bpiprod/BPIimage.nsf/Images/InvestmentQPR/$File/D.pdf

    BPI UITF and ALFM Performance Page
    http://info.bpiexpressonline.com/bpiprod/prodserv.nsf/Investment+Funds/InvestmentQPR

    As for your last question, if it were me, I would wait for the stock market to correct (to go down) before I place my investments. But nobody really knows when the big correction will happen and delaying your placement might cause you to miss out on some hefty returns. So it would really now depend on your risk appetite. The best thing to do would probably be to apply Cost Averaging as Fitz suggested. If you’re itching to buy, you might want to invest only 30% of your funds for now. And then monitor the fund for a couple of months and then invest more into the fund as the months progress.

    If you don’t really have the means to monitor the market, I would go for Cost Averaging at fixed intervals – maybe monthly, bimonthly,quarterly, or as your income would allow it. Note that the longer you stay invested, the lesser the risk would be. So invest for the long haul. That’s it. Good luck!

    These are my personal opinions only. Please invest at your own risk.

  18. MANROJ says:

    Thank you so much, Money Magnets! You have been very helpful, and I will definitely consider your advice.

    All the best!

  19. MANROJ says:

    Hi again, Money Magnets and Fitz!

    This is what I plan to do. Keep my 400k in my BDO Peso Balanced Fund and wait for my investment to further go up. As of this time, I have already earned 40k and hope the market further improves in the next few months.

    For my extra 300k, I plan to put 100k in ALFM Growth Fund, 100k in BDO Equity Fund, and the last 100k in Union Bank’s Equity Fund. I heard that Union Bank’s Equity Fund is also a good investment.

    What do you guys think about this? Any comments or better suggestions?

    Fitz, I really owe you a lot for this site. You are heaven sent!

    Cheers to all!

  20. Hi Money Magnets

    Thanks for the reply! So you’ve been investing since 2004. May I know what you did with your MF investments during the global crisis? Did you transfer them or just them be? If you did the latter, I would assume that you have a specific financial purpose for not withdrawing since you do not need the money.

    That’s great news on your stock market investing! I am also doing the same thing. Started with safe investments then moving to riskier ones.

    Happy investing as well! I know we will achieve our financial goals! :)

    Cheers to our success!

  21. Hi Pia!

    Luckily, before the Global crisis hit, I had to move cities so I was able to withdraw my balanced fund. As for ALFM Peso Bond Fund, I just left it as is. I really didn’t mind that it wasn’t performing that much for that year but I wasn’t losing as well because I already had considerable gains the past 3 years. I did eventually withdrew it and transferred it to a Balanced fund. I made the mistake of investing in the ING Phil. Dollar Bond Fund around June 2007 though. It was losing a lot in 2007 but I’m glad I didn’t touch it. It’s one of the best performing dollar-based UITFs right now. I’ll write about it in my blog soon. Watch out for it. Thanks for following by blog by the way. ^^ I’ll be checking yours from time to time as well ^^

    Hi Manroj!

    You got that right. Year to date performance of the Union Bank Large Cap Philippine Equity fund is the highest among all equity-based funds in the market as of October. It’s a whopping 78.91%! But like they say, past performance is not indicative of future performance so better still to regularly monitor them. If you’ve got dollars to invest, I’ll be writing about where I put my dollars in my blog. Hope to see you there as well.

    Thank you.

  22. doc lopez says:

    Hi,

    I just want to ask, if for example I have 50,000, where should I invest this money? I saw the brochure of BPI and the minimum amount will be 100k if I’m not mistaken .. I would greatly appreciate ur advice(s).

    BTW I’m a newbie w/ investing. Care to share some tips?

  23. Hi Money Magnets!

    Good for you! I’m really glad I read Fitz’s post and the comments here. Got it! Looking forward to your blog posts!!! :)

    Thanks Fitz for posting this!

    Cheers to our success!!! :)

  24. MANROJ says:

    Thanks again, Money Magnets! I have one last favor to ask. Can you provide me the link in Bloomberg for Union Bank’s Large Cap Equity Fund?

    I compared the 3 charts, (BDO Peso Balanced Fund, BPO Equity Fund, and ALFM Growth Fund) and it shows that the biggest earner is the ALFM Growth Fund, followed by BDO Equity Fund at a close second.

    I would just like to see the chart of the Union Bank Large Cap equity Fund, if it’s available.

    Thanks for all the help and valuable advice.

    Kind regards.

  25. chris dumlao says:

    sir,,,tanung ko lang po,,paano po ba tumatakbo talaga ang UITF?kelangan b every month bibili ka ng unit..or for example…5,000 investment mo….pwdng ganun lang for couple of months….

  26. Hi doc Lopez, I believe BPI has lowered their minimium investment requirement to 50k already. For investment tips, read this blog, and my blog ^^

    Hi Pia! Kampai! ^^

    Hi Manroj, sorry for the late reply. I’m not familiar with Union bank funds. Search for their site in the web, look at the portfolio summary, and it should be written there. *Not all have a Bloomberg ticker, btw* Hope you find it. ^^

  27. tsinita says:

    hello everyone, especially Fritz. I was actually looking all over the web for investing tips since I’m free today( the very few times i’m free)when i cahnced on this site. I’m in need of some info/advice on how to invest. Look, I went home for my holiday last July and left some amount in my ATM account with BDO (newly opened). I just went to the bank and opened an ATM account, was so busy and in a hurry and didn’t have the time to inquire more. I left my ATM card with my daughter ( not the PIN). Now, I am convinced of everything I read in your site about the BDO/BPI etc. investment funds. I have about 500K in that ATM account and it would be idle until i go home again next year. Is it really wise at this moment to invest in these funds (?)?. If, so, then I could instruct my daughter ( divulge to her my ATM PIN, of course) to invest the money for me. Is there a need for monitoring, as i read from the other posts? or I can just invest and leave it there …and see to it myself when i’m home? My daughter is young and am afraid she may not be able to monitor it if need be.

    thanks much…I’ll be visiting this site more often from now…you really are very informative. thanks guys.

  28. gerkikay says:

    Hi Fitz! Your posts are very helpful to a newbie (or dummy) like me! I am exploring BDO’s UITF and now I have a better understanding of what it really is! The people from the bank who are supposed to explain doesn’t know what they are saying! Thanks and expect me to come here more often! Take care!

  29. Tholits says:

    Hi Fitz,

    Kindly explain further your statement
    “If he invested only 10k with the BDO Peso Balanced Fund but did it every month from November 2007 until August 2010, then he would have earned more than P135k if he cash out at September 2010 with NAV 2,610.”

    How does small frequent investment gain higher return in the long run against one time big time investment? Appreciate if you explain using sample computation. Thanks

  30. Fitz says:

    Hi Tholits,

    That investing strategy is called cost averaging.

    Small frequent investments allow you to buy more units when the price is down, and less units when the price is up. Thus, in the end, your average price is relatively low.

    When you do a one time big time investment, you really don’t know if you bought it when the price is up or down… unless you really spent time to study the market.

    For “busy” people who just wants to invest, cost averaging helps in minimizing your risks.

    You can read more about cost averaging in my series of posts which starts here:

    How To Do Cost Averaging

    The post talks about the stock market, which is on the basic level, works the same as UITFs.

    Reply back or email me if you need more clarification on this. :D

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