Quick answer
An index fund copies a market index such as the PSEi (the 30 largest, most-traded companies on the PSE) instead of picking stocks, so it's diversified and usually cheaper than actively managed funds. In the Philippines you can buy a PSEi index UITF or mutual fund from banks and fund companies (often from ₱1,000), or the PSEi exchange-traded fund (ETF) through a stock broker. Index funds are for goals 5+ years away.
Key takeaways
- Index funds track a benchmark like the PSEi rather than trying to beat it.
- Two ways in: PSEi index UITFs or mutual funds (bank or fund company), or an ETF traded on the PSE (stock broker).
- Lower fees and broad diversification are the main advantages; you still take full stock-market risk.
- The PSEi is concentrated in a few sectors and has been volatile for years, so consider adding bonds and global funds.
- Invest monthly and hold long term; don't use index funds for money needed within 5 years.
On this page
If picking stocks feels like guessing, index investing offers a simpler path: own a small piece of all the major companies at once, keep costs low, and let time do the work. It's how many professionals invest their own money, and it's available to Filipinos for as little as ₱1,000.
What is an index fund?
An index is a list of companies that represents a market. The PSE Composite Index (PSEi) tracks 30 of the largest and most actively traded companies on the Philippine Stock Exchange, covering banks, property developers, conglomerates, telcos, utilities and retailers.
An index fund buys the stocks in the index in roughly the same proportions. It doesn't try to beat the market; it aims to match it, minus fees.
Why index funds suit most beginners
- Instant diversification: one purchase spreads your money across 30 companies.
- Lower fees: no team of analysts picking stocks, so fees are usually lower than active equity funds.
- No stock picking: you don't need to analyze companies or time the market.
- Discipline: easy to automate with monthly contributions.
Two ways to invest in the PSEi
| Index UITF or mutual fund | PSEi ETF | |
|---|---|---|
| Where to buy | Bank or fund company (branch, app, distributor) | Stock broker, on the PSE |
| Price | NAVPU/NAVPS, once a day | Market price, during trading hours |
| Minimum | Often ₱1,000–₱10,000 | One board lot + broker fees |
| Fees | Annual trust/management fee | Annual fund expense + broker commission when trading |
| Automation | Many offer auto-debit plans | Some brokers offer peso-cost averaging programs |
| Best for | Hands-off monthly investors | Investors who already have a stock account |
The Philippines' first ETF, which tracks the PSEi, has been listed on the PSE since 2013. Several banks and fund houses offer PSEi index UITFs and mutual funds.
How to choose an index fund
- Total annual fee: lower is better, since it's deducted every year.
- Tracking difference: compare the fund's returns with the PSEi's over 3–5 years. A good fund trails the index by roughly its fees, not much more.
- Minimum investment and convenience: pick a platform you'll actually use monthly.
- Early redemption fees: check minimum holding periods.
The details are in each fund's disclosure statement (KIIDS) or prospectus and monthly fact sheet.
Understand the risks
- Full market risk: if the PSEi falls 25%, your index fund falls about 25%.
- Concentration: the PSEi is dominated by a few sectors and conglomerates, and the largest companies make up a big share of the index.
- A long flat stretch: the PSEi peaked in early 2018 and has spent years below that level, a reminder that one country's market can underperform for a long time.
- Currency and global exposure: a PSEi fund is purely Philippine. Your job, home and pension are already tied to the Philippine economy.
Build a simple diversified mix
Rather than going all-in on the PSEi, many long-term investors combine:
| Component | Purpose | Example vehicle |
|---|---|---|
| Philippine equities | Local growth | PSEi index fund or ETF |
| Global equities | Diversification beyond the Philippines | Global equity feeder fund |
| Bonds | Stability and income | Bond fund, Retail Treasury Bonds |
A common starting point is to hold more bonds the closer your goal gets.
How to start, step by step
- Make sure you have an emergency fund and no high-interest debt.
- Decide your goal and timeline (5+ years).
- Choose a platform: your bank's UITF, a fund company or app for mutual funds, or a stock broker for the ETF.
- Complete the risk profile and open the account (valid ID and TIN).
- Set up an automatic monthly investment, for example ₱2,000 every payday.
- Review once a year. Don't stop investing during downturns; that's when your money buys more units.
Use PERA for the tax benefit
If the money is for retirement, many PSEi index and equity funds are available as PERA products, so you also get a 5% tax credit and tax-free growth. See our PERA guide.
Frequently asked questions
What is the best index fund in the Philippines?
Compare PSEi index funds on three things: total annual fees, how closely they track the PSEi (tracking difference), and minimum investment and convenience. The cheapest fund that tracks closely and fits your platform is usually the best choice.
What is the difference between an index fund and an ETF?
Both track an index. An index fund (UITF or mutual fund) is bought from and sold back to the fund at the day's NAV price. An ETF is listed on the stock exchange and bought or sold through a broker during trading hours at market price, in board lots.
How much do I need to invest in an index fund?
Many PSEi index UITFs and mutual funds start at ₱1,000 to ₱10,000, with lower minimums for additional investments. For an ETF, the minimum is one board lot at the current price plus broker fees.
Is the PSEi a good long-term investment?
It gives you exposure to the Philippine economy's largest companies, but it has been volatile and has spent years below its 2018 peak. Many investors combine a PSEi fund with bond funds and global equity funds so their results don't depend on one country.
Can I invest in US or global index funds from the Philippines?
Yes, indirectly through peso or dollar feeder funds offered by Philippine banks and fund companies, which invest in global index ETFs. Some international brokers also accept Filipino clients, but check regulation, fees, taxes and currency risk carefully.
Sources
Figures checked against these official and primary sources on October 4, 2026. Government rates and promos change, so confirm on the agency's site before you act.
- Philippine Stock Exchange: Investing at PSE (indices and ETFs)
- Securities and Exchange Commission: Registered investment companies
- Bangko Sentral ng Pilipinas: UITF regulations
- PwC Philippines: CMEPA tax changes for funds and stock trading
General information, not personal financial, tax or legal advice. See our editorial standards and disclaimer. Found an outdated figure? Email support@success.ph.