Communication

Choosing the right managed fund for you

By AMP Capital

Managed funds give you the freedom to invest in many different asset classes, but deciding how and where you want to invest can be daunting. Ultimately the best choice for you will depend on personal factors such as your age, income, expectations, and investment objectives.

So before jumping in, outline your goals and how much you’re willing to risk. Ask yourself, what do I hope to achieve from investing? Then calculate how long you’re willing to wait to achieve your goal, remembering that faster returns generally come with higher risk.

Where to start

First, choose the type of asset class you’d like to invest in, because the best managed fund for you will ultimately depend on this. Once you’ve decided that you can choose from a range of different kinds of managed funds.

Then, pick your preferred method of investing:

Multi-manager funds
These funds are designed to be a one-stop solution for investors, providing diversification across specialist investment managers as well as asset classes.

Actively managed funds
Actively managed by an expert investment manager, these funds aim to outperform the market or underlying index through holding a specific portfolio of assets that differ (sometimes significantly) from the index. Active funds generally involve more frequent buying and selling of securities.

Passive funds (or index funds)
A relatively simple option, passive funds buy a portfolio of assets which mimic an index. They aim to generate a return by following the specific index they are tracking.

Exchange Traded Funds (ETFs)
ETFs are generally passive investments as they track the performance of an index and deliver the index return less any fees. They are different to traditional managed funds as they are traded on the ASX.

Active Exchange Traded Funds
Unlike traditional ETFs, active ETFs are proactively managed and aim to outperform a benchmark or index. Like passively managed ETFs, they can also be traded on the ASX.

Investing for your stage of life

Wealth accumulators (aged 25 – 59)

The majority of investors are in the midst of a career journey. Depending on your age and personal circumstances, you’re probably interested in supplementing your current or future income, accumulating wealth – or maybe planning for your retirement.

You may feel more confident to take risks in your investment decisions, as research has shown only 67% of wealth accumulators are seeking guaranteed or stable returns. And your investments are probably paying off – considering ABS data found investment returns accounted for 20% of the weekly income for the average Australian

If you’re a wealth accumulator…

 

  • You may want to invest in an actively managed fund, because although the fees can be higher, you’re paying for the expertise of a professional fund manager who actively aims to outperform the market.
  • If you already own investment property, you may want to manage risk by investing in alternative single-asset classes such as shares, or bonds.
  • If you’d like to supplement your income, you may consider investing in a multi-asset income fund, which aims to distribute income on a regular basis.

Retirees (aged 60+)

If you’re over 60, you may be interested in planning for a comfortable retirement – or if you’ve already retired, you may be interested in supplementing your income and accumulating more wealth. While you have more experience making financial decisions, you may have less time to ride out a downturn, so consider more stable investments with predictable returns.

If you’re a retiree…
  • Cash investments have a relatively short time frame, and are a low-risk way to gain regular income in the form of interest payments.
  • If you feel comfortable playing the market, invest in a multi-asset growth fund with more potential for higher returns.

As always, the idea is to understand the options available to you and choose the solution that aligns to your investment objectives and will best help you meet your retirement goals.
 

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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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