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Managed investments - also known as managed funds - are investments which allow investors to pool their money with that of many other investors in order to access a broad range of investments managed by a professional team. Equity trusts, property trusts, insurance bonds and many superannuation funds are all examples of managed investments.
Managed funds vs other investment types
The key difference between managed funds and other investments, such as a direct share portfolio or an investment property, is that managed investments are an indirect method of investment. You can still invest in shares or property, but you don’t own each parcel of shares or each investment property and you leave the decision making and ongoing management to a professional fund manager. The type of investments purchased by the fund will depend on its investment objectives. For example, a managed Australian share fund will invest in shares listed on the Australian Stock Exchange while a diversified balanced fund will invest in shares, property, cash and fixed interest investments.
How managed funds work
When you invest in a managed fund you buy units in the fund thereby gaining an interest in the investments owned by the fund. The number of units you will receive will depend on the price of the units on the day you buy them. The price will vary daily according to the change in market value of the fund's investments. As the value of the fund’s investments rise or fall, the fund’s unit price moves accordingly. So this means the value of your investment will rise and fall as well, and you may achieve capital growth (or loss) when you sell your units.
Income generated from managed funds are in the form of distributions, which are paid on a regular basis – normally monthly, quarterly or half-yearly. Each distribution is based on the earnings of the fund, which can come from share dividends, rent from property, interest from fixed income investments and any capital gains realised on these assets. Investors can usually accept the income from distributions as cash or reinvest it in the fund.
 | Understanding Managed Funds - Michael Lannon | | Steps for investing in Managed Funds - Michael Lannon | | The Benefits of Managed Investments - Michael Lannon | | A Balanced Approach to Investing - Michael Lannon |
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