What is a managed fund?
Managed funds pool the money of many individual investors. This money is then invested by a professional fund manager in different asset classes (eg shares, property and bonds) in line
with the fund’s stated investment objectives.
Managed funds have been available for more than 50 years. Millions of Australians are invested in managed funds through their superannuation and, in 2010, close to 900,000 held nonsuper
investments in managed funds.
What types of managed funds are available?
Investors can choose from a wide selection of managed funds.
Some of the more well-known types of funds are outlined below.
- Growth funds. Focus on long-term capital growth rather than income and are suitable for investors with a time horizon of more than five years. They mainly invest in Australian and/or international shares and property securities.
- Single sector funds. Invest in just one asset class – either cash, fixed interest, property, Australian shares or international shares. Some also specialise within an asset class – for example geared share funds or global resources funds.
- Diversified funds. Also known as multi-sector funds, these tend to diversify across a number of asset classes.
- Index funds. Also known as passive funds, these funds aim to achieve performance returns broadly in line with a selected market index (eg the S&P/ASX 200).
- Active funds. These funds are actively managed and aim to outperform a particular index. The fund manager researches the market and buys and sells assets based on the fund’s objective.
- Income funds. Focus on generating an income stream with a low risk of capital loss. These funds tend to invest primarily in cash and fixed interest investments.
- Multi-manager funds. Sometimes referred to as ‘fund of funds’. Rather than investing directly in shares, cash or fixed interest, this type of fund invests in a selection of other managed funds across a range of different investment managers.
How do you choose the managed fund that’s right for you?
To help choose the managed fund that suits you best, consider the following questions:
- How much risk are you comfortable with?
- What is your investment time frame?
- What are your objectives – are you focused on returns or capital growth?
- What types of sectors or asset classes do you want to invest in?
You should also consider the fund’s management style, the experience of the fund manager and the objectives of the fund.
Wealthwise can help you select the managed fund that’s right for you.