The Pros and Cons of Managed Investment Funds
Managed investment funds are also known as unit trusts. Their attraction is that they offer a great deal more diversification than you could manage if investing with a smaller amount of money. This creates a diversified portfolio that can be considered much safer than one with fewer investments. Diversifying is one of the best ways to minimise loss when investing.
While you may not have day-to-day control over your money in a managed investment fund, you do have the ability to choose what kind of managed fund to invest in, in the first place. You can choose Australian shares only, international shares or a mixture of both. You can also choose the type of risk you are happy with. Growth funds give a better return for greater risk, while those funds that are considered safest have a much slower growth rate.
Another good point about managed investment funds is that they dont need a lot of work from you. There will be a fund manager - or a team of them - who will look after your money and make all the decisions necessary to ensure the best return possible. No matter what kind of managed investment fund you decide on, you do need to know that there is always some risk. Whether that is small or great is up to you.
Mel writes about all types of managed funds including those managed funds with low fund manager fees.