Unit Investment Trust Funds (uitf)

[tacamonchi]

My uitf officer texted me this pm that my navs went down further than yesteday's drop. baka 4% na lang ang annualized returns. Just waiting for the UITFs to stabilize (wishful thinking ba?) before i pull out and deposit in the rural banks that are now giving me 20% per year, net of tax. Mali yata ang pasok ko sa UITF- wrong timing....

[Dr_PepPeR]

UITFs are intended to have long term investment horizons, most will have at least one year. Annualizing the ROI at this point, especially if you are doing this YTD is not indicative. In fact, annualizing the ROI is not done by any sane bank because it can be quite misleading. If you are the type who shifts investments because you think the market will move somewhere on a daily or even on a weekly basis, don't go into UITFs. You are simply second-guessing the investment manager. It might be better to invest it yourself directly, at least you get everything net instead of paying part of your investment income as trust fees.

[Guest lene]

UITFs are intended to have long term investment horizons, most will have at least one year. Annualizing the ROI at this point, especially if you are doing this YTD is not indicative. In fact, annualizing the ROI is not done by any sane bank because it can be quite misleading. If you are the type who shifts investments because you think the market will move somewhere on a daily or even on a weekly basis, don't go into UITFs. You are simply second-guessing the investment manager. It might be better to invest it yourself directly, at least you get everything net instead of paying part of your investment income as trust fees.

 

I agree with Dr. Pepper. Last year when the bond prices fell , a lot of people panicked because when they bought the UITFs earlier , they were enticed by the seemingly high ROI's which were annualized. Unfortunately, not all banks were able to explain the product properly to clients ( in most cases, even the branch officers didn't understand the product very well and sold it on the basis of "returns" ). Nowadays, historical returns given are on an absolute basis.

 

If you can help yourself,stop looking at the price daily.If you bought the UITF today,look at it again in 6 mos or in a year's time. Fluctuations are normal considering the marked to market valuation of UITFs but over a long period, you tend to ride out these fluctuations.

[sunking]

I agree with Dr. Pepper. Last year when the bond prices fell , a lot of people panicked because when they bought the UITFs earlier , they were enticed by the seemingly high ROI's which were annualized. Unfortunately, not all banks were able to explain the product properly to clients ( in most cases, even the branch officers didn't understand the product very well and sold it on the basis of "returns" ). Nowadays, historical returns given are on an absolute basis.

 

If you can help yourself,stop looking at the price daily.If you bought the UITF today,look at it again in 6 mos or in a year's time. Fluctuations are normal considering the marked to market valuation of UITFs but over a long period, you tend to ride out these fluctuations.

 

Hear hear!

 

Real-life example:

 

BDO balanced fund from last year April - 1622.xxxx NAVPU

Right now - 22xx.xxxx (and that's with the downturn recently)

 

Only reason I'd actualize profit: if I had more to put in (but I'm saving up for a trust/life product)

 

Only wish: that I'd bought earlier than April heheheheh! I check the NAVPU's usually quarterly, around the time they post their reports.

[tonyp]

When I mentioned earlier about annualizing it was intended to be used as a tool in keeping track of your investment.

 

What if you got in Day 1 when NAV’s are, say at 110.25, and you went back on Day 90 (end of the holding period) you realized that the NAV is only 111.00.

 

What could have happened? A scenario like this may have happened: at Day 60 it may have peaked at 112.00 and eventually slide to 111.00 at Day 90 due to factors beyond the control of the investor. This happened in 2006.

 

In my own experience last year, I was able to get out when it started to slide and did not wait for the end of the holding period. I was annualizing my investment on a daily basis by keeping track of the NAV rates. These rates are accessible via the internet. At a certain point in time last year I was getting an annualized rate of 22% which was definitely an extraordinarily high return which will not last.

 

My suggestion. Have a strategy when you go into a certain investment where the return for a fixed period is uncertain. Establish the penalty rate to get out before the end of the holding period.

[golfer697]

I agree with Dr. Pepper. Last year when the bond prices fell , a lot of people panicked because when they bought the UITFs earlier , they were enticed by the seemingly high ROI's which were annualized. Unfortunately, not all banks were able to explain the product properly to clients ( in most cases, even the branch officers didn't understand the product very well and sold it on the basis of "returns" ). Nowadays, historical returns given are on an absolute basis.

 

If you can help yourself,stop looking at the price daily.If you bought the UITF today,look at it again in 6 mos or in a year's time. Fluctuations are normal considering the marked to market valuation of UITFs but over a long period, you tend to ride out these fluctuations.

 

 

That is a good point! Saves you from stress!! Hehehe! Wala na akong napapanood nowadays except Bloomberg!! However, on the other hand, if you do monitor your UITFs regularly, you can react by pulling out & going back in at the right time!! Case in Point - When it slumped last year, I pulled out & went back in after 3 months! Checking my charts, I am now earning at 10% rather than if I stayed in, the earnings would have been only 7%!! That's cause you go in at lower navpus. I recovered my losses the time I went out by going into bonds for 90 days. Good thing I was able to go out early on before navpus went down lower.

[Dr_PepPeR]

That is a good point! Saves you from stress!! Hehehe! Wala na akong napapanood nowadays except Bloomberg!! However, on the other hand, if you do monitor your UITFs regularly, you can react by pulling out & going back in at the right time!! Case in Point - When it slumped last year, I pulled out & went back in after 3 months! Checking my charts, I am now earning at 10% rather than if I stayed in, the earnings would have been only 7%!! That's cause you go in at lower navpus. I recovered my losses the time I went out by going into bonds for 90 days. Good thing I was able to go out early on before navpus went down lower.

 

Of course, if you really want to play it like the stock market, it is really up to you. However, you will really be on your own since there will be a lack of fundamental and technical tools for you to base your orders on. You also have to take into account the pretermination periods, some are as short as 30 days while others are 90 days. But like equities, the rule is simple, buy low sell high. Don't wait for the topping off or bottoming off, by that time it may be too late. Good luck!

[koolkalangxyz]

I'm not sure if this is a valid question but I would just like to know what happens to the dividends where the funds are invested in? Does it go to the bank? or will these be reflected on the NAVpu as well?

[Dr_PepPeR]

I'm not sure if this is a valid question but I would just like to know what happens to the dividends where the funds are invested in? Does it go to the bank? or will these be reflected on the NAVpu as well?

 

If you mean the interest/trading gain/loss of the assets held in the UITF, these are of course reflected in the NAVPUs (one way to look at it is that it is distributed among the subscribers). NAV = Net Asset Value = Assets less Expenses. This is computed daily so the market price of the asset is the basis for the asset value. If there is actual interest income realized, then it increases the Assets, but the prime determinant is the price of the asset at the end of the day. The expenses include all allowable expenses such as broker's commission (for equities), taxes, and trust fees. Only the trust fees go to the bank.

[weekdaywarrior69]

Hi Sir Doc Pepper,

 

Is it a good time to get in right now considering there seems to be a downtrend on NAVPU for the past days?

 

By the way, I sent you a PM hope you got to read it.

[weekdaywarrior69]

i must have sounded stupid with my above post. what i mean is with the current down trend on NAVPUs, do you see it bottoming out not far from its current values and eventually rebounds?

 

i've talked to a bank's branch manager and he suggested me to wait it out a bit more if it will still continue to slide down before i get in.

[Dr_PepPeR]

i must have sounded stupid with my above post. what i mean is with the current down trend on NAVPUs, do you see it bottoming out not far from its current values and eventually rebounds?

 

i've talked to a bank's branch manager and he suggested me to wait it out a bit more if it will still continue to slide down before i get in.

 

I wish I had a crystal ball sir. As far as I know the NAVPUs are on a correction phase now. Yes, it is a good time to go in but I'm not sure if this will further bottom out. The problem is that Tetangco and Omar Cruz are giving mixed signals due to their feuding. Everytime there is a downtrend, the general rule is that you should use that opportunity to go in. If I knew when it would bottom out I think I would be rich and would be able to spend my time posting on this other thread.....

[golfer697]

Of course, if you really want to play it like the stock market, it is really up to you. However, you will really be on your own since there will be a lack of fundamental and technical tools for you to base your orders on. You also have to take into account the pretermination periods, some are as short as 30 days while others are 90 days. But like equities, the rule is simple, buy low sell high. Don't wait for the topping off or bottoming off, by that time it may be too late. Good luck!

 

 

That's true Dr. Pepper! No fundamentals to rely on just gut feel & maybe constant monitoring. But I just like to cut my losses & play it safe. No use going after high returns if you lose your principal. As regards the pretermination periods, it won't matter if you're losing since they will penalize you off our earnings. I asked the bank if we can halve the losses, hehe. You know the answer to that! Thanks. I need all the luck especially in a down market. But looks like its starting to pick up.

 

You would be posting in which thread Dr. Pepper???

[Dr_PepPeR]

That's true Dr. Pepper! No fundamentals to rely on just gut feel & maybe constant monitoring. But I just like to cut my losses & play it safe. No use going after high returns if you lose your principal. As regards the pretermination periods, it won't matter if you're losing since they will penalize you off our earnings. I asked the bank if we can halve the losses, hehe. You know the answer to that! Thanks. I need all the luck especially in a down market. But looks like its starting to pick up.

 

You would be posting in which thread Dr. Pepper???

 

Just take note that some bank's UITFs pretermination penalty is based on the proceeds received, and not on the income, so whether you win or lose on pretermination, you still lose (did I get that right?).

 

I would be posting more on the MP thread sir, instead of here IF I had a working crystal ball.

[golfer697]

Just take note that some bank's UITFs pretermination penalty is based on the proceeds received, and not on the income, so whether you win or lose on pretermination, you still lose (did I get that right?).

 

I would be posting more on the MP thread sir, instead of here IF I had a working crystal ball.

 

 

Oh okay!!! Hehehe! Sa MP thread pala.

Didn't know that some banks base their pretermination penalty on the proceeds!!! That would be unfair!!! And yes you are right, there's a great possibility that win or lose there's still a tendency to end up losing. Mine charges penalties on the income so one can actually play with the placement.