Managed investing is one of the most popular ways to invest. It offers a range of benefits for investors but it is important to understand that investments are subject to risk and may lose value.
A managed investment is a pool of money that is invested in shares, bonds and other assets. The fund manager then monitors and makes decisions about how to invest the funds in line with its investment objectives. The manager may make changes to the portfolio as market conditions change. Each managed investment has a different level of risk – this can be determined by the type of investments in the portfolio and the asset classes they are comprised of. A managed fund can be a great way to gain access to the global financial markets where it may be difficult for individual investors to invest on their own.
Managed investments can also offer diversification and can be more cost effective than trying to achieve the same diversification as a self-directed investor. This is because a managed investment will usually have lower transaction costs, such as brokerage and exchange rates.
Investors can earn returns through price growth of the underlying assets in the managed investment and distributions (dividends). Each unit or share of a managed fund represents an ownership stake in the funds underlying assets. Managed investment prices rise and fall in line with the underlying assets. The underlying assets of a managed investment can be anything from cash and fixed income, property to equities.
The main reason to consider a managed investment is to take advantage of the skills and expertise of a professional fund manager. Fund managers have a wealth of experience and are able to provide expert advice to help you select and maintain the right investments for your personal situation and goals.
Some managed investments specialise in specific asset classes such as commercial property and some aim to outperform a particular market. This is known as active investing and can be a good way to generate strong returns with lower volatility than a passive portfolio.
It’s important to remember that investments can lose value, even if they are well chosen and diversified. The financial markets are unpredictable and unforeseen events can affect the performance of an investment. It’s therefore important to make sure that you have an understanding of your own investment goals and what level of risk you are comfortable with.
When considering a managed investment it’s a good idea to read the Product Disclosure Statement (PDS). The PDS tells you about the fees and charges associated with the fund and how it’s been performing. It will also outline the minimum time period you need to invest for and the fund’s risk level. Check that this lines up with how long you’re planning to invest for and your own risk tolerance. It’s also a good idea to speak with an adviser to ensure you are making the best decision for your own circumstances.