Managed funds may be suitable for people who want to diversify their investments and rely on the skills of investment managers to make the investment decisions. In a managed fund, your money is pooled together with other investors and then an investment manager buys and sells shares or other assets on your behalf.
When you invest in a managed fund, you are allocated a number of shares or units in the fund. Each unit represents an equal portion of the fund’s value. You are usually paid income periodically in the form of distributions based on the profit or income the fund receives from the underlying investments. The value of your units will rise or fall with the value of the underlying assets held in the fund.
Managed funds can be a good investment as they offer diversification and provide access to a broad range of assets or markets with a relatively small investment of cash. However, depending on the type of managed fund you choose, the convenience may come at a price. Though fees vary widely, you may be charged higher fees than other investment types. Also, you may not be able to convert your investment to cash when you want to and you are relying on the skills of other people to control your investment decisions.
