Getting started in managed funds….Your 5-point checklist

One reason why managed funds are so popular in Australia is that you don’t need thousands of dollars to get started. In fact, you can buy into most managed funds for as little as $5,000. In this article, we explore some benefits of invest in a managed fund and the five things you need to do before making a decision.

Why invest in a managed fund?
Managed funds, also known as unit trust or mutual funds, allow you to pool your money together with other investors so that you can invest in a range of assets that may otherwise be out of your reach. There are various types of managed funds. Some focus on a particular asset class, such as property, while others invest in a combination of assets (across shares, property, infrastructure, bonds and cash).

Some key reasons for investing in a managed fund include:

1. Diversification

A vital strategy that limits risk. By spreading investments across different fund managers, companies, industries, sectors and/or countries, managed funds lessen the risk that one bad investment will significantly reduce the overall value of the portfolio. To achieve this level of diversification on your own, you would need large sums to invest.


2. Professional management

Managed funds are managed by a professional fund management team who provide you with expert fund management (research, select and monitor your investments) as well as regular reporting. They are experts on the economic climate and how it can affect your investments. Fund managers will have access to research and resources that most individual investors do not.


3. Access to sophisticated investments

When you invest in a managed fund you have access to a broader range of assets that may not be readily available (or affordable) to smaller individual investors. You can access a broad range of assets or markets with a relatively small amount of cash.

4. Liquidity

Like shares, managed funds are liquid assets. This means that if you want, you may redeem parts or all of your share/units on any business day (restrictions may apply). Unlike shares though, you don’t need to pair up a buyer and seller in order to establish a buy/sell transaction.


What you need to consider
When investing in a managed fund, you should be aware that:

• Returns are not guaranteed – future returns may differ from past returns, and the level of returns may vary, and
• The value of your investment may vary, and there may be the risk of loss of invested capital.

A checklist
Before making a decision you should:

• Read the relevant Product Disclosure Statement for full details on the terms and conditions that apply to your investment
• Read the fund’s Information Memorandum and any other associated documents
• Go to the Australian Securities and Investments Commission’s consumer website ‘Money Smart’, where you’ll find more information about managed funds and fees
• Conduct your own independent investigations and analysis of the fund, and
• Obtain appropriate financial, legal and tax advice.

For more information on the types of managed funds available, ways to invest, unit pricing and performance as well as the fees and risks associated with investing in a managed fund, please see the ‘Understanding managed funds’ booklet.


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