Friday, 4 April 2008

Make Easy Money With Managed/Mutual Funds

Source: David Koch, Reasons to have managed funds

Managed funds are a great resource available to all investors, but they're especially beneficial in times of market volatility, like we've seen over the past few months.

If you're not familiar with the term, managed funds are simply funds managed for you by someone else; usually a professional advisor like a fund manager. They basically place your money, along with a number of other investors, into one large fund.

So, why would you want to do this? Well, there are a number of good reasons.

One of the main reasons managed funds exist is that so few of us have the time, energy or expertise to research, trade and monitor individual share investments. The real benefit of having your investments managed by a professional is that you gain access to the years of experience and knowledge that most fund managers have to offer.

According to the ANZ Bank there are plenty of other reasons to invest in a managed fund. For instance, managed funds allow you to invest in a diversified portfolio of investments, beyond what you'd normally be able to achieve if you went it alone. For example, if you only had $1,000 to invest you might end up with an interest in 40 or 50 companies, which can then safeguard you from market fluctuations because you don't have all your eggs in the one basket.

It's also worth pointing out the benefit of scale. As managed funds combine investors' money they often have the buying power of millions of dollars, which lets them make the most of investment openings that aren't usually offered to small retail investors.

Another main advantage of using a managed fund is the money you can potentially save. Managing your own shares can cost a lot, but a managed fund usually only involves a one-off set-up fee and a yearly management fee based on how much you have in your account at the time.

But despite all the benefits, there are still plenty of investors who'd prefer to manage the risks and rewards themselves. Don't get me wrong, this can be a lucrative strategy, provided you know what you're doing and provided you're getting good advice.

If you can't do your own fundamental analysis and research, it's crucial you invest on the advice of someone who that should rule out stock tips from taxi drivers!

There's a wealth of research available from brokers, banks, investment newsletters and online. Some of it's excellent and some is rubbish. Before acting on anyone's advice, check out their track record of recommendations. These should be readily available and reported in accordance with the Australian Securities and Investments Commission standards.