Updated on 03 September 2019
Many of us are already aware of the advantages of investing in index funds but are having a hard time choosing which fund to invest in. We are enticed by a dizzying array of index fund options, ranging from mutual funds, UITFs, and even an ETF, with their respective pros and cons. Although there are a lot of information available online, it is hard to sift through the hype. So I decided to conduct my own extensive and thorough research (I hope) and create the ultimate guide to Philippine index funds that is easily accessible and easy to understand.
I read and skimmed hundreds of pages of prospectuses (prospectii?), declarations of trusts, circulars from the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC), and other related documents that I can access online in the course of two weekend nights.
You may think that’s impossible because you have lives. But I don’t.
As an expat, I have several considerations in determining where I should put my hard-earned money. My requirements are:
- The fund must have low management fees
- Its tracking error (of the Philippine Stock Exchange index) must be relatively small
- Transparency in reporting, with information accessible by investors and non-investors alike
- Must track the Philippine Stock Exchange index (PSEi)
- It must be convenient to buy
WHY INVEST IN A PHILIPPINE STOCK EXCHANGE INDEX FUND?
By investing in a PSEi fund, you are automatically invested in the 30 biggest public companies in the Philippines. This means you have instant diversification in terms of stock holdings.
Here is chart tracking the performance of the PSEi since 2004 from Trading Economics:
Notice that apart from the dip in 2008 to 2010 coinciding with the world financial crisis, the PSEi’s trajectory is generally upwards. From 1511 points in January 2004, the PSEi’s value increased to 8741.30 in January 2018. This means that for the long-term, your investments will grow if you put it in an index fund tracking the PSEi.
GUIDE TO PSEI - HOW TO CHOOSE WHERE TO INVEST
1. Low management fees
This is the cost of running the fund. In theory, management fees for index funds should be lower since managers only need to follow the composition of the index being tracked. In the US, index funds management fees can go as low as 0.09% for Schwab S&P500 and 0.095% for Fidelity Spartan 500 index.
Unfortunately, because of limited competition, fund management fees in the Philippines are TOO HIGH considering that they only have to track 30 stocks for PSEi.
It’s not that hard, guys. Please stop overcharging us!
However, with the entry of several UITFs and and an ETF in the market, there are now index funds charging management fees as low as 0.50%. Hopefully this trend continues and fees eventually become even lower.
2. TRACKING ERROR
Many of us assume that the index fund we invest in will automatically and accurately track and match the performance of the target index. But not all index funds are created equal. Some index funds track their benchmarks more accurately than others.
Tracking error is the gap or deviation between the returns of the fund compared to the returns of the index. In general, index funds underperform compared to their benchmarks. Among the reasons for the gap is the fact that there are associated fees in running the index fund. Another reason is that index funds need to have cash reserves to pay those who want to redeem from the fund as well as to manage inflows into the fund. Meaning, index funds are not 100% invested into the index.
The lower the percentage of the tracking error, the more accurately the index fund is able to replicate the performance of the benchmark.
Why is this important?
The reason we invest in an index fund is because we want to mirror the returns of the benchmark. If the index fund that we’re investing is not faithfully tracking the index, we need to understand the reason why and ask ourselves if the risks are worth it.
There are times when index funds may outperform the benchmark. This means that fund managers are taking more risks with your money. On one hand, it’s awesome if the fund outperforms the benchmark because, more money! On the other hand, beating the index is very hard to sustain and trying to do so may even lead to losses. Index funds almost always outperform actively managed funds in the long term.
Which means that for long-term investing, we should opt for an index fund with low tracking error because this means that the fund’s managers are closely following the benchmark.
In the Philippines, many index funds publish their tracking errors while some do not. I am generally wary of secretive firms . If they’re not releasing information as crucial as tracking errors, what else can they be hiding?
3. TRANSPARENCY
In the age of the internet, there’s really no reason why companies can’t make their public filings and other crucial information easily accessible through their websites. They’re probably thinking that prospective customers will call or visit their office to ask for the needed information. Actually, we won’t. I think I speak for many in my generation that we won’t contact these companies unless they’re promising exceptional benefits.
We regard secretive companies with suspicion and most probably will avoid doing business with them. It may be counter intuitive, but nowadays the more generous you are with your product, the more you can convince people to buy from you.
Additionally, as an expat, I don’t have the luxury of just picking up the phone or dropping by an office to have a little chat about fund offerings. I prefer to read the information on my own, conduct my own research, and base my decisions on what I’ve independently learned instead of listening to a pitch from a salesman.
4. CONVENIENCE
Since I’m based abroad, I prefer to be able to buy shares through online platforms instead of physically going into an office.
MATRIX OF PHILIPPINE INDEX FUNDS
I compiled a comprehensive guide to Philippine index funds which includes the factors I believe we should consider when deciding where to invest. The information in this table are culled from publicly available data.
| Fund | Entry Fee | Management Fee | Exit Fee |
Tracking Error (Self-reported) |
Remarks |
| ATRAM Philippine Equity Smart Index Fund | None |
1.50% per annum
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, etc. |
None | Not available |
Inception: March 1 2016 Class: UITF Buy where: ATRAM |
| BDO Equity Index Fund | None |
1% per annum
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, etc. *annual total of fund fees does not exceed 10 basis points or .10%, based on monthly KIIDS |
0.50% of the original participation amount (early redemption; 30 calendar days min holding period) | 0.60% since inception (KIIDS 29 June 2018) |
Inception: 10 July 2015 Class: UITF Buy where: BDO |
| BDO PERA Equity Index Fund | None |
1% per annum trust fee + fund expenses payable to third parties (custodian, external auditor fees, etc.)
*annual total of fund fees does not exceed 10 basis points or .10%, based on monthly KIIDS |
1% of original participation fee (early redemption; 30 calendar days min holding period) | 1.43% since inception (KIIDS 29 June 2018) |
Inception: 22 December 2016
Class: UITF Buy where: BDO Note: Only for Personal Early Retirement Account (PERA). Tax-free |
| BPI Philippine Equity Index Fund | None |
1% per annum
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, etc. *annual total of fund fees does not exceed 10 basis points or .10%, based on monthly KIIDS |
None | 0.16% since inception (KIIDS 29 June 2018) |
Inception: 20 May 2013
Class: UITF Buy where: BPI |
| East West PSEi Tracker Fund | None |
0.75% per annum + fund expenses payable to third parties (custodian, external auditor fees, other fees)
*basing on KIIDS 29 June 2018 I obtained via email, annual fund fees may reach more or less 30 basis points or .30%.
Will verify the total once their KIIDS database is uploaded on the East West website.
|
0.25% of the amount withdrawn or Php 500, whichever is higher (early redemption, 30 calendar days withholding) | 0.0003% (KIIDS 29 June 2018) |
Inception: 1 December 2015
Class: UITF Buy where: East West Note: While KIIDS and public filings not yet available in their site, EastWest promptly answered my email requesting for fees information. They answered my email the first hour of the next business day (I emailed during the weekend)! Very impressive! |
|
First Metro Philippine Equity Exchange Traded Fund
|
Brokerage fees |
0.50%
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees Source: Prospectus *I can’t find information on how much the third party fees totaled. |
Brokerage fees | 0.04% (published in its website) |
Inception: January 2013.
Class: Exchange Traded Fund (ETF) Buy where: any brokerage account Symbol: FMETF Note: Very fast response to inquiry. Received an email from First Metro on the first hour of the next business day. I emailed during the weekend. |
| Land Bank Equity Index Fund | None |
1.50% per annum
+ fund expenses payable to third parties, i.e. custodian, external auditor fees, other fees |
25% of net earnings (500 minimum) | Not available |
Inception: December 2016
Class: UITF Buy where: Land Bank
|
| Metro Philippine Equity Index Tracker Fund | None |
1% per annum
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees |
1% of amount (early redemption) | Not available |
Class: UITF
Buy where: Metrobank Note: Not much information available on the Metro Bank website
|
| PAMI Equity Index Fund | 0.50% to 3% of amount invested |
1.50% per annum + fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees |
1% of amount redeemed (6 months min holding period) | Not available |
Inception: 16 June 2015 Class: Mutual fund Buy where: Phil Am Asset Management
|
|
Philequity PSE Index Fund
|
Sales load of 3.5%
|
1% per annum + fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees |
1% (early redemption; 90 days min holding period) |
0.92% in 2015 0.49% in 2016 0.03% in 2017 |
Inception: 22 Feb 1999 Class: Mutual fund Buy where: PhilEquity Asset Management; COL Financial |
| PNB Enhanced Phil-Index Reference Fund | None |
1% per annum
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees |
50% of gains (early redemption; 30 calendar days min holding period) | Not available |
Class: UITF Buy where: PNB Note: It is difficult to access information from their website. UPDATE: Information now fully accessible in their website. |
| Rizal Equity Fund | None |
1% per annum + fund expenses payable to third parties, i.e. custodian, external auditor fees, other fees |
0.25% (early redemption) | Not available |
Inception: 28 March 2005. Class: UITF Buy where: RCBC Note: Website only have the most basic information available. |
| Security Bank Equity Index Fund | None |
1% per annum
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees *Based on KIIDS of 31 July 2019 |
None. No minimum holding period |
0.90% (labelled as information ratio) (2018)
|
Inception: 23 November 2015
Class: UITF Buy where: Security Bank Note: It’s funny how Security Bank spun its high tracking error as a positive, saying that “the higher the number, the higher the reward”. Just, no. |
| Sun Life Prosperity Stock Index Fund |
Option A: Paid when fund is bought. Under this option, the investor may redeem their share anytime.
The commission shall not exceed 2% of the investor’s total purchase cost (2.04% of the net invested amount).
|
10 June 2014 Prospectus, p. 2 1% management and facilities fee per annum
AND 1% for fund distribution “SLAMCI is being paid the following fees: (a) as the Fund’s adviser and manager, an annual fee of 1% of assets under management (AUM) AND (b) as the Fund’s distributor, an annual fee of 1% of AUM…inclusive of VAT.” AND 0.15% Transfer Agency fee |
** 1% (early redemption; 30 days min) from Fund Facts as of 29 March 2019 But Prospecus allows up to 2% fee based on the redemption amount **
Sales load Option B: No initial sales commission deducted. The investor agrees to “repay” SLAMCI a deferred sales charge (DSC) plus VAT, but only of the investor sells the investment or a portion thereof, within 5 years. The DSC disappears after 5 years.
|
.24% 1 year return (based on graph in the Fund Fact as of 29 June 2018) |
Inception: 5 May 2015
Class: Mutual Fund Buy where: Sun Life, COL Financial Note: Sun Life’s presentation states that their management and distribution fee is 1%, which is different from what their prospectus says.
|
| UCPB Philippine Index Equity Fund | None |
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees |
5% of the amount redeemed (early redemption; 30 days min holding period) | Not available |
Class: UITF
Buy where: UCPB Note: Scant information in the UCPB website. Waiting for UCPB’s response to my email. |
| UnionBank Equity Index Fund | None |
+ fund expenses payable to third parties, i.e., custodian, external auditor fees, other fees *based on monthly KIIDS published in UnionBank website, the annual total of fund fees is around 5 basis points or .005% |
0.25% or PhP 500 whichever is higher (early redemption) | 0.005% (in 2014). |
Inception: 22 May 2014
Class: UITF Buy where: UnionBank |
WHAT CAN WE LEARN FROM THIS TABLE?
1. Fees are not what they seem
As we can see, management fees range from a low of .50% to a high to 2.15%. These are the annual fees usually published by fund companies when they’re trying to convince people to invest with them.
What’s usually not made clear is that there are still other expenses payable to third parties such as custodians and external auditors. These are not stated outright in their shiny brochures.
If you read the prospectuses/declarations of trusts of these index funds, you will notice that there are two kinds of fees: the management or trust fees, used to pay fund managers and employees, etc. Then there are fund expenses, to pay third parties covered by separate contracts such as custodians and external auditors, as well as to pay the boards of directors (they didn’t become board member just for fun, you know), operations expenses, among others.
These fund expenses are usually equivalent to around 5 to 10 basis points (0.05% to .10%) of the fund and, like management fees, are deducted from the value of the index fund. In total, we can expect that if a fund says they charge 1% annually, total fees are actually in the 1.05% to 1.10% range.
But what the banks and mutual fund companies declare in their brochures and websites are only the management fees, neglecting to mention that there are other fees besides. I’m sure this applies to actively managed funds as well.
2. Mutual funds are expensive to buy
Compared to the UITFs and the lone ETF, mutual funds are comparatively expensive to buy. Sun Life has an elaborate sales load scheme. All three index mutual funds: Sun Life, Philequity, and PAMI have sales loads ranging from .5% up to 3.5%.
Unless you have a way to buy these three funds without sales load (maybe through COL financial, etc.), be sure that you have very good reasons why you will put your money in these funds.
3. It's hard to invest in Philippine index funds if you're based abroad
Most Philippine index funds can only be bought from their respective companies and require your personal appearance in their offices. As an expat who only goes home maybe once, or at most twice a year, this is a huge disadvantage.
Of all the funds, the easiest to buy is First Metro ETF since you can buy shares through any online brokerage account. Next are PhilEquity and Sun Life, which are also available in COL Financial in addition to their own management companies
FINDINGS
Based on the criteria I outlined earlier in this post, I was able to narrow down my index fund options to:
- First Metro Philippine Equity Index Fund. Low fees and low tracking error. Freely available information on its website and fast customer service.
- East West PSEi Tracker Fund. Low fees and low tracking error. Fast customer service.
Also for consideration is PhilEquity PSE Index Fund because of its convenience, low tracking error, and solid track record.
Management and Operation Fees
When it come to trust fees, First Metro’s 0.50% management fee cannot be beat. Its closest competitor, East West, is 50% more expensive. Philequity’s fee is 100% higher than First Metro’s.
Since all these companies are tracking the PSEi, I can’t really see any reason why management fees have to be so high. There’s no premium in conducting complex analysis and research since they only have to track the benchmark. There are only 30 stocks in the benchmark. Buying and selling the component stocks can even be automated.
Even if we factor in the brokerage fees when buying and selling First Metro ETF, I still think total fees will be lower in the long run. We have to remember that the brokerage fees are applied against the transaction value alone while management fees are charged against the TOTAL VALUE of your investments, including gains. Avoiding paying brokerage fees by accepting higher annual management fees is penny wise and dollar foolish.
Tracking error
All three funds are able to minimize their tracking errors but East West’s 0.0003% tracking error is really impressive.
Similarly, the tracking errors of First Metro (0.04%) and PhilEquity (0.03%) are also very good.
Convenience
If you already have a trading account, the easiest index fund to buy is First Metro ETF since it trades in the Philippine Stock Exchange and can be bought through any online brokerage account. If you have a trading account with COL Financial, you can buy PhilEquity shares without being charge the sales load.
As for East West, you have to personally appear in their office to open a UITF account.
MY FINAL VERDICT
Based on my requirements, I chose First Metro Philippine Equity Index ETF because it has the lowest management fees among all Philippine index funds and has a low tracking error. First Metro is also very transparent and provides information to clients and non-clients alike through its website. Buying their ETF is also very convenient for me since I already have a trading account.
There’s no special step I have to do in order to start investing in First Metro’s ETFs. I only have to log on to my BPI Trading account and start buying and selling my shares. True, there are brokerage fees I need to pay but I think the fees are offset by the 0.50% annual trust fees (plus fund expenses), which is the lowest in the market right now.
Also, as an expat, I appreciate the fact that I can just go to their website and read their company reports and other public filings without jumping through hurdles, actually calling people, going to an actual office to talk to a relationship manager, etc.
Of course, this decision is based on MY own requirements and may or may not fit your needs.
I hope this post can help you in making wiser investment decisions. I challenge you to list down what you’re actually looking for in an investment and use my guide to Philippine index funds as the starting point of your own research.
I’d love to hear back from you. Please let me know what you think about my guide to Philippine index funds in the comments.
No time to read now? Post for later.
Hi, I'm Katie Scarlett!
I'm a mother, feminist, bookworm, yogi, and a hoopy frood who knows where my towel is. I am on a constant quest towards self-improvement, to mixed results.
89 Responses
Hello there. What are your thoughts on FMETF being illiquid. Can you really sell your stocks at the time when your shares are very high?
Hi Froi,
I noticed that FMETF may be seen as illiquid by some especially those who wish to trade in large numbers. If you’re going to trade in the hundreds of thousands or millions of pesos and want to liquidate or buy right away you will be frustrated. But FMETF regularly trades in respectable volumes daily.
Hi Katie! Thank you for putting this up here. Really helpful! This is exactly what I need!! 😁 I’m also an expat and been thinking to invest in index fund back home. You really saved me a lot of time by doing this well-written guide. 👍👍
You’re welcome Rica and thank you for reading my blog. I’m glad to be of help.
Hi Katie! I have been reading several books from John Bogle thus my interest with Index fund. Since, I am an OFW, I have trouble about how to fund if I invest in the Phils. See, because of this Fraud thingy, banks are requiring OTP-one time password, every time I make online transaction, and I find it impractical to maintain Phil. number, so, I close my account with Metrobank. I went to other banks and they told me the same thing.
You mentioned about BPI Trading account, does BPI ask for OTP everytime you make transaction online? Thank you and I hope to hear from you soon.
BPI Trade does not require an OTP. I also have an AB Capital Securities account, which also does not require an OTP. Hope that helps.
Thank you Katie, that helps.
Thank you, very informative and helpful for all expat like us searching where to invest our hard earn money with higher return and lower fees.
Hi Katie,
Let me first give my thanks for providing such a detailed but easy-to-grasp article about Philippine Index Funds.
I am also a student expat living in Australia. Currently 21 years old, I want to start investing in FMETF or PhilEquity PSE Index Fund when I visit Philippines this December. My dilemma comes in choosing which index fund and platform I could use best with my investing horizon being long term saying 5-15 years and maybe even more than that.
Based on my personal research, COL and BPI Trade, and BDO Nomura are the platforms available. Knowing the Philippine Bureaucracy, I will need to get a TIN and SSS to be able to open accounts on COL and the lot. I am seeking advice on which you personally think suits me best as an expat like you. Feel free to go beast in providing any other help helpful advice.
Kindest Regards
I’m personally invested in FMETF and plan on continuing to increase my holdings until, well, forever until retirement. I currently have both BPI Trade and AB Capital Securities but I prefer using the latter more. Customer support is excellent and I can transfer my US dollar to AB Capital’s account through wire transfer. They will convert your USD to PHP using that day’s rate. It saves me the bother of doing multiple bank transfers.
Thanks for dropping by.
Hello Katie,
Would like to clarify if the item i should be buying is the FMETF once I’m in the trading interface? Currently, I have no idea how does FMETF works. Is there a way to connect with you for some questions?
Hi John! The ticker symbol is FMETF as well. You may email me by filling out the info boxes on my contacts page.
Hi Katie,
Would it be better to pick option 1 or 2 below to avoid management fees and pay only broker buy/sell fees? If yes, which of 2 option below is a better strategy?
1. Just pick the top conglomerates like sm ac jgs aev mer jfc smc gtcap ltg agi mpi dmc so you can also get dividends and liquidity unlike fmetf?
2. Or get the top 5 sm smph bdo ali ac… Unlike
Dear DJ,
I prefer to invest in the PSE index so I personally don’t like trading individual stocks that often (except in special circumstances). I’d pick neither since I don’t have the time and don’t want to experience constant anxiety over the rapid changes in individual stocks.
Katie Scarlett
Hi Katie. Thanks for this very detailed post. I’m also based abroad, in US specifically, and had a goal of investing in the US stock market this 2018. However, during my research, I stumbled upon Mr. Money Mustache who advocates index fund. I dug deeper and realized that it makes total sense. Not only does it fit my lifestyle, but it’s also endorsed by some of the best finance people out there including Mr. Buffet himself!
Being a Filipino though, I’ve always wanted to give/invest back to our country. Your post gave me a great deal of guidance on how to hit 2 birds with one stone. Thanks so much for putting out quality content.
Hi Chickee. Thank you for commenting, it means so much to me right now. 🙂 I also like reading MMM and other FIRE bloggers and think how I can replicate them in the Philippines. Thanks for dropping by.
Hi Katie, Thank you for sharing your research on index investing in the Philippines. I also live in the UK at the moment. MMM and JLCollins’ index investing brought me here as I am interested in getting into investing with Vanguard index funds (VTSAX specifically as suggested by JL Collins) and saw the news (https://fundselectorasia.com/vanguard-products-launch-in-the-philippines/) that Security Bank has opened a SB US Equity Index Feeder Fund which is the domestic wrapper for the Vanguard Total Stock Market ETF, and a SB Global Equity Index Feeder Fund’s target fund which is the Vanguard Total World Stock ETF. You need to have a dollar account with Security bank though. Have you come across this article? Have you any plans in investing outside Phils?
Hi Mervin,
Thank you for visiting my blog. Yes, I am currently in the process of investing overseas but I’m just ironing out a few kinks with my prospective online broker. Will share my experience real soon.
As for the SB Global Equity Feeder Fund, it’s a great idea BUT, if you can directly invest in target fund just cut the middle man. Personally, SB’s offering is a pass for me but it might be an option for others who cannot open trading accounts that has direct access to US equities markets.
Hello! I appreciate this work of yours very much! It gave me so much knowledge about index funds particulary about the costs and fees!
But may I ask, if I’m going to invest in index fund through a third-party broker (such as ColFinancial) instead of through an agent, do I also need to “time” my investment when the market when the PSEi is low like a common strategy in investing in stocks?
Thank you so much!
Thank you for reading my blog. As to “timing” when to buy shares, I don’t believe in timing the market.
Hi Katie! Thank you for this informative and easy to understand article of yours. Thank you for sharing your experience too. This helps me a lot since I have also been researching how and where to invest. Keep up the good work and keep inspiring us. Everyone needs motivation and inspiration to prosper. God bless!!
Thank you for the nice thought, Krysel!
Thank you for sharing this and for creating this blog (bookmarked it na!) I wish I discovered it earlier. Would you have any thoughts on PhilEquity’s MSCI Philippines Index Fund?
Thank you for sharing this (bookmarked your blog!) Wish I discovered it earlier. Would you have any thoughts on Philequity’s MSCI Philippines Index Fund?
Hi Nina,
Thank you too for bookmarking my blog. You won’t regret it (naks naman)! The MSCI Ph Index Fund looks interesting but since this is a new fund offering, I haven’t formed my opinion on it yet. Thank you for bringing this to my attention though. This means the Philippines currently have offerings tracking 2 stock market indices, giving investors more options! Interesting times.
Computing my real hourly wage is next on my to-do list! 🙂
Hi Katie, thanks so much for this post! Do you know where I can invest in PH index funds + get monthly dividends? I know that for BPI Philippine Equity Index Fund UITF and COL, what they do is re-invest the dividends into the mutual fund; individuals don’t get dividends… I’m just wondering if there’s a place where we could get monthly dividends. (I’m trying to follow the recommendations of Mr Money Mustache http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/). Thanks again! 🙂
Hi Dana,
As far as I know, only First Metro ETF issues dividends annually instead of monthly.
Hi Katie,
I want to know your thoughts on this – I have also been trying to just invest in index funds for long term. I have been holding FMETF for long term and so far they have not given out dividends – except for a stock split in 2017. This compared to the Singapore ETFs that I have been holding which gives out regular dividends. It has always bothered me why FMETF does not give out dividends when the component stocks of the PSEI do. As you mentioned, they only really need to track the index, and they already charge management fees plus other costs. I just feel like I’m being cheated out of dividends and to hold it long term means you lose out on the passive income via dividends that you would have earned. Maybe I have missed something that clarifies this point that you may have come across your research. Thank you
Hi Leslie,
You know what, you have a point. I’ll try to dig around and see what’s up.
Hi! I am very new to stock trading but I am well interested in the topic. I am currently in Australia as a temporary resident, but I would like to invest in Philippine stock exchange (I am a filo citizen). How did you first start of with making a trading account? I really am fresh to all of this.
Does setting a trading account have to be the same place I am currently in? Or when creating a trading account, it is automatically international and can buy stocks anywhere? Please enlighten me with your sound knowledge 🙂
Thank you 🙂
If you wish to invest in the PSE, you have to open an account with a Philippines-based online broker. Many people open an account with COL Financial. I personally have accounts with AB Capital Securities and BPI Trade. For Ab Cap Sec, you can open an account by sending your documents via courier. Faxed documents cannot be accepted per SEC regulations.
For international stocks(meaning outside of the PH), it’s more complicated. If you want to buy US or European stocks you have to open an account with brokerages specifically offering the service. Not all online brokerages offer cross border trading because of the complicated rules, taxation regimes, etc.
I hope this helps.
Thanks for this well-thought out post. It seems in the Philippines, index funds are still relatively expensive compared to US counterparts (where competition keeps costs low).
I held some Sunlife mutual fund shares in 2007/2008 and you’re right the front sales load was pretty expensive (which you’ll pay if you only hold your shares in the short term). What I hated about mutual funds was the lack of transparency as to which particular companies the fund was buying shares of. How are stock/ cash dividends paid? (I never received any of it). this is why I feel better holding individual stocks. Costs are transparent and I receive dividends regularly. This, for me, offsets the risks.
I hope that with the increase of financial literacy advocates in the Philippines spreading information, banks and mutual funds companies will eventually lower their fees.
Hello, thanks for this very informative post! I’m currently new to investing and even managing my finances. I’m still afraid to dip my toe in the water at the moment that’s why I try to read up as much as I can about this particular topic and the like. Just recently applied for a health insurance as well as invested a small portion of my salary into a mutual fund (advice given by a close friend). Anyway, thank you for your blog!
Hi Paolo,
Congratulations on taking the first steps to carefully managing your finances. Stick around and you’ll find a lot of useful info on my future posts. For the meantime, have a look around!
Hi KatieScarlette,
Thank you for this informative post.
I am considering following the bread crumbs until the end of the trail.
Just need more details of what one needs to do at the end.
So after setting up the online trading account and buying shares from the recommended index fund and waiting, reading, waiting, swimming, and waiting…
What happens when you plan to retire? Does one need to sell all shares or Is it possible to set it up to provide a monthly/yearly income when it is time to retire.
Hi Terence,
What do you mean by “the end”? If you mean by retirement, then use the money to fund a happy and prosperous retirement. You don’t have to withdraw everything at once, just the amount you need for expenses. If you plan your investments carefully, you can set it up so that you can withdraw annually without greatly diminishing the value of your principal and making the money last until the day you die.
Hi Katie,
This blog is great for expats. May I ask why you invest in the PSE when you are based abroad? Do you plan to move back to the Philippines? Otherwise, are the higher fees for local index funds and currency risk worth it, instead of investing in your current location, considering you don’t have pesos, but fund your investment from foreign currencies?
Hi Kaeru,
My family is based in the Philippines and so far I’m planning on settling there for retirement. That’s why I chose FMETF because of the low fees; I dont want to play around with expensive, actively managed funds. Unfortunatel, it’s very hard for expats to invest where I’m currently at (Northeast Asia) due to language barrier and lack of customer service for foreigners. I did try.
HI Katie, I wish I’ve read this before opening up Sunlife MF (PSEi), Feb this year. I hate to tell you I even opted for the one with a 5 yr-lock in period. So I guess, I have no choice but to continue funding it for the long haul. Anyway, I’m working here (PH) so I should have more local info yet I’m obviously still learning to discern where to put my hard-earned money. Kudos for such a detailed post, very helpful and timely! May I know why you opt for BPI Trade and not COL Financial? I’ve been interested with opening an account with COL for years now, but I just wanna wait (they said this June) until all transactions are accepted online since I don’t wanna go through the hassle of sending docs through post.
Hi Steph,
I only reason I opened BPI Trade was that I have several BPI accounts. I’m rarely using it now and prefer to use my AB Capital Securities account to trade. I use AB Cap Sec because transferring funds is very convenient and they allow me to transfer funds from my USD account directly to my trading account, which trades in pesos. Their conversion rate is not bad, which makes transacting with them very convenient for me.
Hi, since you’ve been investing in First Metro’s ETFs for a while now, can you provide the figures for all there fees, including third-party fees? 🙂
Hi Alexandra,
Apart from the FMETF annual management fee of .5% of total holdings, the fees depend on how much stocks I will buy for the day. But the percentages are:
brokers’ commission (AB Capital Sec) 0.25%
VAT 12% of the broker’s commission
PSE transaction fee 0.005%
Securities Clearing 0.01%
Thanks for the very informative post Katie.
I am new to this, and would like to understand how it works. Based on what I’ve read, you buy shares of the index fund/ETF through a broker (AB Cap, COL, etc.) and then the fund manager will be the one to allocate the given capital? (i.e. which company shares to buy, the choices being the top 30 or 35 firms) Is this correct?
or
The index fund is one entity, which mirrors the collective performance of all the top 30/35 firms? And you buy shares of this entity? The fund manager being the one to advise if investors should buy more or sell shares depending on the index fund’s performance?
Currently looking at buying FMETF shares, too.
Seraph,
Both are correct. FMETF is an entity (a company) that mirrors the PSEi. The PSEi is made up of stocks of 30 companies. FMETF mirrors the composition of PSEi and FMETF should execute the trades. All the investor has to do is to buy shares of FMETF. FMETF = PSEi = stocks of 30 companies
Hope that helps.
Hi katie, thank you for this very informative article. I have read books about investing and i have learned so much. I also have a BPI trade account and im using it to buy stocks, but just a few because i just have a small income for now. Anyway, i learned about diversification so i am really interested about investing in the index fund. Before i read your article, i was already considering BDO PERA equity index fund. Im aware that it has a high fee but the tax free and tax credit advantage enticed me. FMETF was also my option and you made really good points. It’s also advantage for me because i already know how to buy stocks.
Can i ask a question? How can i apply peso cost averaging in buying FMETF? I can only allot 1000 pesos per month for buying FMETF for now, and because there’s a board lot, i can’t buy stocks every month even in the minimum.
Thank you for all the useful info you gave through your article and more power to you. I hope to read more of your works.
Hi Paulo,
Instead of investing your 1,000 pesos every month, why not save it up and invest every 8 months to be efficient with the fees. Remember that every time you buy you are charged VAT and other associated fees.
Thank you Katie Scarlett ang comprehensive ng iyong review sa iba’t ibang index funds sa pinas. Although parang madaming disadvantage kapag overseas investor. foreign exchange risk, high management fees, custodian fees, no franking credits sa dividends. Sana talaga maibaba ang management fees para more money sa bulsa ng investors lalo na kapag mas matagal ang investment horizon 20-30 years ang laking bagay ng kahit 0.5% additional return pa.
Dear Yeng,
Pangarap ko in the future dumami na ang mga Pinoy na gustong mag-invest sa stock market at mas madaming banks at financial institutions na mag-offer ng funds para may incentive sila na magbaba ng management fees. Sa US kasi libo-libo ang mga mutual funds/UITFs/ETFs kaya pababaan ng management fee kapag index fund since automated naman ang pag-track ng index.
Correction PNB charged 1% in their Phil Index Tracker Fund not 2%
Hi JM,
Indeed it is. I checked the PNB website and corrected the information accordingly. Your comment inspired me to double-check all the figures and I’m glad to say that apart from the PNB annual fees, everything else is correct. Sorry PNB for the mistake! 😀
KS
Hi Katie
Thank you for a detailed article on ETFs in the Philippines. I am expat and an amateur at investing. I am planning to invest long term on ETFs but I just wanted to know how it actually works? How you make money out of it? Do you only gain if you sell your ETF? or do get dividends as well? Would you suggest putting in additional investment every month or yearly to save on fees?
Hi JC,
Very simply, you make money when you buy the ETF for a low price and sell it for a higher price. You can earn by 1. dividend distribution (and they send you the dividend cheque instead of reinvesting in the fund) and 2. when you sell your shares. If you’re going to invest, make sure that it’s at least 8,000 pesos. It doesn’t matter if it’s monthly or annually, as long as you invest regularly.
Katie Scarlett
Hi Katie,
Thank you very much for your inputs and information about index fund.
I’ve been doing local stock trading here in the Phil for more than 2 years; and now is my timing to have stock index fund based on my own Financial plan. Your data in the table helps me a lot. Hope you continuously share your experience to enlighten us more in the future. Feel free to ask if you have questions on local stocks for COL and Philstocks who are the platforms that I currently used this time.
You’re welcome Herald and thank you for reading my blog! I’ll take you up on that offer! 😀
Hi Katie,
Long time no hear.. May I ask if you already have current stock portfolio in US stock market like NYSE, NASDAQ, etc.. Or if you also have ETF’s, mutual funds in US.
I might be travelling in US these coming months and stay their for long time. I am thinking of playing stocks or mutual funds while I’m their.
Thanks to advice.
Herald,
I hold Vanguard ETFs for retirement.
Hi Katie. Thanks for your post. I’ve been studying about stocks and index funds lately and your post helped me a lot. I’m looking at investing in the First Metro Philippine Equity Index Fund but I only have COL financial account. they dont have it there. All they have from first metro are First metro save and learn Equity which has 1.875% management fee. Looking at investing in Phil Stock exchange index fund instead.
Hi bluesky81,
You have to look for FMETF in the stock search instead of mutual fund search. Since FMETF is an ETF, it trades like a stock.
Thank you so much, Katie. I’m looking at it right now and will buy shares from it soon.
Good luck and congratulations on taking action!
KS
Hi everyone and thanks Katie for this informative post. I’ve been researching Phil REITs initially and end up looking for Index fund instead before I stumbled upon this blog. I’m in the process of opening a BDO account coz I already decided to use BDO Nomura as my broker.
1. Are there any brokerage platform with multi-currency account in the Phils?
2. Any broker that can use to Invest in Index fund through RSP?
Thanks in advance!
Hi Katie:
Is FMETF like buying and selling stocks? do i need to buy when it is on support or i can do peso cost averaging? Thank you and i love reading your blog.
Connie
Connie,
Yes it is like buying and selling stocks. In fact, FMETF, being an ETF, is a mutual fund that behaves like stocks. Personally, it does not matter to me if you invest lump sum or pseo cost averaging, as long as you invest as soon as practicable. Remember that time in the market is more important than timing the market. The longer your money is invested, the more chance it has of growing.
Thank you so much for reading my blog!
KS
Hi Jhun,
1. None that I know of. I know that some brokerages accept USD and then will convert your money to pesos so you can trade in pesos.
2. If by RSP you mean registered savings plan like in Canada, the closest that we have is PERA (Personal Equity and Retirement Account). You can read more about PERA in this post: https://katiescarlettneedsmoney.com/what-is-pera-and-why-you-need-one-right-now/
KS
Hi,
RSP or Regular Savings Plan that lets you invest a fixed sum on a repeat mode. Very similar to dollar-cost averaging where you invest a fixed sum regularly into the same choice of investment over a period. Most of our banks here in Singapore have this investment plan.
There are banks that can link that for you, like for example BPI and BDO, but I personally haven’t done myself.
Hello Katie:
Since FMETF is being traded like stocks. I could sell it when it is near its resistance and buy on support. Or I could hold onto it for a period of say 5 years and do a peso cost averaging. Is my understanding correct?
Cheers!
KS
Hi, just recently started venturing in stocks so pardon me for my lack of understanding, but for the Sun Life Prosperity Stock Index Fund is the 1% fund distribution also per annum meaning the total expense ratio per annum of the fund is actually 2%??
Hi, Katie. Thanks for creating this blog and writing about investing. I’m learning a lot from you. I have a question please. How does FMETF charge the management fees? Do they pencil that in annually and deduct it from the fund itself, or do I need to leave some cash in my trading account?
Hi Chris,
They deduct it from the investment itself.
Hi. Thank you for this blog. i discovered this via reddit’s phinvest.
tanong ko lang kung tama po ang pagkakaintindi ko sa Index Funds.
para makabili ako ng Index Fund, lets say FMETF, i have to go through brokers.
so once i opened my account (e.g. COL eto lang po ung alam kong broker hehe), im going to buy the stocks of FMETF on the stock market, tama po ba?
since ako ang bumili ng stocks, ako ung mag mamanage which means i have to monitor it on daily basis. so i need to learn everything about stocks po. tama po ba?
so mag rerealize lang ang magandang profit pag maganda ang pagkakatrade ko ng stocks ni FMETF?
Marvin,
Para makabili ng FMETF, kailangan mo ng broker. Ang FMETF ay isang ETF, ibig sabihin, kumikilos ito na parang isang equity stock.
Tandaan na may ibang pa klase ng index fund bukod sa ETF – mutual fund, na mabibili sa mga investment companies (PRU, Sun Life, COL inancial) at UITF, na mabibili sa mga bangko (BDO, BPI, etc).
Tama
Tama din
Tama ulit
may mga addtional questions pa po ako uncle_iroh hehe
pero diba po si FMETF is good for long term din? so hindi kailangan na daily ung monitor natin sa stocks ni FMETF?
ok lang po ba na bumili ako ng stock ni FMETF (php xx,xxx), then hindi ko cya imonitor daily, then bibili ulit ako ng stocks ni FMETF if magkaroon ng investment money.
then after several years, saka ko cya ibebenta if ok ung profit.
ok lang po ba ung gantong strategy?
or mas better kung i go UITFs in banks po?
thank you.
Hi uncle_iroh its me again
may dagdag po sana akong questions
pwede ba na hindi daily monitoring kay FEMTF?
like annual investment ang gagawin ko.
mag iinvest ako (php xx,xxx) today, then dadagdagan ko ng certain amount annually if magkakaroon ako ng investment money.
then saka ako mag sesell ng sshares pag nakita ko na okay na ung profit na makukuha ko.
may profit pa din po kaya pag ganun?
or mas okay if i go for UITF?
then ganun din po ang gagawin ko. dadagdagan ko nalnag yearly if merong extrang investment money then withraw if nakita kong okay na ung profit ko for that UITF.
Thank you po and regards,
Marvin
P.S. sorry for flooding. di ko po alam kung nag popost ba ung mga nauna kong comment since hindi cya nalabas as pending di tulad nung nauna kong comment. sorry for the inconvenience 😦
Kung pangmatagalan ang investment mo, hindi kailangang bantayan araw-araw.
Dapat may maayos kang plano at hindi bara-bara lang. Aralin munang maigi at huwag maniniwala a mga guru sa Facebook, lalo na yug mga mailig mang-hype.
Bakit ka mag-UITF kung mas mababa ang fees ng FMETF? Gusto mong mamigay ng libreng pera sa kanila? tandaan, mas mayaman sila sayo. Wag mo na sila lalong payamanin.
Ahhh okay po. so hindi na magandang kumuha ng UITF if meron na akonf FMETF? ito ay dahil sa malaking fees ng UITF. thank you po
plano ko po sana mag invest sa mutual fund kaya ko naisip na mag UITF since ang meron palang po ako is FMETF.
Marvin,
Depende sa goals mo pero in general, bakit ka kukuha ng another UITF kung meron ka nang FMETF? Lalo na kung ang kukunin mong UITF ay index of equity fund din naman?
Sa palagay ko, dapat munang aralin mo muna ang mga financial instruments bago ka sumabak para hindi sayang ang pera at oras mo.
Hi uncle_iroh its me again
may dagdag po sana akong questions
pwede ba na hindi daily monitoring kay FEMTF?
like annual investment ang gagawin ko.
mag iinvest ako (php xx,xxx) today, then dadagdagan ko ng certain amount annually if magkakaroon ako ng investment money.
then saka ako mag sesell ng sshares pag nakita ko na okay na ung profit na makukuha ko.
may profit pa din po kaya pag ganun?
or mas okay if i go for UITF?
then ganun din po ang gagawin ko. dadagdagan ko nalnag yearly if merong extrang investment money then withraw if nakita kong okay na ung profit ko for that UITF.
Thank you po and regards,
Marvin
Maam katie
Above all thanks for providing us such a good overview of each topics you discuss. One more thing madam, if you mind to discuss PERA in detailed way, you know, it is better to learn it from an expert. Thanks in advance
Hi Rain,
I have a blog post about PERA here: https://katiescarlettneedsmoney.com/what-is-pera-and-why-you-need-one-right-now/
Hi katie from what I understand correct me if im wrong, magka iba yung index fund at ETF according to warren buffet. Hinahanap ko nga saan maka invest directly sa PSEI but hindi ko mahanap I guess ETF is the only choice
Hi Carl,
ETF and index funds are different. ETF is a pooled fund that can be bought and sold like a stock while an index fund is a pooled fund that is invested in indices. In the Philippines, that’s the PSEi. You can’t directly invest in the PSEi because it is an index and not an investment instrument. You can invest on the PSEi through ETF (FMETF) or through mutual funds or UITFs.
I hope this helps.
KS
Hi! Thank you for this blog.
Just purchased a few FMETF shares and I’ve been reading that it is a good index fund investment.
Question: do you automate your FMETF purchases (if it is possible) and would you say that it is advisable? I just plan to place a nominal amount in it maybe monthly, then monitor monthly.
Thank you again for your time and this blog 🙂
Hi Katie,
Your blog actually helped me decide to go for FMETF instead of UITF index funds from BDO or BPI. THANK YOU!
Do you know a way to automate the buying of FMETF from online brokers? BDO has Easy Investment Plan (EIP) while BPI has Regular Subscription Plan (RSP) for their UITFs so it’s very convenient.
I’ve been searching for a way but haven’t seen a blog about this. Maybe you can write about this too? Comparing online brokers and their FMETF automation solutions? 😉
Again, my question is: What’s the cheapest & most customizable way to automate my FMETF monthly purchases?
Thanks!
Pexo
Hello Ms. KATIE,
Thank you very much for your very informative blog on FMETF, which I first encounter that acronym when I was searching for best investments in the Philippines. I am really new here and these index funds works. Before reading your blog, I was planning to invest in LIFE MF. But I have read that it is expensive, so I am planning to start to invest in FMETF because I have read your article on this and I am planning to use the fund for my daughter’s college fund. It encourages me to invest because of you and previous experiences of having no savings or investments. What you do is Women empowerment. Thank you very much. I hope you can help and assist me to open my trade account so that I can start investing in FMETF. How can I ask an assistance from Ms. KATIE? I can save 2k a month. Thank you very much. I hope you can help.
Be safe always and Godbless.
Hi Katie! 🙂
I’ve already invested in BPI Philippine Equity Index Fund several years ago (before First Metro Philippine Equity Index ETF was made). I’ve gotten some good returns on it so far (~13.5%). Because of your article, I now want to invest in FMETF. I’m planning to just leave my BPI index fund as is and start investing with FMETF. Would the fees still be deducted from my BPI index fund yearly (meaning ~1.1% will be deducted from my fund every year even if I do nothing to it)?
Thanks! 🙂