Investing in UITF vs VUL: Answering a Reader’s Question

Updated: December 21, 2021

Today, I’m sharing with you an email that I recently received. The sender is asking which is the better investment, UITF, or VUL.

Several people have also been asking me similar questions, that’s why I decided to answer it here today for everyone.

But first, let’s read the letter of Mrs. M below:

Hi Fitz.

I am in my early thirties, have started my own family, and yet striving to learn a lot on managing my finances. I have my savings accounts and direct investments in stocks through COL Financial since 2014. I use my credit card for some of my essential expenses but I manage to always pay in full on or before the due date.

Since this is the time of the year where employees have extra cash from the 13th-month pay, bonus, etc., I want (and made a promise to myself) to invest in UITF rather than spend on assets that will eventually depreciate.

I went to several banks (BDO, BPI, and Security Bank) in Makati to inquire about their respective UITFs. The customer service representatives (CSR) just made a brief explanation/description of the UITFs they offer.

As in, kung ano lang yung mababasa mo na description sa website nila, yun lang din ang sasabihin nila. At feeling ko (though this is just my personal observation), parang hindi prinopromote (or should I say, parang dinidiscourage) ang UITFs.

There was even one CSR who said to me, “Ma’am, wag na lang sa UITF kasi mataas na ang NAVPU nun, lugi ka. Mas maganda yung investment & insurance (referring to VUL) kasi piso (or less than) palang yung NAVPU.”

Then the CSR called the bancassurance officer to discuss and encourage the VUL.

In this regard, my questions are:

1. Okay pa din ba mag invest sa UITF kahit mataas na ang NAVPU? For example, the fund started in 2005 with an initial NAVPU of P100, and now more than 10 years later, the NAVPU is at P175. I understand na dahil matagal na yung fund, syempre tumaas na ang NAVPU nun.
2. In connection to number (1), should I invest in newly introduced UITFs para mababa pa lang ang NAVPU? Kaya lang, upon my survey of UITFs of different banks, parang wala naman newly introduced UITFs.
3. Instead of investing in UITF, do you think it would be better to get VUL?
4. Which bank/s and/or bancassurance/insurance company/ies do you prefer?

By the way, I consider myself to be a moderately aggressive type of investor. My investment horizon is estimated at 7-10 years.

Mrs. M.

First of all, I find it disappointing that a lot of bank staff and officers are still uneducated about their own products.

Second, worse than their financial ignorance is their assumption that they’re helping their clients with their misinformed investment advice.

I really hope that this practice changes soon. And more importantly, let this be a reminder of how essential it is to learn about money management and investments.

There are many out there who dispense financial advice (and I’m one of them). Don’t blindly follow what we say because the truth is — “Personal finance is personal”.

This means that it’s only you who truly knows your financial needs. And with proper financial education, you can become your own best financial adviser.

Anyway, let’s now go back to the questions of Mrs. M.

1. Okay pa din ba mag invest sa UITF kahit mataas na ang NAVPU? For example, the fund started at 2005 with an initial NAVPU of P100, and now more than 10 years later, the NAVPU is at P175. I understand na dahil matagal na yung fund, syempre tumaas na ang NAVPU nun.

It’s wrong to compare the Net Asset Value Per Unit (NAVPU) of different UITFs because investment funds (which include mutual funds) are independent of each other.

Moreover, you cannot just claim that one fund is expensive solely based on its NAVPU. This also means that a fund with a low NAVPU is not necessarily a better investment.

Let me illustrate my point.

Below are the NAVPU of 3 Equity Funds back in December 1, 2011:

• BDO Equity Fund: 256.6889 per unit
• BPI Equity Value Fund: 104.46 per unit
• Security Bank Peso Equity Fund: 1.314624 per unit

As you can see, the NAVPU of Security Bank is sooooo cheap at only P1.314624 per unit. Meanwhile, the NAVPU of the BDO Equity Fund is sooooo expensive if you compare it with the other two.

But let’s say that you have P150,000 back then, and you invested P50,000 on each of the three Equity Funds. Then you’ll have the following number of units:

• BDO Equity Fund: 194.7883 units
• BPI Equity Value Fund: 478 units (they don’t allow partial units as far as I know)
• Security Bank Peso Equity Fund: 38,033.6887 units

Now here’s the interesting part. Let’s say you decided to redeem all your investments last December 1, 2016. Below are the NAVPU of each fund on that date:

• BDO Equity Fund: 409.6892 per unit
• BPI Equity Value Fund: 149.82 per unit
• Security Bank Peso Equity Fund: 1.946293 per unit

How much money are you going to get from each investment? Below are the results:

• BDO Equity Fund: P 79,802.66
• BPI Equity Value Fund: P 71,613.96
• Security Bank Peso Equity Fund: P 74,024.70

Your BDO Equity Fund investment made more money, despite having the highest NAVPU. So now you know why it’s useless to compare the NAVPU of different funds.

Instead of the NAVPU, what you should compare is the historical performance of each fund. What is their compounded annual growth rate for the past (n) years?

You can also ask if the fund has been consistently meeting its target price year after year. And if possible, research who are the people managing the fund and making the investment decisions.

Again, stop comparing the NAVPU (and the NAVPS of mutual funds) against each other.

To answer the question… yes, it is always a good time to invest, especially if it’s long-term (more than 5 years). Don’t let the price of the NAVPU scare you away from investing.

Further reading: How Do You Make Money From UITF Investing?

2. In connection to number (1), should I invest in newly introduced UITFs para mababa pa lang ang NAVPU? Kaya lang, upon my survey of UITFs of different banks, parang wala naman newly introduced UITFs.

I would rather invest in UITFs (and mutual funds), who already have years of performance because I can check if the fund is well-managed or not.

If there’s a new UTIF (or mutual fund) available, which you’re interested to invest in, then ask for the fund’s objectives, investing strategy, and who the fund manager is.

If the fund’s objectives and investment strategy are aligned with your financial goals and risk tolerance, and you trust the people who will be managing the fund, then you can safely invest in it.

Further reading: Fast Talk Answers to UITF Questions

3. Instead of investing in UITF, do you think it would be better to get VUL?

NO, it’s not better.

If you need life insurance, buy term insurance — it’s cheaper.

If you need investments, invest directly in a UITF, mutual fund, bonds, or the stock market — you’ll earn more.

Now, if you need both, then get them separately — you’ll have higher control of your money.

Learn more: Why You Should Not Get a VUL if You Need an Investment

4. Which bank/s and/or bancassurance/insurance company/ies do you prefer?

In our illustration above, while the BDO Equity Fund had the best performance, it’s important to note that the difference isn’t really that big (only a few thousand pesos).

That’s because they all invest in the same market — the Philippine economy (and stable global economies).

The money that the fund managers handle is by the billions. Thus, they will never invest a large portion of the fund in extremely risky economies.

So what’s my point? Don’t stress too much about choosing where to go.

Open an account in the bank that’s most convenient for you. Get life insurance from a company where you personally know someone.

More importantly, invest where it is most accessible to you so you won’t get lazy, and it would be easy and habit-forming. Because investing is not a one-time thing that you do.

Finally, some concrete advice for Mrs. M.

First, consider investing in mutual funds through COL Financial because you already have an account with them anyway. Call their customer service for assistance.

Second, invest in the UITF products of your own bank — the bank where you already have a savings account.

Lastly, because your investment horizon is 7-10 years, then you can consider investing in an Equity Fund. But please define your long-term financial goals so you’ll know exactly when to redeem your investment.

Final Thoughts

I hope you learned a lot from this post. If you know someone who works in a bank, then kindly share this article with them.

We need to make them aware that they should financially educate themselves so that they can offer better service to their clients.

I know this has been a long post, so thank you for reading.

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