Stocks vs Mutual Funds vs VUL vs UITFS

[jut703]

Gusto ko din sana sa Stocks pero sa mga payo ng mga expert dito like sir Jut703 mukhang mas ok sa akin sa ngaun ang Mutual Funds at UITFS.. Medyo nalilito lang ako sa dalawa kasi sa BPI dun ang bank ko tapos kapag nag-inquire ako agad ang offer yung BPI-Philam(mutual funds ba ito?). May isa na din kami ni misis yung sa dollar.. Salamat sa mga matyagang nagtuturo dito.. Laki talagang tulong..��

Mutual funds and UITFs are very similar. They work on the same concept - your money is pooled in with other investors' money so you can buy a wider variety of stocks than what you could buy as an individual.

There are minor technical differences (e.g. MFs give you shares, UITFs give you units) and their management fees can be different (some MFs have entry fees, exit fees, management fees, while most UITFs just have fixed management fees). Biggest difference perhaps is that most MFs are offered by insurance companies or companies like PhilEquity, while UITFs are offered by banks.

Bottomline: they're effectively the same and you should just look for the MF/UITF with the most consistent returns and the lowest management fees possible.

Personally I would recommend index funds because they track the performance of the PSEi and I don't think any managed MF/UITF has consistently beaten the index.

Now for your second question on BPI-Philam investment. If you applied in a BPI branch, this is most likely an investment instrument that also comes with a minimal insurance coverage. I have a Philam VUL and its historical performance is not as good as BPI's index fund. Only advantage is that you've got insurance coverage, but it'll take 10 years before you really reap the benefits of the fund.

In any case, again go back to the basic principle: compare each investment instrument available to you and get the one with the highest returns, net of all fees.


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[dcph172]

^ binabawasan ba yearly ng insurance premium ang investments say sa bpi-philam? Do they redeem the units aside from the management fee yearly whether theres profit or loss?


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[jut703]

That's what I don't like about my Philam insurance. I can't track it as easily as I can track my stocks/UITFs.

I got my VUL 3 years ago and I don't even know how much my VUL is worth now. Policy states that if the fund amount is less than the assured amount, in the event that I die, my dependents will get the assured amount. However, I don't know of any online portal for Philam that allows me to check how much my fund is actually worth now, net of the premium payments and the management fees.

This is one of the reasons why I want to keep my investments separate from my insurance. Though VULs work for some people, I learned the hard way that I'm better off buying term insurance and investing the difference.


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[dcph172]

^ the assured amount is 125% of the initial investment right? Is there a clause that says current value at event of death whichever is higher vs the initial investment?


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[jut703]

^ the assured amount is 125% of the initial investment right? Is there a clause that says current value at event of death whichever is higher vs the initial investment?


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Mine is 200% of premium amount. And yes there's a clause that says either face value or insured amount will be paid out upon death, whichever is higher.


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[MoneyNoobie]

New member here... I am just about to get a VUL from BPI-Philam Life Insurance Corp. Gusto ko lang sana humingi ng advice. I am new to investing... Actually my plan was to open an account at COL and do my investing directly sa stock market. Pero nung napunta ako ng BPI I was talked into getting a VUL instead because the agent said it is also an investment with insurance. Gusto ko lang po sana humingi ng payo kung ano ang advisable, kung kumuha ako ng VUL at mag open parin ako ng COL account or di ko na tuloy yung VUL ko instead kuha ng term insurance and do investing at COL.

Thank you.

P.S. the VUL that they were proposing nga pala is BPI-Philam Equity Index Fund. 56k Annual Premiums and yung sa insurance nya 650k life insurance and 650k heath insurance. And the maturity is 5 years.

[dreamur]

See jut's advice above. If you don't intend to hold the VUL long (at least 5 years), then dont invest in it. Remember you will be paying the annual premium in the next 5 years.

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[MoneyNoobie]

See jut's advice above. If you don't intend to hold the VUL long (at least 5 years), then dont invest in it. Remember you will be paying the annual premium in the next 5 years.

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I think I have no choice but to finish paying the premium. I am new to investing and buying things that I can't touch maybe that's the reason I am having second thoughts. I think I get a VUL and open a COL Financial Account just to see if I can invest directly in stocks.

[jut703]

New member here... I am just about to get a VUL from BPI-Philam Life Insurance Corp. Gusto ko lang sana humingi ng advice. I am new to investing... Actually my plan was to open an account at COL and do my investing directly sa stock market. Pero nung napunta ako ng BPI I was talked into getting a VUL instead because the agent said it is also an investment with insurance. Gusto ko lang po sana humingi ng payo kung ano ang advisable, kung kumuha ako ng VUL at mag open parin ako ng COL account or di ko na tuloy yung VUL ko instead kuha ng term insurance and do investing at COL.

Thank you.

P.S. the VUL that they were proposing nga pala is BPI-Philam Equity Index Fund. 56k Annual Premiums and yung sa insurance nya 650k life insurance and 650k heath insurance. And the maturity is 5 years.

There are two schools of thought for people under your circumstances - VUL or BTID (Buy Term and Invest the Difference).

1. VUL - as your agent says, VULs combine insurance and investment so they're convenient. What they don't tell you is that a significant amount of your premium goes to management fees, so your investments don't get as much returns as dedicated UITFs or stocks. Basically that's the price you pay for convenience.

2. Buy Term and Invest the Difference - when we say Term Insurance, this is the insurance that you renew annually. The good part of it is that your premiums are much, much lower than VULs. For 650k coverage, you only pay about 3k a year. Even for 20 years (and increasing premiums as you age), it still comes out cheaper than VULs. And since it's cheaper, you can invest the difference in stocks or UITFs. These instruments have much lower management fees than VULs so effectively, your returns are higher. The drawback is that you have to be more disciplined - you should ensure that you really invest the savings; many people end up just spending it.

Personally I also invested in VULs, but in hindsight I think I would've been better off buying term insurance and investing the difference. Oh well, the difference over the long term (over 20 years) isn't as significant as compared to if I withdraw within 10 years, so I'll just finish paying off the VUL and forget about it until I'm in my 50s or something.


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[MoneyNoobie]

There are two schools of thought for people under your circumstances - VUL or BTID (Buy Term and Invest the Difference).

1. VUL - as your agent says, VULs combine insurance and investment so they're convenient. What they don't tell you is that a significant amount of your premium goes to management fees, so your investments don't get as much returns as dedicated UITFs or stocks. Basically that's the price you pay for convenience.

2. Buy Term and Invest the Difference - when we say Term Insurance, this is the insurance that you renew annually. The good part of it is that your premiums are much, much lower than VULs. For 650k coverage, you only pay about 3k a year. Even for 20 years (and increasing premiums as you age), it still comes out cheaper than VULs. And since it's cheaper, you can invest the difference in stocks or UITFs. These instruments have much lower management fees than VULs so effectively, your returns are higher. The drawback is that you have to be more disciplined - you should ensure that you really invest the savings; many people end up just spending it.

Personally I also invested in VULs, but in hindsight I think I would've been better off buying term insurance and investing the difference. Oh well, the difference over the long term (over 20 years) isn't as significant as compared to if I withdraw within 10 years, so I'll just finish paying off the VUL and forget about it until I'm in my 50s or something.


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Thank you for your insights Jut. They really help me a lot. I think I would go on with VUL. I think I can manage paying the premiums off and just forget about it for 10 to 20 years just to make sure to get the best out of it. At the same time I would also try to open up an account at COL just to test if I can do investing in stocks directly.

Thank God for these forums where I can find people that I can go run to, especially for people who are new in investing and need advise.