BDO Trust Group is currently running an Easy Investment Plan (EIP) public promo from June 1 to November 30, 2013.

Through this exercise, they hope to enable more people to meet their financial goals by investing in BDO’s UITFs via the EIP. Accounts that will open and/or contribute to their EIP funds during this period will be entitled to monthly raffles wherein we will be giving out an iPad Mini by geographic location, namely: Metro Manila, Luzon, Visayas and Mindanao. Aside from the monthly draws, there will also be a grand draw onDecember 20, 2013 and winner per geographic location can choose from among a 2-night, 3-day trip to Hong Kong for two (2), an Apple iPhone 5 or Samsung 40-inch LED TV.

Save, invest and get a chance to win some cool prizes! But the biggest winer is you when you invest early, invest wisely and invest regularly. Check out your favorite BDO branch for more details.

Well, I hope I win too!

There is every reason why we should be celebrating Fitch’s recent credit upgrade of the Philippines. With the upgrade, we are now officially “investment-grade” which really means many things. An investment-grade status is a confirmation that the Philippines is a sound nation financially and that it has the capacity to pay off its debts.

President Aquino is obviously ecstatic with the upgrade; he said “this is an institutional affirmation of our sound good governance agenda” in a statement.

In a nutshell, the new status will effectively reduce the cost of our borrowings which when managed properly, can be used for key investments and infrastructure that will further spur economic growth. The upgrade will also usher the inflow of more institutional investments such as investment funds of other countries that usually require investment destinations to be ‘investment grade’. This move will even grow the local investment market which has been bullish in the last 3 years. The Philippine Stock Market already reflected a positive sentiment upon the news of the upgrade. It is more likely that the stock market will continue to ride on this upgrade, as well as other investment instruments like bonds.

It is important to note that while Fitch is a very reputable rating organization, the other two rating organizations namely Standard & Poor’s and Moody’s must also upgrade the status of Philippines to confirm our being truly ‘investment-grade’.

I believe that the upgrades merely affirmed what the market has already known as showed by how the Philippine investments have been faring, particularly our sovereign debt. For some time now, the Philippine sovereign issues (ROPs) have been trading with yields much lower than other nations with the same credit rating; in fact, the Yield-to-Maturity (YTM) of our ROPs are even lower than the debts of other nations who are rated as ‘investment-grade.’ Returns are always an indication of the risks involved so when the market makes our debts trade with lower yields, it also means that the market views us as low risk as well.

I asked some of my friends about what the benefits of the upgrade means to them and to the nation as a whole. I’m also proud to say that these friends of mine are experts in their own fields as well – I am blessed with awesome friends right? This is what they say:

“We deserve the upgrade, but remember that a credit rating is just a confirmation of what is already present in a debt issue, the debt security issuer and the economy as a whole. In other words, we and not the rating agency made ourselves investment grade. So upgrade or not, the country is indeed on its way to becoming an economic force in the world arena. We just need to learn how to spread wealth better.”

— Efren Ll. Cruz, RFP- President of Personal Finance Advisers Corp., best-selling finance author, columnist, investments expert

“This is definitely the seal and proof that Philippines is a good country to invest in and supports my bullishness in the Philippines. This will open up our markets to more investors who were not allowed to participate before. Increased Investments will surely open up better opportunities for the ordinary Filipino. I definitely recommend that Filipinos participate in this growth opportunity by investing as well.”

— Marvin Fausto – Chief Investment Officer of Banco de Oro Universal Bank

“The investment upgrade will propel our stock market even further as it will allow more foreign funds to invest in the Philippines. It will also help our economy as it will allow our government to borrow cheap, build more infrastructures, and allow businessmen to expand their businesses further. To the common Filipino, it would give them an opportunity to take housing and car loans cheaper. This upgrade has triggered a signal to the world that – ‘Hey! The Philippines exists and is now a safe haven for your money!’ This is such a great time to be a Filipino.

— Marvin Germo, RFP – Stock Market expert and investments speaker

“Investment Grade is not an end objective. It is a recognition that a country has graduated from a condition of doubt to a reasonable level of investment risk. The Philippines graduating to that is an expectation this year – the only thing uncertain was when. Fitch’s ratings upgrade to the Philippines is a validation of the core improvement in the country’s international credit and investment status. This upgrade means that the Philippines has to do its homework. It has leveled up in the eyes of the investment community globally. The upgrade actually does not necessarily translate to immediate economic betterment as being investment grade simply means that one can borrow at cheaper rates in the international market. Borrowing is something we do not need to do now as the country is very liquid – both the government and the private sector. Local interest rates are in their historic lows already. What the investment grade is telling us is that ‘we believe in your country to be able to institute the needed structural reforms to translate our trust into productive pursuits.’ Finally, it is important that the two other larger ratings agencies – S&P and Moody’s should affirm the same soon to consolidate and cement this trust.”

— Dr. Alvin P. Ang – Economist and President of the Philippine Economic Society

“Companies that would not otherwise invest in the Philippines as they require investment grade status would now do so. Our borrowing costs would also go down. This means more jobs and a stronger economy as money goes towards industries, infrastructure, etc. In the near term the peso is likely to appreciate though, which could pose problems for OFW families.”

— Rizalina Mantaring – President & CEO, Sun Life Philippines

The above views are from the experts; I will post another blog about the views of ordinary Filipinos (who are experts in their own rights) which I solicited through social media.

We are very excited with the nation as a whole and while there is much work to be done, I believe we are in the right path. We must also never forget where all these blessings are coming from and knowing our responsibilities for such blessings, lest all these gains will be for nothing.

Blessed is the nation whose God is the LORD, the people he chose for his inheritance. – Psalm 33:12, NIV

Are you considering investing in UITFs?

UITFs or Unit Investment Trust Funds are pooled funds offered by the trust department of the major banks of the country.

But what is a UITF? As per the Trust Officers Association of the Philippines (TOAP), they defined it as “an open-ended pooled trust fund denominated in pesos or any acceptable currency, which is operated and administered by a trust entity and made available by participation. Each UITF product is governed by a Declaration of Trust (or Plan Rules) which contains the investment objectives of the UITF as well as the mechanics for investing, operating and administering the fund. Most UITFs are considered medium to long term investments.  Clients considering to invest in UITFs must have the financial resources to stay invested in them for a reasonable period of time in order to maximize earnings potentials.  If the funds to be invested will be needed by the client in the immediate future, the UITFs may not be a suitable investment vehicle for such client.”

UITFs are very good investment instruments for investors with a longer time horizon and are comfortable with the volatility typical of pooled funds. Pooled funds can be high risk when invested in equities, low risk when invested in fixed income (bonds) or moderate when invested in a balanced fund.

Before jumping into UITFs, it is best that you understand the nature of this instrument. Further, it is advisable that you check on the fees associated with pooled funds — they are not all the same. Some funds require entry and exit loads and some funds have higher management fees. Fees will ultimately affect your yields.

2012 was a good year for investments, particularly for equities so it is expected that equity UITFs will do really well. I need to caution readers, however, that returns are not the sole factor if selecting a fund. Aside from fees, it will be good to check on how volatile the funds are, experience of the fund manager and size of fund. Bigger funds are usually less volatile but may not have the best performance. Further, equity funds that are more diversified and having more variety in the fund is generally less risky. Let’s compare two funds even if they are both equity funds — a fund that is invested in only 10 companies might perform better than a fund that is invested with 20 to 30 companies since certain calls are easier to make. However, the fund with fewer companies are riskier since one bad call of the fund manager can have a large impact on the fund.

My advise — talk to your bank and do your homework. Regardless, I am a fan of UITFs because in the long run, these investments will help me achieve my financial goals. Personally, I go with bigger sized funds that offers the lowest fees offered by the larger and more stable banks.

To know more about UITFs, please read my earlier blog HERE. You can also check out performance of Philippine funds at Bloomberg’s SITE.