Last year, I wrote about how I invested in the BPI Philippine Equity Index Fund for the future college tuition of my first child. I also explained a bit about what an index fund is and how it is a good investment vehicle for your long term goals. You can read about it here. BDO also has an Equity Index Fund, but I invested in the BDO Equity Fund last Nov. 2018 instead, just for fun. I like the idea of trying to beat the PSEi, which the index fund mirrors. The BDO Equity Fund and BDO Equity Index Fund are actually very similar based on their top ten holdings as of 1/31/2019:
BDO Equity Fund:
BDO Equity Index Fund:
If you compared the two tables, all but two of the top ten holdings are the same. The Equity Fund included ICTSI and PLDT Co. in its top ten, instead of Aboitiz Equity and JG Summit based on the PSEi. There are also minor differences in the % breakdown for the top ten holdings. The Equity Fund Portfolio is composed of 96% equities (stock ownership in companies) and 4% short-term deposits, while the Equity Index Fund is 99% equities and only 1% short-term deposits. The management fees for both are identical at 1% p.a. For the past 3 years, the BDO Equity Index Fund has outperformed the BDO Equity Fund. But not by a significant margin. I told you, risk taking for me is fun. 🙂
I chose to invest through BDO because I wanted to try opening a UITF account online (If you want to invest through BPI for the first time, you will still need to submit documents to a branch). It was a quick and convenient process. I didn’t have to submit any documents or make a personal appearance at the branch. I just logged into my BDO account online, then followed the instructions here.
The good thing about starting as early as your child is born is that you will have enough time for your money to grow and withstand the fluctuating cycles of the stock market. It’s never too early to start investing. Again, I chose to invest in a UITF for its convenience, potential returns, and affordability. There are still other ways to save up for a college fund.
Let’s say the average cost of tuition right now is P150,000 for a year. If the yearly increase in tuition is 10%, the cost of tuition in 18 years will be a little more than P800,000 a year, or P2,400,000 for four years. If you invest P5,000 monthly for 18 years in a UITF that grows 10% annually, you will have grown it to around P2,700,000. You can play with potential figures in this investment calculator. As for me, I’ll set this specific college fund goal to P3,000,000, and track it in a blog quarterly. Okay, maybe it’s time to reconsider cutting down my milk tea expenses. Good luck to every parent out there!