Managed Fund Basics

What is a managed fund?

A managed fund is a pool of money raised from investors and professionally managed by a company holding an Australian Financial Services License.

The portfolio may be invested in a range of assets including shares, fixed interest income securities, cash and property related securities and will be documented in the managed fund's Product Disclosure Statement.

Portfolio managers select and manage securities held in the fund and investors share in the fund's income, expenses and any gains or losses the fund makes on its investments in proportion to the units they own. Managed funds may offer investors the advantages of diversification and professional management.

Investment objective

A managed fund has a specific investment objective which is outlined in the fund's Product Disclosure Statement. An example of a Franklin Templeton Product Disclosure Statement issued by us is available on this website. Click here to see a Franklin Templeton PDS.

The role of the fund manager is to buy, sell and manage securities in accordance with the investment strategy of the fund in order to achieve the fund's stated investment objective.

Why choose managed funds?

Managed funds are a popular investment choice for many reasons including:

  • Increased diversification across a range of securities, asset classes and/or geographic regions
  • Full time professional management
  • Affordability - managed funds may offer competitive fee structures, access to asset classes that may be expensive for an individual investor to invest in with potentially lower administration costs
  • Liquidity - in most cases an investor can redeem units in their managed fund and receive the cash value in a relatively short period of time.

General Advice Warning

This is general advice only and does not take into account your personal situation, goals or investment objectives.

Before acting on this advice, you should consider the appropriateness of the advice in relation to your own situation. We recommend you speak to your financial adviser to determine what is appropriate for your goals, needs and objectives.

Reducing risk

While all investments may carry some risk, there are a number of ways you can minimise the risk levels of your managed fund portfolio while creating the potential for strong returns.

Professional Advice

A financial adviser will take the time to understand your unique financial situation, your investment goals and your risk tolerance. To help mitigate risk and increase your portfolio's return potential, he or she may help you create a diversified portfolio and can set up a regular investment program that will deliver the benefits of dollar cost averaging.

Diversification

One of the best ways to minimise risk and increase return potential is to diversify your investments. Managed funds are ideal investment instruments as they allow an investor to diversify their investments across asset classes, sectors and regions.

Regular Investing

Another smart investment strategy is to invest in increments over a period of time. Regular investment plans are available on many managed funds. Regular investment plans invest a set amount of money, directly debiting money from your bank account, to purchase units in your managed fund. This allows you to dollar cost average your investment.

Dollar cost averaging

When the net asset value (NAV) of managed fund units is low, the amount invested will purchase more units than when the NAV is high. This can have the effect of reducing the average price paid for the units of a managed fund. While there are numerous benefits to dollar cost averaging, it is neither a guarantee for profit nor a protection against a loss in a continually declining market.

Long-term investing

Fluctuating markets can be challenging, investors adopting a long-term investment strategy will be better equipped to ride out any volatility of returns.

Professional management

Professional management can help to reduce risk by having a team of trained professionals managing your money on an ongoing basis.

General Advice Warning

This is general advice only and does not take into account your personal situation, goals or investment objectives.

Before acting on this advice, you should consider the appropriateness of the advice in relation to your own situation. We recommend you speak to your financial adviser to determine what is appropriate for your goals, needs and objectives.

Risk vs Rewards

Measuring risk is a personal decision with no right or wrong answer. Some of your considerations might include:

Focus: Is your overall goal capital preservation or appreciation?

Timeframe: Successful investing is often based on time, not timing. How long do you plan to invest and is liquidity a consideration?

Volatility: How comfortable would you be if your portfolio declined 10% or 20% in a short period of time? If you are uncomfortable with large fluctuations, you may want to consider investments with lower levels of low volatility.How long would you be comfortable holding investments experiencing a decrease in value?

Returns: In general, the greater the risk, the higher the return potential.

Securities: Bonds tend to be less volatile than equities, although equities may provide higher returns over time. Managed funds have different types of risk depending on the securities they own.

Foreign exposure: Are you interested in investing in markets outside of Australia?

Diversification: Investing across assets classes, geographic regions and market capitalisations can reduce risk and help you earn more consistent results over time.

Investment history: Do past investment experiences influence your present situation?

General Advice Warning

This is general advice only and does not take into account your personal situation, goals or investment objectives.

Before acting on this advice, you should consider the appropriateness of the advice in relation to your own situation. We recommend you speak to your financial adviser to determine what is appropriate for your goals, needs and objectives.

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