Managed funds as they’re usually called are special forms of investment fund, managed by investment professionals. They’re true funds, with investors providing a pool of capital to invest. Managed funds are usually related to equities markets like the stock market, but some may relate to things like property investments or other types of capital investment.
Who needs a managed fund?
The reasons for investing in a managed fund can vary considerably. The people most likely to benefit from managed funds are:
- Younger people, setting up a wealth creation portfolio.
- Business people making strategic investments to develop their capital.
- Busy people needing someone else to manage their investments.
- Retirees needing a retirement income and more capital as they get older.
The common factor here is efficiency. Managed funds can provide good returns on investment without direct involvement in the process of managing assets. Stock market investment, for example, can be a full time job. Most people don’t have that sort of time, or the expertise required to make significant profits. Managed funds are a simple way to lock in wealth creation methods.
Common questions about managed funds
- Do managed funds charge fees?
Yes. Managed funds make money by making money for their clients. They charge fees for their services based on the value of the investments. Their fees are usually a percentage of the value of the investment.
- Do managed funds ever fail?
Very rarely. A very small number of managed funds around the world have failed in recent years, despite the stock market meltdown of 2008 and the recession. Many of the funds actually took advantage of the crash to invest in stocks that later recovered.
- Do managed funds guarantee returns?
No. It’s actually illegal to even suggest that a record of past returns indicates future performance. There are risks in any form of investment, and market values can change drastically over time, depending on economic conditions. It would be quite unrealistic to assume a future return in a recession could be the same as a return in a boom market, for example.
- How do managed funds make money?
In several ways. Managed funds make profits both through managing other people’s money and through their own investments. They therefore have lots of incentives for their funds to perform and make profits. Most of the managed funds, in fact, do outperform the markets, and definitely outperform individual investors, who usually don’t have the capital to make large amounts of money off their own holdings.
- Are managed funds better than superannuation?
Managed investments and superannuation are very different things, and need to be evaluated differently. There are different tax benefits in superannuation and other factors involved in the comparison. The goals of superannuation and managed funds are also different. Superannuation is a statutory form of retirement saving, managed funds are not. Super may be suitable for saving, but not necessarily for wealth creation, which is the main focus of managed funds.
If you’re looking to add some new possibilities to your financial management, managed funds should be investigated. Do your research, talk to a fund manager, and you’ll see plenty of options.
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