“I have a DIY (Do it yourself) fund, why should I use ‘managed’ funds?”

In our first part of this article, we explored the advantages of buying shares via managed funds. We focused on investing in the Australian share market. You can recap on Part one here.

Part Two shows you how to access specialist management in other important sectors.

Fixed interest/Bond funds

 Bonds tend be low to moderate risk investments, more risky than term deposits, but less risky than shares. With bonds you generally receive interest and principal but a loss of principal through poor investment selection can negate many years’ worth of interest. A specialist bond manager typically holds 25 or more, well researched securities, the instant diversification they provide is hard to pass up in this sector, especially given the often modest fees charged by managers in this sector.

International shares

 Many Australian investors have a difficult time following the local share market, trying to follow international share markets in addition is a huge task. Add in the cost to access international shares directly (including research time and brokerage costs), understanding the effect currency movements have on your holdings and familiarising yourself with different international accounting standards and tax regimes and the idea quickly becomes overwhelming.

International specialist fund managers should outperform a novice international share investor on a risk adjusted basis, even when fees are taken into consideration. Ignoring international shares altogether may be convenient, however doing so reduces exposure to important sectors such as technology, manufacturing, luxury brands, and healthcare. Missing out on this diversification can lead to adverse outcomes.

In our view, managed funds are beneficial for exposure to at least some sectors.
For Australian share exposure, the decision between managed versus direct is a personal one, or one made with the assistance of a qualified adviser. It is based on your passion for investing, time available to devote to portfolio management, your skill and tolerance for risk and volatility. The slightly reduced liquidity associated with managed funds can help impose on the investor, a disciplined and a long term view.

Need help with managed funds or want to learn more? Contact us.

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282. 

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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