Which Is Better UITF or Mutual Funds?

I tend to get asked this question a lot. And the common answer is neither, both or it depends on the fund.

You can actually compare a Unit Investment Trust Funds against a Mutual Funds as long as they're both invested in the same asset class (ex. they're both equity funds). It doesn't seem helpful at all to draw a line between these two types of investment vehicles.

In reality of course, each has their own advocates. It's nothing like debating VUL vs BTID, which can be contentious. But usually people do have their own preference.

Some like Mutual Funds because, in this setup, growing the fund is the only reason for the company's existence. And it's not unreasonable to expect that the best fund managers will have their own funds, rather than work in a department in a bank. (But to be fair, if the bank paid well, there's no reason not to work there either).

Another common reason cited is that it gains more than UITFs. Returns of course vary greatly, and we can't generally say most Mutual Funds will give better returns than most UITFs. But that isn't a totally baseless assumption. PhilEquity (a mutual fund) pretty much seems to have the best returns over the longest time period.

But in the end, it seems all those reasons boil down to one common theme: the potential for greatest returns.

Personally I prefer UITFs. For a few reasons: I can buy fractional shares; that means all money I put in is invested right away, even if that last peso bought just a 0.0001 unit. (Although maybe some mutual funds might have this feature as well.)

I also like that UITFs tend to have lower fees and no entry/exit fees. More of my money gets invested and grows.

But mostly I like that there are a lot of bank branches, making it more convenient to make face-to-face transactions if needed. I can also transfer money from my bank account to my investment account online. (To be fair, some MFs can be paid as bills via online transaction as well.)

But mostly, my reasons boil down to two related things: efficiency and convenience.

So maybe UITFs really are better than MFs - or MFs are really better than UITFs; it just depends on your personality.


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