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

Traditionally superannuation trustees of DIY funds have shunned actively managed funds in favour of direct shares and listed exchange traded funds (ETFs). Directly held listed shares and listed notes have at least three main advantages over managed funds. These include:

  • Overall lower fees
  • Greater investment control
  • Greater liquidity (you can sell your shares and convert to cash quickly)

However, trustees who shun managed funds are also missing out on a range of potential benefits that they have to offer. In Part 1 of our special report on the benefits of managed funds, learn how buying shares via managed funds can give you an advantage when investing in the Australian share market

The benefits of Australian Share Investing through active managed funds

Identifying and managing investment opportunities

Specialist fund managers can focus solely on particular segments of the market. They search daily for opportunities. As professionals with a disciplined and accountable approach, they often manage a more diversified, less volatile and more robust portfolio than the direct share investor. They may be less likely to ‘blow up’ as a result of a few bad decisions. Some outperform their respective benchmark index (e.g. ASX 300) while others do not. 

Rewards may outweigh the fees and risks

Even when adjusting for risk, many still perform well including allowing for fees you have to pay them. They assist investors in staying the course during turbulent times. There’s certainly a comfort factor in knowing a fund manager is watching your portfolio daily and may also be co-invested with you.

Less administration time

Claw back time spent on administration. A managed fund may also mean receiving only a few tax statements a year compared to correspondence from dozens of directly held companies.

Tax efficiencies                 

Some investors who favour direct Australian share investing often talk about franking credits. However, franking credits are always passed on by an Australian fund manager to the managed fund unit holders

Can you answer these DIY questions?

If you are a DIY share investor, the three questions for you to consider are:

  1. Can you keep up with professional managers and how much time would that take you?
  2. Do you have a passion for investing or do you think of it as “work”?
  3. Do you have the time available to devote to portfolio management?

Managed funds can give you more free time, reduce your administration effort, and also get you access to experts who could diversify your portfolio.

Continue reading part 2 of this article here. We’ll explore how you can expand your reach to different sectors and international markets with managed funds.

 

 

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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