I received an email yesterday from one of PISO Ni Juan readers
and I thought it is interesting to share this with the rest of PISO Ni Juan
readers as well. To keep the sender’s privacy, we would not divulge the
gentleman’s name but let’s focus on his query.
Here’s his email to us:
Dear Juan,
I opened my savings account on April 2005. I make it a point
to deposit P1,000 every payday. A friend advised me it’s better to invest my
money in mutual fund. If I invested my money in mutual fund instead of saving
in my deposit account, how much would be my money now? Approximately?
Best regards,
---------------
To answer his question, I would need to run some
calculations based on what he said about his savings account.
He said that he
opened a savings account in April 2005 and since then diligently deposited
P1,000 pesos every month. His question is “how much is the approximate amount
had he opted to invest his money on a mutual fund".
Interest rates for deposit accounts by most banks are at 0.25%
per annum. If he started saving P1,000 pesos starting April 2005, the amount of
his savings by the end of year 2012 is about P93,896.91. His investment returns
may only be about 0.96% from the total principal of P93,000.00.
Table 1 below shows his investment’s value at the end of
every year starting April 2005.
 |
| Table 1 |
INVESTMENT IN UITF
For comparison, let’s calculate how his investment would
grow in case he opted to invest his money with BDO Equity Fund, the leading and
high performing equity UITF offered by BDO Unibank, Inc.
Should he opted to investment in BDO Equity UITF with the
same amount of P1,000 every end of the month starting April 2005, how much
would be his returns of investment by the end of 2012?
To calculate, I took the historical month-end NAVPU of BDO
Equity Fund and converted his month-end contribution (savings) of P1,000 pesos into
units of participation every month. This we get through the formula below.
No. of Units
of Participation = Money Invested / Prevailing NAVPU
The year-end value of his investments will be the product of
the prevailing NAVPU times the current total units of participation at the
year-end.
The value of his investments every end of the year should be like the one shown in Table 2 below.
 |
| Table 2 |
Based on the results above, in case he opted to investment
his money in BDO Equity UITF, his investment returns by the end of 2012 would
be P193,148.75 pesos or about 107.7% returns from his total investment of
93,000 pesos.
INVESTMENT IN MUTUAL
FUNDS
Let’s check now, by how much would be his ROI in case he
opted to invest in mutual funds.
I consider getting the calculations by considering the historical
performance of Philequity Fund, Inc., the leading equity mutual fund managed by
Philequity Management, Inc.
Same with the calculations we have done with BDO UITF above,
I took the historical NAVPS of PEFI every month-end. With his investments of
P1,000 every month, I divided this with the prevailing NAVPS every month-end to
get his number of shares every month.
His year-end investment value would be the product of the
prevailing NAVPS times the current total
number of shares.
The value of his investments every year-end should be like the one shown on Table 3
below.
 |
| Table 3 |
Based on the results above, in case he opted to invest in
mutual funds, in particular, with Philequity Mutual Fund, Inc. he would have
gained returns of about P219,463.31 pesos or about 135.98%
ROI!
The gentleman's friend's advice is absolutely right!