Mutual Fund vs UITFs vs VULs

Have you recently decided to start investing but don’t have the time or knowledge to monitor your investments? Are you opting to choose investment funds that provide professional management of your investment? Should you invest in a variable universal life insurance, a mutual fund or a UITF?

On today’s post, I will be giving you a broad overview of each product to help you make the right decision – differences and similarities, pros and cons, and advantages and disadvantages.

Mutual funds, UITFs and VULs –

ALL are types of investments but they differ in format.

In simple terms, all of them are investment products. They are pooled funds – wherein sums of money from many people are collected into a large fund that is then spread across many investments and managed by professionals.

To briefly describe each investment…

Mutual funds are pooled funds that are set up as a corporation and managed by a fund manager. Each investor is a shareholder of the fund corporation. (Read more: WHAT is a Mutual Fund? and HOW Do You Make Money From Mutual Funds?)

Unit Investment Trust Funds (UITFs) offers access of investments is through the trust of the bank. The investor is a participant of a fund.

Variable Universal Life insurance (VUL) is an financial product that has a life insurance component together with the fund investment (aka VUL is both an investment and an insurance.) It offers the security of insurance protection via term coverage, together with the opportunity to participate in potentially unlimited growth via mutual fund investments.

How are they different from one another?

Mutual Fund
Unit Investment Trust Fund (UITF)
Variable Universal Life Insurance (VUL)
Where to open an account?Investment Companies
(ALFM Mutual Funds,
Philequity Management Inc,
First Metro Asset Management
and Sun Life Asset Management.)
(BDO, Metrobank,
BPI, PNB, Landbank, UnionBank, etc)
Insurance Companies
(Sunlife Financial, Philam Life, Pru Life UK, AXA)
Who should you
talk to when to
open an account?
a licensed mutual fund advisora bank employee or a trust representativean insurance agent
How much money
do you need
to open an investment?
Minimum initial investment:
Php 5,000

Minimum additional investments: Php1,000
Minimum initial investment:
Php 10,000

Minimum additional contribution: Php 1,000
Premiums can be paid monthly,
quarterly, semi annual, annually
or one time payment.

Monthly premium can be as low as Php 1,500.
Are there any fees?Sales Load Fees (Upfront Fee)
1%-2% upon entering the

Annual Management Fees

Early Redemption Fees

Some fund houses offer
ZERO back-end fees
if one is locked in for
5 years. This is to
encourage long term
Sales Load Fees (Upfront Fee)
1%-2% upon entering the

Annual Management Fees

Early Redemption Fees
Upfront Fees

Annual Management Fees

Insurance Charges

Are my earnings taxable?Exempted from withholding tax or tax on profit

Subject to Estate Tax
if the investor dies.
Subject to withholding tax
or 20% tax on profit.

Subject to Estate Tax
if the investor dies.
Exempted from withholding tax
or tax on profit

No estate tax
Who regulates
the investment
Securities and Exchange Commission (SEC)
because the investment
company is a corporation
Bangko Sentral ng Pilipinas (BSP)
because the trust of the fund
is a bank
Insurance Commission (IC)
because the investment
product has an insurance

So which is the best investment product for me?

It depends on where you are in life, your financial status, investment goal and objectives.

If you want the protection of life insurance, go for a VUL. VUL is a financial product that offers the best of both worlds – guaranteed insurance benefit and fund accumulation. The only downside is that it is more expensive. In effect, you really are paying extra for the ‘convenience’ of paying for a life insurance and an investment at the same time. BUT, since it is an insurance product, while all other assets (including Mutual Funds and UITFs) will be frozen by BIR until the appropriate taxes are paid, investments in a VUL are readily available to your loved ones.

If you want to put your money in investments (aka in the long-term), UITFs and mutual funds can work for you. (UITFs and Mutual Funds are basically works the same way, it’s just being managed by two different entities.) A big advantage of these is that they are professionally managed by experienced investment managers, who are trained to invest properly. Even if you yourself are not well-versed in investing, you can rest assured that you’re in good hands.

My Personal Take…

For me personally, to avail of ‘similar’ benefits of a VUL, I’d rather buy term insurance (cheapest form of insurance) that provides a similar coverage as a whole life policy and then invest the difference in either mutual funds or UITFs. It does require effort on my part to look for separate term insurance and investment products and pay them separately. But this way being cost-effective is much more advantageous in the long run, since I am able to add a little more money into my investments.

photo credit: Coffee break. via photopin (license)

5 thoughts on “Mutual Fund vs UITFs vs VULs

  1. Very impressive. But I consider the fund stats before investing. History can reflect on what will happen on the future. On my personal take

  2. hi and good day. I am planning to invest on Mutual Funds but my problem is I already invested a lot in stocks. I invested in stocks last year and I now how have almost 50k worth of shares (I know it’s not that much compared to others) but my problem is I would like to invest again but I don’t know where. I would really love to invest in Mutual Fund but i have the impression that fund managers would invest my money in stocks too. I can’t diversify my investments if my new investment would go to the stocks again, can someone please help me?

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