May 22, 2006
Trust funds/mutual funds alert!
I got a text message recently from a bank president who warns people to think twice about investing in trust funds. Several investors have apparently seen the NAV or net asset value of their investments fall... "Kawawa naman the small unsophisticated investors. They were misled and misinformed by some careless and irresponsible banks who mis-sold the UITF," his message said. UITF stands for unit investment trust fund, which replaced the common trust fund sold by banks previously. It's basically a pool of funds that banks use to invest in bonds or stocks, and everyone in that pool shares in the earnings or the losses on the investment. "And the way GS (government securities) prices are going, there is no guarantee that the yield will be better than savings deposits. In fact, there is no guarantee that the principal will be intact," he adds. Ouch! According to this bank exec, investors have to stay on top of their money and know when to liquidate or add to the pool instead of relying on the say-so of their banker. He says banks still don't have enough infrastructure to keep you abreast of what's happening to your money.Basically all you get is a report at the end of the investment period and apprised of how your money did. The same is true with mutual funds which also are invested in bonds. When interest rates go up, the value of the bonds drop. So ask your banker/insurer what your current NAV is. If it's below 100, it's time to liquidate people! These days, even the old 1% savings account will do. For high safe returns, go for the time deposit.