What is 'The Honey Fund' and Other Questions on UITF and Mutual Fund

A few months back I got invited/included in Investment Groups on Facebook. Little did I know that I would be getting a lot of insights on the investing behavior, concerns and aspirations of Filipinos here and abroad from these groups. Right now I’m a member of TGFI (The Global Filipino Investors), OFW Usapang Piso, Financial Buoyagers, MagInvest Ka Pinoy, Investing in the Philippine Market, Angat Pilipinas for Coalition for Financial Literacy, etc.

In some threads in these groups I have read these amusing questions a few times, “What is ‘The Honey Fund?’ Where can we buy that? Why is it called ‘The Honey Fund?’” In fact, recently Ronald, a member of TGFI started a thread that posted a year-to-date graph showing the comparative performances of “The Honey Fund,” the PSE index and another Equity Fund of a major bank with the caption “Welcome back to 400 Honey Fund!” And since it showed “The Honey Fund” outperforming the PSEi and the other fund underperforming the PSEi, it got some new members interested and the same question was asked once more, “Bakit sya tinawag na Honey Fund?” Ronald answered, “Dahil sya yong pinakamatamis. Higher gains compared to competitors, beating other uitfs and mutual funds.”

Well, that moniker started when I would refer to my husband in my articles as “The Honey,” and since he’s the Chief Investment Officer of the country’s largest bank, Chito (another member of TGFI) and I would refer to his bank’s equity fund as “The Honey Fund.” When I showed the thread to “The Honey,” he was thrilled and we both hope that he and his group would continue to deliver in order to meet the reason given by Ronald. Because let’s face it, it’s not easy to be on top in terms of returns as you get bigger.

Here’s a letter from a reader via email asking more about the fund:

Dear Ms. Rose,

Thank you for all the good financial advice that you give through your column. I admit that what caught my interest to read your article was your pretty face in the column. How shocked I was to know that you are already a mother of 3 grown-up boys. But as days went on, the sound advice and tips you gave in your column together with your hilarious and witty character made me forever hooked. You see upon further research I found out that your husband is connected with BDO so I thought you would be the best person to answer my question. This is regarding the Easy Investment Plan. I chose Peso Balanced Fund and my boyfriend chose Equity Fund as our investment instruments. The Bank automatically deducts P2,000 every payday from my payroll account, and P4,000 from my boyfriend’s. It was earning well until such time I overheard the bank tellers discussing sometime around May, that they’re taking their money out of the EIP because it would fall. True enough the value of our money falls little by little. I do understand that money collected through EIP is not insured by PDIC. Will this stay longer? Or is this tied to the falling of stock market and the appreciation of dollar vs. the peso? Do I get my money out now? Or should I continue. I kept asking for advice from bank tellers on what would happen to the money invested in EIP, but all I got was a vague answer. I hope you can enlighten me, please do take note that I want to continue my EIP because it makes saving so easy. Also can you recommend a good Mutual Fund because as early as now my boyfriend and I are thinking of our retirement?

Thank you so much! Hope to hear from you soon. 

Sincerely, 

Ruby

Hi Ruby, thank you for your kind words. I’m glad that you like the wit and humor in my columns. Maybe a sense of humor plus a good husband help defy external aging! So keep that in mind.

It’s good that you and your boyfriend are already saving for your retirement. This reminds me when my boyfriend and I opened a trust account where we invested our savings. Back then, there was still a higher minimum and I think that was the reason why we decided to have a joint account. You guys are lucky that now the minimum is very low (P1,000 for EIP) that there’s practically no “barrier to entry.” Anyway, if you decide to have something on a joint basis because there are still investments that require a higher minimum, make sure you know each other’s contribution. That’s what we did – we had a ledger that clearly stated our respective contributions and corresponding earnings. That way, there won’t be any problem “should there be a need to separate due to irreconcilable differences.” Fortunately for us, there was no such need as we ended up getting married. And I guess that early habit of regularly saving together has helped us tremendously in our financial journey. The only difference is that there’s no more his and hers because everything now is governed by the Community Property Law under the Family Code.

The advantage of having a system in place:

You’re right in saying that you want to continue your EIP because it makes saving (and investing) so easy. This is the advantage of having a system in place. Can you imagine what you could have done when you saw the market falling and you were jittery hearing the bank tellers discuss their market prognosis? For sure you would have stopped investing. Then maybe you would have come back once the market started to go up again, right? So you would have missed buying on the dips of the market. Not only that, a need for cash, or even just having no time to go to the bank would have prevented you from doing your regular investing. So thank God for systems that protect us from our occasional (or maybe usual?) irrational actions.

You said that you’re already saving up for your retirement so your time horizon is really long. In which case, you can afford to be invested for the long term and you should not worry too much about the market fluctuations. As I said in a previous article, “Once you zoom out, all these market downturns, though painful right now, will later on appear as just small blips in the long run and you’ll realize you were better off being invested the whole time.” (Kakabakaba Ka Ba? (FQ Mom's Take on the Stock Market Roller Coaster Ride)

Be an educated investor.

In various investment group discussions, there is a concern about the inadequate information that clients get from the front liners of banks when they inquire investing in UITF, etc. This is a common scenario in bank branches and reasons vary from lack of education among the front liners to conflict of interest because branch personnel would prefer that their clients keep their accounts in the traditional savings/checking/time deposits with the branch. Some bank personnel also say that they just don’t want to be blamed once the market goes down so they would rather offer their traditional fixed income instruments.

The solution that I see here is for the investor to continuously educate himself. Do not be overwhelmed. You don’t need to master the technical part that some people would refer to as the “nose bleed” part. Don’t worry, you won’t be interviewed by Coco Alcuaz on Business Nightly! Just learn little by little about the basics of investing. There are a lot of books and websites you can read. A lot of people use Investopedia.com for general knowledge. Visit Amazon.com for books. You can choose from a wide array of investing or personal finance books, depending on your knowledge level and type of reading that excites you. Do you want biographical? Workbook type? Short book? The good thing is you may download a sample kindle version for free. If you still want the printed book, just go to the bookstore to buy your chosen book based on the free kindle samples.

Mutual Fund (MF) & Unit Investment Trust Fund (UITF):

Regarding your question on MF, it may be noteworthy that both MF and UITF are pooled funds managed by professional fund managers to earn returns based on the stated objectives of the fund. However, they also have differences such as the following:

1.    MF is a company; hence, regulated by the SEC. UITF is issued by the Trust Department of a commercial bank; hence, regulated by the BSP.

2.    MFs are sold by agents while UITFs are sold by bank personnel.

3.    The instruments issued by MFs are the shares in the MF company while UITFs issue units of participation in the Fund.

4.    The price of MF is expressed in NAVPS (Net Asset Value Per Share) while that of the UITF is expressed in NAVPU (Net Asset Value Per Unit).

5.    When it comes to charges MFs usually charge more because they have a wider price range in their sales charge, redemption fee and distribution fees. Since it’s a case-to-case basis, it’s better to check out the individual funds.

To see the different Mutual Funds, visit PIFA.com.ph. For UITFs visit UITF.com.ph. Unfortunately, this site is under construction so I suggest you visit the website of the banks themselves. (This link - BDO UITF Yield Calculator. – allows you to compare the returns of their different UITF products and helps guide you in the choice of instruments.) You may also want to check out this article by Fritz Villafuerte MF and UITF What's the Difference?

But the most important aspects to consider when choosing your MF or UITF are the following:

1.    Your Goals – Is it for your retirement, your house, your wedding, further studies, etc.?

2.    Time horizon – Given the above goals, how much time do you have to save up for them?

3.    Risk Appetite – They say, “What good is an investment if the investor has trouble sleeping at night?” And maybe you felt this when the market dipped to 5,789.06. But this can be remedied by being an educated investor, as stated earlier. Once you’re able to identify your goals and their corresponding time horizons, you can pair off your goals with the right instruments, and sleep better at night.

4.    Evaluating the fund – Did the fund manager deliver good results vis-a-vis market conditions? Is the fund more volatile than the others? Even if historical results give us a good sense of what’s in store in the future, the fund managers themselves remind us that these are not assurance of their future performance and that’s what every investor should bear in mind.

I hope the above enlightened you. Oh, and by the way, just in case it’s not yet clear, please don’t go to the bank asking for “The Honey Fund.” The Fund in the chart is officially called BDO Equity Fund.

I wish you a sweet financial journey with your own Honey!

Rose

(Rose Fres Fausto is the author of the book Raising Pinoy Boys. Click this link to download free book sample To read her other articles go to www.RaisingPinoyBoys.com archive. Send your questions via email to maryrose_fausto@yahoo.com or text to 0917-5395770.)

This article is also published in RaisingPinoyBoys.com

Image Attribution: Images from howtocleancar.info/dreamstime.com and Ronald Tagsuan put together by the author to deliver the message of the article.