What are managed funds and how do you invest?

Thinking about investing in a managed fund? Here's what you need to know.

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Investing can be one of the best financial decisions you'll ever make. Unfortunately, buying stocks, bonds and other types of investments can also be confusing and risky if you're not an expert. This is where managed funds can be a good option.

When you invest in a managed fund, you get the benefit of expert decision making. These fund managers do all of the investing for you so you don't have to worry about the day to day.

With managed funds, you're able to pool your cash with other investors, which means that you can collectively make an investment in an asset that might otherwise have been too costly or out of reach.

Different types of managed funds

There are many kinds of managed funds. For example, some managed funds may focus on a particular asset class such as property whereas other managed funds may offer investment in a variety of assets, which could include property, cash, shares and bonds.

No matter which type of managed fund you choose to invest in, the principle is the same. You purchase units, which are of equal value in the fund. Like other types of investments, the value of the units that you buy can either increase or fall based on whether the value of the assets owned by the fund rise or fall.

It's also important to remember that assets owned by the fund may be sold on and profits that are generated by these sales along with income generated from the assets are passed on the unit holders by way of distributions. These distributions are similar to receiving share dividends.

Managed funds vs ETFs

Managed funds are simply one type of investment fund. Other kinds of funds are superannuation funds and exchange traded funds (ETFs). When you get down to it, these are actually all pretty similar – they invest your money into shares, bonds, property or cash – and often it's a mix of all four and more.

If you're keen to read a bit more about these, below is a list of popular investment funds available in Australia:

The definitions aren't always clear cut, but most of the time a managed fund refers to a regular investment fund that is not listed on a stock exchange (i.e. an ETF) or acting a superannuation account.

Because they're not listed on a stock exchange, you wont normally be able to invest in managed funds via an online share trading platform. Instead you'll need to manually apply directly with the fund manager. However there are some managed funds that have been registered as mFunds, meaning you can access them with select brokers.

If you've done your research and want to invest in an mFund, you can compare brokers in the table below. Make sure to select a broker with "mFunds" displayed in the markets tab.

Invest in managed funds through a trading platform

Data indicated here is updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
IG Share Trading
Finder Award
IG Share Trading
AUD 8
AUD 50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares, Forex, CFDs, Margin trading
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.
eToro Share Trading (US stocks)
USD 0
USD 10 per month if there’s been no login for 12 months
Forex, CFDs, US shares
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and forex from the one account.
Superhero share trading
AUD 5
No
ASX shares
No
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
Bell Direct Share Trading
AUD 15
No
ASX shares, mFunds
No
Invest in Australian shares, options and managed funds from the one account with no inactivity fee.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
CMC Markets Stockbroking
AUD 11
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, mFunds
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.
ANZ Share Investing
AUD 19.95
No
ASX shares, Global shares, Options trading, mFunds, ETFs, Warrants
Yes
Earn 1 Qantas Point per AU$3 spent on brokerage fees on certain instruments.
Access Morningstar reports, company announcements and and live pricing via ANZ’s share investing platform. Available for desktop and mobile.
Westpac Online Investing Account
AUD 19.95
AUD 63.50 per year on the global markets account
ASX shares, Global shares, Options trading, US shares
Yes
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

*Brokerage fees shown are for standard share trading, see below for a list of mFund fees.

The benefits of managed funds

For those interested in investing and hoping to reap financial rewards for the future, managed funds can prove beneficial in a number of ways. Some of the key benefits include:

  • Diversification: Because you're pooling your money with other investors you can invest in multiple assets and company shares without paying an arm and a leg.
  • Expert assistance: Dealing with investments can be difficult and daunting. When you opt for managed funds you have access to the advice and assistance of expert fund managers. These are the people who not only have the knowledge and expertise that can prove invaluable to investors, but also the time to dedicate to managing multiple assets.
  • Saving time: You won't have to dedicate huge amounts of time to managing your investments because you have experts on hand to all the heavy lifting for you.
  • Do more with your money: Using managed funds means that you can still invest even relatively small amounts of money in a range of assets, rather than settling for one asset due to lack of finances.

Are managed funds for you?

Putting money into an investment of any kind is a big step. You need to determine whether this is the right route for you. Below is a helpful checklist to run over before you take the plunge:

  • How long do you intend to keep your money in the fund? Not all funds are suitable for short term investments.
  • Are you comfortable with someone else making investment decisions on your behalf?
  • What are the fees? Check the management fees ( the management expense ratio / MER) and any performance fees
  • How well regarded is the fund manager? Do they have a good track record?
  • What assets is the fund investing your money into?
  • Ethical considerations - does the fund invest in industries that you don't align with?
  • What are the risks?

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