What is the best index fund in the Philippines?

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How do fees of index funds impact return on investment? Find out the best index fund.

So in another article we talked about investing in index funds could be a better option when done long-term. Such claim is based on two things: expert recommendation and return over long term. Advice from experts like the highly successful stock investor Warren Buffett and the historical performance of foreign and local indices appear to provide more support to such claim.

A rather popular lore goes that investors, in general, can’t beat the index.

So if Pinoys have better chances in investing in index funds, wouldn’t it be necessary to actually check which one is the best in the market?

What is the best index fund?

In a separate article, an attempt is made to answer this question by making a comparison of fees of all index funds. You may want to read that first and then you can come back once done. That article talks about index funds in general, how they are structured, operations, and ways to invest in them.

It was written with the hope you’d select the one with the least fee and in the process, lower your cost of investing. Fees drag your the returns of your investment funds especially that you’re doing this for passive income.

Impact of index fund fees on ROI

This time, the impact of these fees on your return on investment (ROI) is the focus. It’s going to involve making a forecast 30 years into the future, and then see which one actually gives you higher take-home pay. This is a fair assessment.

However, it’s impossible to do this on all of the index funds in the market. Not only because there is less space here, it is also not necessary.

Previously, the way the assessment was done was to look at the cumulative effects of fees of only a handful of funds. The disadvantage is that some of our readers might think those that were not mentioned were not worth looking into. As a consequence, the few funds that were included were given importance by virtue of them being taken into consideration at the expense of others, when absolutely no such intention was ever engendered or implied.

So an update to the article is inevitable.

To make the list more inclusive, no specific funds are mentioned. Instead, the assessment is approached in two ways. Firstly, we’re going to look at the cumulative effect of sales load (in the case of mutual funds) or stock trading costs (in the case of exchange traded funds). Secondly, we’re going to see how management fees are going to impact the bottom-line of investors.

Some considerations

The holding period and exit fee are not considered. The reason being is that this charge can be avoided. You can wait until after the holding period and then redeem your investment, and in that way you wouldn’t have to pay the fee.

It is important to bear in mind that there are limits in this attempt to track the impact of fees on investments. The fact that a projection is done means that this is not going to be what funds would perform in reality. Actual results vary. The numbers you see here do not guarantee how these funds would perform in the future.

Another thing is that it is assumed that the stock index grows 7% every year. From experience, the actual gain of the top 30 Philippine blue chip companies fluctuate widely each year. It doesn’t grow as neatly as the projection that you see here. Again the goal is not to predict the index, instead it is to measure which of the funds would yield the best return in the long run.

Also, it is assumed that these funds won’t change their fees in the future. If and when they do, then the tables wouldn’t reflect such change.

Lastly, the comparison is only on fees and their impact on your money. It doesn’t take into account other factors such as tracking error, customer service, online access, ease of doing business, total expense ratio, etc.

Effect of sales load or entry costs

Sales load or entry costs are any charges against your capital before they’re committed to be invested. In the article “How to invest in mutual funds with zero sales load“, we talked about how mutual fund companies would deduct this fee every time you invest, whether it is your first time or your additional capital for reinvestment.

Meanwhile, when you purchase an ETF share, there are costs to trading (buying and selling) shares on the exchange. They include fees, charges, and taxes that your stock broker would collect.

So the first comparison is the ROI on a one-time P1 million investment. Let’s track the growth of money invested for the next 30 years. A zero-fee fund is also included as a benchmark.

In the table, here are some assumptions.

  • Starting capital of ₱1 million.
  • Time horizon is 30 years.
  • Money grows 7% each year.
  • Withdrawal occurs at the end of 30 years and after the holding period, if there is any.
  • Cumulative gain reflects the percentage difference with respect to the starting capital.
Effect of sales load or entry costs

The table above shows that the one that has no fee at all beats all others. It nets the highest cumulative gain from the initial deposit of a million pesos over a span of 30 years. The table below takes zero fee as reference and shows the percent difference with other fees.

Zero fee7,612,2550%

Are there any funds without any entry fees? Yes, there are. Out of the 20 index funds in the country, 14 don’t charge any such fees. You can read up here a summary of the local index fund fees.

However, one other fee that you have to mind. The management fee can have bigger negative effect on the net outcome of long-term investments.

Effect of management fee

All index funds are offered, managed, and operated by investment houses. In exchange, these investment houses charge a management fee, which is a portion of asset under management (AUM) and it is assessed every year.

Unlike entry costs that are deducted from the capital before being committed to the investment, the management fee is reflected on the net asset value of the entire fund. So this brings about a kind of invisibility, investors would not feel like they are getting charged each year. But they are, only that such fee is imputed into the value of their investment.

More than that, it is also important that on the prospectus (the document that contains details of the fund) contains fees other the management fee. The sum of management fee and all other fees are called total expense ratio (TER).

In the table, here are some assumptions.

  • Starting capital of ₱1 million.
  • Time horizon is 30 years.
  • Money grows 7% each year.
  • Withdrawal occurs at the end of 30 years and after the holding period, if there is any.
  • Cumulative gain reflects the percentage difference with respect to the starting capital.
  • To make all other things equal, effects of entry costs are not taken into account.
  • Zero management fee does not exist in real life, so this is going to be used as a benchmark.
YearDepositZero fee0.50%0.75%1.00%1.50%
Effects of management fee

It is clear. The less the costs are, the better the cumulative gain for investors. More than that, it has a higher negative impact than entry costs. And it does make sense too. In this example, you only pay the entry cost once, but the management fee is assessed annually.

The table below also shows the percent difference when zero fee is used as reference against other fees.

Zero fee7,612,2550%


This article explores the impacts of entry costs and the management fee on long-term investment. The lower the cost, the better your take-home gains on your capital. Sadly, the management fee in local index funds are way higher than the ones found abroad. For comparison, two funds tracking US indices only charge 0.03%.

For retail investors, First Metro Philippine Equity Exchange Traded Fund (FMETF) despite the costs associated with buying or selling its shares may yield the most LONG TERM if projections are correct. However, if the time horizon is short term (like investing and getting back the money in a couple of years), retail investors may be better off with EastWest PSEI Tracker Fund or UCPB Philippine Index Equity Fund.

For institutional investors, PRUInvest PH Equity Index Tracker Fund offers 0.50% fee and thus may provide the most return.

Here is another table and promise, this is the last one. All index funds tracking PSEi are arranged from the least to highest fees.

NameTypeFeeEntry costs
FMETFETF0.50%0.295% (at least 8K capital)
EastWest PSEI Tracker FundUITF0.75%0.000%
UCPB Philippine Index Equity FundUITF0.75%0.000%
PRUInvest PH Equity Index Tracker Fund (Class I)UITF1.00% (0.50% for institutional investors)0.000%
BDO PERA Equity Index Fund PERA1.00%0.000%
BPI Philippine Equity Index FundUITF1.00%0.000%
CTBC Bank – Sun Life Philippine Stock Index Feeder FundUITF1.00%0.000%
Metro Philippine Equity Index Tracker FundUITF1.00%0.000%
Philequity MSCI Philippine Index Fund, Inc.Mutual fund1.00%5.000%
Philequity PSE Index Fund Inc.Mutual fund1.00%5.000%
Philippine Stock Index Fund Corp.Mutual fund1.00%1.500%
PNB Enhanced Phil-Index Reference Fund UITF1.00%0.000%
PRUInvest PH Equity Index Tracker Fund (Class A)UITF1.00%0.000%
Security Bank Equity Index FundUITF1.00%0.000%
Sun Life Prosperity Philippine Stock Index Fund, Inc.Mutual fund1.00%2.000%
UnionBank Equity Index FundUITF1.00%0.000%
PAMI Equity Index Fund, Inc.Mutual fund1.12%3.360%
Land Bank Equity Index FundUITF1.50%0.000%
Fees of Philippine equity index funds


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24 thoughts on “What is the best index fund in the Philippines?”

    1. Hi, Seph. You may check the fees of that fund and compare it to any of the funds that are comparable so that you can see the projected returns over time.

  1. Truly appreciate your analysis..As an American and Married to a Filipina and we have a 3 yr old son we are investing in a account with First Metro Securities and have a advantage since I receive dollars an exchange rate average 47.35-1.00 dollar..hes very lucky..it seems buying a condo may not be profitable but it has intrinsic value that cannot be measured in dollars..I dont buy jewelry anymore..I keep a nice simple gold bracelet a nice simple gold necklace and a G-Shock watch I love now everything is about investing..we think FMETF is great..just bought 30 shares but will average 10,000 peso every 6 months so that 20,000 a year and 100,000 every 5 years best scenario will try to increase it to 50,000 a year especially while its affordable…you always adapt your investment strategy even when investing because new ideas pop up all the time..I like stocks too..MM and DITO and Converge going public in October we think thats another growth stock.

  2. Hello! For example I will allot 10k for index fund, may I know which would be better monthly (2k for 5 month) or annual investment (10k per year) when it comes to returns?

  3. Hi! In terms of risk, would you say that ETF (i.e. FMETF) and equity index funds (e.g philequity psei index fund) would be about the same? Or are ETFs riskier than index funds, or vice versa? Thank you! 🙂

    1. Hi Patty. FMETF is also an equity index fund, so their asset portfolio is nearly alike. One risk is liquidity. Unlike other equity index funds in mutual funds and UITF where they are required to buy back or sell shares when an investor redeems or subscribes, you have to wait for someone willing to trade before you can buy or sell FMETF stocks.

  4. Hi! If I subscribe to Philequity PSE Index Fund through an online stock brokerage like First Metro Sec with no sales load, if not outgrow, can it somehow match the return of FMETF considering the example above?

    1. Hi Jai, check other costs like exit fee and management fee. Go for one that has the lowest fee if you want to maximize your earnings.

  5. Hello, just wondering if there are VAT/Taxes when you buy or sell/redeem and where is it in you google sheet computation vis-a-vis BDO PERA wherein you added back the tax credit? Thanks a lot for this info. I was reading “the little book of common sense investing by John Bogle” and he is promoting index fund investing in the book. Essentially saying that the least cost wins in the long run.

  6. You mentioned about expense ratio as not part of your computation. Is that different from management fee? If YES then how do we incorporate that in our evaluation of different ETFs? Where can we find comparative expense ratios of these ETFs? Thank you and really appreciate your info.

    1. Hi Max. Expense ratio is a sum of all fees, including management fee. The projection that you see here do not include those other fees (custodian, external auditor, etc.)

  7. Does the bank get their annual trust fee from the UITF investment or do they deduct only when you redeem? Thanks, sorry it this is a newbie question also

  8. I believe that no load is the best option, but if you are to invest long term and compounded, and you have yo choose between the two, is back end better than front end load?

  9. Hi! I’ve read in the book “Common Sense Investing” by Bogle explained that the ETF types are not exactly index funds. As similar as they seem, it just isn’t the case – he pointed out that because ETFs are traded, unlike classic index funds, it accumulates speculative returns and that investors should stay away from this if investors are looking at serious long term investments. What are your thoughts on this?

    1. Hi John. There’s always pros and cons associated with any and all types of investing. The goal of this article is only to show a comparison among index funds based on their fees, so it does not take into account any other factors like liquidity or under-/over-valuation of an ETF that deviates from its net asset value. While Bogle raised “speculative returns” as they are traded like stocks, you can also read up on ETF arbitrage where mispricing of ETFs due to trading actions can be addressed.

  10. Hi, now that PERA tax incentives are available, would it still be better to invest in FMETF for long term gains? ex. If I had 100k, is it better to go all in on one of the two, or split it between them? What if I had 200k, I could max out the PERA and put 100 into FMETF, or put the entire 200 in it.

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