Manila, Philippines

Easier Than Stocks: How To Gain From UITF Trading

Easier Than Stocks: How To Gain From UITF Trading
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Caveat emptor. Aside from trading stocks, I also trade (buy-and-sell) UITF actively. Whut?
Yes, I’m into trading UITF’s. It’s actually a lot easier if Juan knows how to go about it. My special someone gave me this idea which I want to share with you.

A Bull Market by cowlet, on Flickr
Trading UITF can be less costly than actively trading stocks due to absence of trading fees every time you buy and sell. Do note though that there are management fees, taxes etc embedded in the unit prices so best to check with your bank. Likewise, some UITFs have minimum holding periods before you can sell (e.g. 1 month). It may not be as exciting as trading actual stocks in PSE but since it is less volatile and very much predictable, I’d say the potential gains outweigh the boredom and friction costs. In stocks, timing the market is risky. With UITF, timing the market is very easy.

Here’s the trick. Caveat, UITF is meant to be a long-term investment so before you turn it as a short-term trading instrument, better make sure you have the proper risk appetite and training.

Online Subscription
I’m not paid to plug for them but I use BPI ExpressOnline in my online subscriptions of their UITF. You just sign up one time in a nearby branch, meet the minimum initial investment for UITF, and you can do your additional placements or redemptions online so it’s fast and easy. Check with your favorite bank if they also have this.

Choose an Equity-based Fund
The key is to time the market to increase chances that you will gain from the trade. The secret lies in the cutoff time in buying and selling your UITF. Easiest will be to subscribe to an equity-based UITF. Some UITF mirror the PSE which makes it easier to predict the movement while some UITF equity funds just focus on 5 to 10 active PSE stocks. In either case, it is easy to research the components of the fund in the bank’s website.

If the actual stock market is green, then there is a big chance that the equity-based UITF prices to be published by end of day (~5pm to 7pm) is also green. If the stock market is down today, then equity-based UITF will likely be down as well. As such, if you buy before cut-off (in this case by 2:30pm), then you’ll be able to buy at end of day prices. Same with selling.

What I do, if the market falls big time in morning trade until after-lunch re-opening, then I buy some more UITF before cut-off, so that I will be able to buy units at lower prices. Conversely, if the market is very much up (which bodes well for my stocks portfolio), I redeem some units before cut-off so that my selling price is higher compared to previous day. No guarantees of course because sometimes fund managers of UITF outperform or underperform compared to the index but majority of the time, they move in the same direction. So the profit lies in being able to predict the unit prices (as guided by market movement) and cashing in on the easily-anticipated movements. That’s hard to do in the stock market, especially short term.

I mentioned that it tends to be a bit boring since Juan is just taking advantage of timing differences. But then again, less excitement may mean less risks leading to more gains. Further, since the UITF tracks the index or some select stocks, daily gains may not be as big as gains of individual stocks. But then again, that also means losses may not be as big as those you lost in individual stocks. Lastly, though buying UITF reduces your investable funds immediately, proceeds from selling takes 3 banking days so replenishment of your bullets is not as quick as that of stocks trading. But if you have ample cash, then you can always buy and sell in tranches, anyway there are no transaction fees.

Again, caveat emptor.

Goodluck! This is actually good practice for beginners. Especially for the Jon Snow’s of the stock market.

Photo: A Bull Market by  cowlet 
Creative Commons Creative Commons Attribution 2.0 Generic License   


 PH Stock Market

19 Responses

  1. Anonymous says:

    Can you redeem the full number of units but still maintain the UITF account? Or do you have to leave a minimum? This is of course pertaining to the trading strategy you mentioned. Thanks.

  2. Geri says:

    Usually it's the next day, assuming you made it to the cut-off time. Some banks have cut-off of 12nn or 2pm, wherein if you buy before those times, the buying price is at end of the day and credited to your account by morning the next day.

    If you bought after cut-off time, you buy the price as of closing day the next day, and credited to your account 2 days after. This is usually the case for most banks.

  3. aldisin jumdana says:

    Hi Geri,
    kapag bumili po ako ng unit, how many hours it takes before it will credited to my portfolio?

  4. Geri says:

    I don't have PNB UITF but if you can buy and sell online, and there's no holding period for the units you hold (e.g. some UITF have 30 days holding period before you can sell), then it might work.

  5. Anonymous says:

    Will this UITF trading work if you have PNB UITF?

  6. trend investing says:

    These are very useful pieces of information that will be of great use to me in a good position future Pretty. I came across your blog and wanted to say I really enjoyed reading your blog. Either way I will subscribe to their feed, and I hope to publish soon. Thanks for all the hard work. Appreciate the brushes, which are well done. I really appreciate your professional approach.

  7. Rae says:

    Hi, how do you factor in the holding period? Or do you just compute for your average cost per unit before selling.

  8. Geri says:

    Yup I just consider average cost before selling to lock in some gains. For this particular bank and this particular fund (equity), fortunately there is no holding period. For now.

  9. Anonymous says:

    Thank you for this,Mam

  10. Anonymous says:

    No prob, Sir.

    Binabasa basa ko na po ang blog posts nyu po 🙂

    Barely out of College

  11. Anonymous says:

    Sir, anung website po ang tinitingnan nyu pag inaabangan nyu yung mga values ng UITF (market) ?

    Thank you.

    Green horn lang din po kasi 🙂

    Nice Blog po'

    Barely out of College 🙂

  12. Geri says:

    Thank you for the kind words. As a beginner in investments, I enjoin you to visit the Beginner's Guide and UITF / Mutual Funds links to guide you through details. It is import that you are well informed and guided before you risk your or your parents' hard earned money.

    To answer your question, there is no such website as far as I know. Since I trade stocks using COL Financial, I would know whether the PSEi and specific stocks are down for a certain day. And since I invest in Equity fund UITF which also invest in PSEi or specific stocks, I would know whether their fund values will also go down.

    Basically we invest in the same thing: stocks, there's just a timing delay in UITF which we are trying to take advantage of.

  13. Geri says:

    Like today, October 8, 2014. As of 9:50am, market is down by 1.07% or 77bps. If this trend continues until before 2:30pm today, I'll most likely buy a tranche of equity funds. Not all in though since it may still go down some more.

  14. Geri says:

    Hi Jay. I don't really have a fixed number of buys and sells. What I do is I divide my revolving fund into 3, say 3 x 10k so that's 30K. If I think market will remain down by closing at 3:30pm, I place a buy or subscribe order before 2:30pm. I do this every time the marker is going down or until my revolving fund runs out.

    Conversely, if the market gained significantly today and there's a chance that there will be profit taking the next day, I place a sell or redeem order before 2:30pm.

    Just my personal trading pattern though. And note that ROI is not as big since fund values more slower than actual shares. Bit boring but chances of losses are smaller too.

  15. Anonymous says:

    Hello Sir, ask ko lang din po.

    Usually ilan beses po kayo nakakapag “strategize” sa UITF nyu po, per quarter?



  16. Anonymous says:

    Hi Sir,

    Nice one on the uitf strategy.

    I know you mentioned BPI in this blog post, are you saying between BDO and Metrobank, BPI is much more “profitable” than the 2 banks? #justasking hehe

  17. Geri says:

    By profitable do you mean their uitf is better performing? I have UITF from both BPI and BDO and I have significantly higher ROI with BPI simply because I can do the strategy above and I can easily buy and sell. In short my UITF with BPI is active whereas for BDO I just enrolled in EIP so monthly I just keep on buying. It's more passive.

    Haven't tried MBT though simply because I don't have an account with them (I opened my BDO and BPI accounts circa 2007) and there's no nearby branch. These banks though prepare a monthly report on their funds' performance so you can easily compare. I think there are also sites that compile UITF and mutual fund performance from various providers.

  18. Unknown says:

    i just started 2 weeks ago with uitf and i thought of this strategy in theory before… its a good thing and im very happy to know that people are actually doing it :).. brilliant tactic 🙂

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