Managed funds can be a great way to gain access to the experience and knowledge of professional investment managers. They may also give you access to investments that are not available to general 'mum and dad' investors.

How do they work?

Managed funds pool together money from a large number of investors, and invest those funds in various asset classes such as shares, property, private equity and many other areas.

Advantages of Managed Funds

Access. Managed funds can give you access to investments you may not otherwise have access to. For example, it is very difficult for an individual to purchase shares in well known global companies such as Google and Toyota, but via a managed fund you can gain access to many global companies based outside of Australia.

Scale. The large scale of managed funds can also be an advantage. Some investments may be very desirable, but have minimum investment limits which are far higher than the average investor can handle. A managed fund will pool together lots of small investments and combine them to make large investments. This scale can also give fund managers access and influence that individual companies would rarely have.

Another advantage of the large scale of most managed funds is known as the 'economies of scale'. If you were to buy and sell a number of direct investments yourself, you would have to pay full brokerage fees on each transaction. For a managed fund, the fees can be spread over hundreds, or possibly thousands of investors in the fund, reducing the transaction costs for each investor.

Diversification. Managed funds are also great for diversification. By making individual investments you can still diversify your investments, however the amount you have to invest may limit the amount of diversification you can achieve. Through a managed fund your investment will be spread over a much larger number of different investment types and asset classes, regardless of the size of your initial investment.

Expertise. There are many individual investors who spend a lot of time studying the market, but it is unlikely that they spend more time, or have access to more information, than a professional fund manager and their team. Most fund managers also use sophisticated systems and analysis to assist them in selecting the most appropriate investments for their fund.

Disadvantages of Managed Funds

Limited control. Although managed funds give you access to the expertise of the fund manager, they also takes away your ability to choose which specific investments you wish to invest in and when you wish to buy and sell those specific investments. However, you can choose managed funds which invest in specific sectors, and you still have the choice when to buy and sell your units in the overall managed fund.

Fees. Managed funds have varying levels of fees payable, which are used to run the fund and pay the wages of the funds management team. If you are investing in a managed fund which invests solely in Australian shares, it may sometimes be more cost effective for you to own the investments directly. In many other cases however, investing through a managed fund can be cheaper than investing in the same assets directly.

Find out more about managed funds today! Contact our office on 1800 744 482 or call your local adviser Shane Moore on 0439 869 682 Click here to find out why Equita are the right advisers for you.