Its interesting that although there is so much access to financial education online and in print, some basics are still misunderstood.
There are many people that don’t understand the role of a managed fund in a portfolio.
Simply, If you have some money to invest and want to rely on professionals who have skills in making investment decisions, a managed fund might be the answer. This is often an alternative to investing directly in shares.
How managed funds work
In a managed fund, your money is pooled together with other investors. An investment manager then buys and sells shares or other assets on your behalf.
You are usually paid income or 'distributions' periodically. The value of your investment will rise or fall with the value of the underlying assets.
A managed fund is one type of 'managed investment scheme'. The investment manager may be called a 'fund manager' or 'responsible entity'.
Back To TopPros and cons of managed funds
Managed funds can be a good investment as they:
Offer diversification
Can access a broader range of assets or markets
Are convenient for regular contributions
Make it easier to do paperwork and tax returns, compared with buying shares direct, as the fund manager will supply all the necessary information
However, the convenience comes at a price, as:
You may be charged higher fees than other investment types
You may not be able to access your funds when you want to
You rely on the skills of other people and do not control investment decisions
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Steps when investing in managed funds
These are the steps to take if you invest in a managed fund:
Buying and selling managed funds
Choosing a managed fund
Keeping track of your managed funds
Managed funds are for people who want to invest in a diversified range of assets and rely on the skills of people who make investment decisions for a living. But be mindful of the fees and always read the fine print before you sign up.
There are many people that don’t understand the role of a managed fund in a portfolio. Simply, If you have some money to invest and want to rely on professionals who have skills in making investment decisions, a managed fund might be the answer. This is often an alternative to investing directly in shares.
1. How do managed funds work? In a managed fund, your money is pooled together with other investors. An investment manager then buys and sells shares or other assets on your behalf. You are usually paid income or 'distributions' periodically. The value of your investment will rise or fall with the value of the underlying assets. A managed fund is one type of 'managed investment scheme'. The investment manager may be called a 'fund manager' or 'responsible entity'.
2. What are the pros and cons of managed funds? Managed funds can be a good investment as they:
- Offer diversification
- Can access a broader range of assets or markets
- Are convenient for regular contributions
- Make it easier to do paperwork and tax returns, compared with buying shares direct, as the fund manager will supply all the necessary information
However, the convenience comes at a price, as:
- You may be charged higher fees than other investment types
- You may not be able to access your funds when you want to
- You rely on the skills of other people and do not control investment decisions
3. What are the steps when investing in managed funds?
You should speak to an adviser to assess your risk profile and financial objectives and see what sectors and managers may be suitable for you.