📊 Types of Index Funds You Can Invest In

Last week, we talked about what you’re buying when you invest in an index fund. 

This week is the natural follow-up. Once you understand what an index fund is, the next question is unavoidable:

Which one do I choose? Before we answer that, it helps to know that index funds come in a few broad types.

In today’s edition, we’ll go over:

• Main types of Index Funds

• How to Choose the Right Index Fund for You

• What’s a “good” return for an index fund?

• How to start

TLDR;

The Bottom Line

Index funds come in different types (local equity, global equity, and bond index funds). The right one depends on where you want exposure, how long you can invest, and what role the fund plays in your overall setup.

The content

The Main Types of Index Funds

For most Filipino investors, index funds usually fall into three buckets.

Local equity index funds track the Philippine stock market, most commonly the PSEi.
Examples include (which we’ve discussed in the previous newsletter!):

• BDO Equity Index Fund 

• BPI Philippine Equity Index Fund 

• Security Bank Philippine Equity Index Fund

• FMETF (First Metro Philippine Equity Exchange-Traded Fund) (not exactly an index fund but still mirror PSEi)

These funds rise and fall with the Philippine market and are heavily influenced by local banks, conglomerates, property developers, and utilities.

Global equity index funds give exposure outside the Philippines, often to the US or developed markets.
Common examples available locally include:

• BPI US Equity Index Feeder Fund (global diversification through the largest US companies)

• BDO Global Equity Index Feeder Fund

• Security Bank Global Equity Index Feeder Fund

These funds behave very differently from PSEi funds because they’re driven by foreign economies, currencies, and industries like technology and healthcare.

Bond index funds track a basket of bonds instead of stocks and are usually used for stability rather than growth.
Examples include:

• BPI Philippine Dollar Bond Index Fund

• BDO PERA Bond Index Fund

Bond index funds tend to move more slowly and are often used alongside equity funds to reduce overall volatility.

Actionable Tips For you

How to Choose the Right Index Fund for You

Step 1: Decide where you want your growth to come from.
If your income, expenses, and plans are mostly in the Philippines, a PSEi index fund is a straightforward choice. 

If you want growth that isn’t tied to the local market, a global equity index fund gives exposure to other countries, currencies, and industries.

Step 2: Match the fund to your time horizon.
Equity index funds are for long-term money, usually five years or more. If you might need the money within one to three years, an index fund is the wrong tool, regardless of past returns.

Step 3: Choose a setup you can stick with.
For most people, one index fund with regular contributions is enough. Holding a mix of local and global funds only works if you won’t constantly adjust when markets move.

Quick shortcut:

• Long-term money + PH exposure → PSEi index fund

• Long-term money + global exposure → global equity index fund

• Short-term or uncertain money → not an index fund

The right index fund is the one you can invest in consistently, leave alone for years, and clearly explain why you own it. 

What’s a “good” return for an index fund?

A “good” return for an index fund isn’t something you should expect every year. Index funds are designed to match the market they track, and markets move in cycles. 

For example, the S&P 500 has historically averaged around 8–10% per year over long periods, even though individual years vary widely. As an illustration, ₱100,000 invested in an S&P 500 index fund and left to compound at about 8% annually could grow to roughly ₱215,000 after 10 years and ₱460,000 after 20 years. 

If you’re getting market-level returns at low cost and staying invested, the fund is doing its job.

How do I start?

You can usually invest through:

• banks (as UITFs or mutual funds)

• investment platforms connected to banks

• brokerage accounts (for ETFs like FMETF)

The experience varies, but the basic idea is the same: you open an account, choose the fund, and invest either as a lump sum or regularly.

Minimum investment amounts depend on the fund and the provider:

• Many UITFs and mutual funds have minimums ranging from ₱1,000 to ₱5,000 to start

• ETFs like FMETF can be bought in the stock market, often with a few thousand pesos depending on the share price.

Stuff Worth Sharing

The Link Lowdown

• Missed last week’s issue? Check it here: Index Funds in the Philippines: What You’re Really Buying