A managed fund involves combining your funds with multiple investors. Your investment is then handled by an investment manager also referred to as a “Responsible entity” or a “Fund manager.” They make investments on your behalf such as buying and selling shares and assets.
Once your investment starts to pay off, you are paid distributions or an income systematically. Depending on the amount that you have invested, it will increase or decrease based on the value of the initial assets. Here are some tips on how to purchase a managed fund.
How to buy a managed fund:
Managed funds are purchased directly from a financial advisor, a fund manager or an online broker. There are several steps that you will need to follow, these include:
Risk and timeframe:
Once you have decided on the type of managed fund you would like to invest in, you will then need to think about the type of the risk that you are prepared to take with your finances. If you are expecting a high return, you will need to make a high investment and this increases your risk. There are timeframes associated with every investment that you make. How long are you willing to wait before seeing a return on your investment? These are all things you will need to consider prior to making an investment decision.
Read the terms and conditions:
With a managed fund, the terms and conditions are referred to as a “Product disclosure statement (PDS).” A PDS will provide you with all the information you need to consider prior to making an investment. This material can be quite complicated, especially if you are a first time investor; therefore, go through it with the fund manager or a financial advisor prior to making a decision.
Long term performance:
The success of managed funds fluctuates, even if it does well one year does not mean that the success will be the same the following year. If you want a better idea of how a fund will perform, analyse its performance over a 5-7 year period. You can also make a comparison between a managed fund and an indexed fund; this will provide you with data in regards to whether or not it is keeping up to speed with the relevant market.
Managed funds are available in the thousands. Prior to making a commitment, do some research to ensure that you are confident about the choice that you are making.
What has your experience been with managed funds? We’d love to hear about it in our comments section.