Disclaimer: I have not been paid by BDO to write this post. I am simply presenting one product that I think can be useful and relevant to my readers. This post may not contain all the details about the product so I recommend that anyone interested should contact the bank directly.)
In a previous post, I wrote about having been invited to a workshop (Steps to Financial Peace) given by Randell Tiongson, a well-known financial planning consultant, as well as other inspirational speakers.
Randell spoke of the Philippines’ low savings rate – 16% in 2003 – the lowest in Asia. If Filipinos saved only 16% of their income, it meant that so many are not saving or not saving enough. In the workshop, Randell also mentioned that if all extra money is placed only in savings or time deposit, it earns at a lower rate than inflation. Purchasing power then is being eroded by inflation as it cannot keep up with the higher inflation. The only way to keep purchasing power ahead of inflation is to put one’s savings into higher-yielding products. Trust products are the popular investment channels available now to most people Problem is that while the minimum placements have gone down considerably to allow more people to invest in these, it is still not low enough.
I remember a time when the minimum investment amount in Unit Investment Trust Funds (UITF) was around PhP 1 million. That meant only the already rich could invest in these types of products. Everyone else had to be content with a savings or time deposit product. Over the years, however, the minimum trust investment started coming down to Php500,000, then PhP100,000 and eventually, as low as P10,000. A sponsor of the workshop happened to be Banco de Oro (BDO). During the workshop, the executives of BDO’s Trust Department, introduced a new trust product called Easy Investment Plan or EIP.
For only P1,000 a month, you can already join the ranks of those who have access to higher-yielding products.
Briefly, what are UITFs?
They are NOT deposit accounts; rather, they are trust agreements. In the case of the EIP, BDO is the trustee, tasked to make decisions as to how to invest the funds.
They earn a higher rate of return compared to deposit accounts but are not insured with the PDIC or obligations guaranteed by a bank.
An investment is assigned a certain number of “units” depending on the unit value on the date you made the investment. This unit value goes up or down on a day-to-day basis. When redeemed, the final value of one’s investment can be higher or lower than your original investment amount, depending on what the unit value was on redemption day.
There are different UITF products. UITFs are pooled and invested in different instruments, depending on the UITF product. Some UITFs are for the conservatives who want to be exposed to minimal risk so the funds are invested in fixed-income placements. Other UITFs carry a higher rate of return but also carry a higher risk; these are usually invested in equities or stocks. And still other UITFs offer a rate of return in between the first two, and are usually invested in a balance of fixed income placements and equities. The choice of UITF product rests with you, the investor, depending on whether you want to be conservative or riskier.
What are the features of BDO’s EIP?
I screencapped this information from the BDO website so I don’t miss anything.
In summary, I think what makes this an easy investment vehicle compared to a regular UITF product is this:
1. It only takes a minimum of P1,000 contribution per month for you to gain access to a UITF. This is very affordable to people who cannot plunk down P10,000 in one go as a minimum investment in a UITF. Although the Certificate of Participation is only issued every time your contribution reaches P10,000, your P1,000 contributions are already earning UITF rates from the time of your contribution.
2. It is an automatic debit arrangement so you need not remember to transfer money to the UITF account. But of course, you still need to make sure that the account from where the contribution will be debited is fully funded.
What types of people should consider the EIP?
Just about anyone can invest in the EIP as long as he can faithfully set aside at least P1,000/month, understands the risks of a product not covered by the PDIC, and has a medium- to long-term financial plan.
To learn more about the BDO Easy Investment Plan, visit any BDO branch nationwide or call BDO Trust and Investments Group at (02) 878-4265, (02) 878-4244 or email firstname.lastname@example.org.