Last January, I started investing in the BPI Money Market Fund . This fund is a UITF focused on short term fixed income instruments, such as time deposits, treasury notes, and corporate bonds. Treasury notes are debt securities issued by the government with a fixed interest rate and maturity from 2 to 10 years. It’s basically lending money to the government with interest. Corporate bonds are debt securities issued by corporations with a usually higher interest rate, and maturity of at least 1 year. Or basically lending money to corporations with interest.
I mentioned in a previous post that you should identify your goal, time horizon, and risk appetite before investing. It is also a good practice to build an emergency fund and get protected with insurance before putting your money in stocks and mutual funds. Right now, all our savings and excess cash are funneled into a college fund, stocks, and a car fund.
I invested in this UITF mainly to save up for the down-payment of a car, which is about 3 or 4 years from now. Since the product is invested in short term fixed instruments, this seemed better than just setting money aside in a savings account. As of July 31, the fund was invested mostly in time deposits and money market instruments, at 71%. 19% of the fund was in government bonds (mainly the 2 fixed rate treasury notes), while only 9% was in corporate bonds (6% from San Miguel).
I chose this particular fund because the management fee was relatively low at 0.25% p.a. This was the cheapest I saw among those invested in short term fixed instruments. This is also withdraw-able anytime with no extra charge, unlike a regular time deposit. I have been putting in money every month since January, and the current unrealized gain of my investment is 0.80%, easily higher than interest on savings accounts.
If you’re looking for a place to park your extra savings, invest some of your emergency fund, or even build a travel fund for a vacation next year, this is an OPTION. Other banks also offer mutual funds and UITF’s composed of fixed income instruments. I’ve heard someone buy a car with profits from trading stocks (high risk, high reward). Whatever vehicle you choose, do it a pace and amount that you are comfortable with. Because personal finance is still that. Personal. As for me, I still have 3-4 years to convince my wife we don’t need a bigger (expensive car), but just a basic (cheap) Sedan.