How Managed Funds Can Help Achieve Your Financial Goals

When it comes to investing for your future, managed funds can be a very smart strategy. The managed fund you’ll be most familiar with is KiwiSaver. Using a managed fund can help you achieve your long-term goals like saving for a house deposit, or towards your retirement. We outline the advantages of managed funds, along with a few finer details that are worth thinking through before you commit.  

Reducing your risks through diversification  

Managed funds are known for offering reduced risk through diversification. That’s because they combine your money with a group of investors. It’s then used to buy a variety of investment types, such as: 

• Shares from local and global companies 

• Bonds 

• Other types of assets, like commercial property 

Managed funds ensure you don’t have to invest all your savings, and your money isn’t just tied to one company or sector. 

The benefit of professional fund managers 

As the name suggests, managed funds are managed by professionals who will make investment decisions on your behalf. 

Along with assessing the best investment options for your money, these fund managers will also monitor changes in the market to make qualified and informed decisions. 

You can, of course, manage your own investments. Taking a more ‘DIY’ approach means you need to really understand the options and have confidence in your decision making. This requires a lot more of your time and effort. 

Better and easier market access 

Some global markets and asset types are hard and expensive to invest in on your own. That’s when managed funds can give you a big advantage. 

Managed funds let you access better (and broader) investment opportunities with ease. And you can invest using a smaller amount of money. 

Simple to grow your savings over time 

As KiwiSaver shows, you don’t need a lot of money to start investing in a managed fund. But, to get the best results, it’s worth adding to that amount regularly. 

Establishing an automatic payment from your bank account can make this effortless. You can literally ‘set and forget’ while growing your investment and take advantage of the benefits that come from compounding interest. 

Managed funds are heavily regulated 

Managed funds in New Zealand are heavily regulated by the Financial Markets Authority (FMA). This means your fund manager is legally obliged to show that they are meeting FMA’s strict criteria. They also must report regularly to you about how your money is being invested, and how that investment is performing. 

Extra details that you should consider 

While you don’t have to be an investment expert to achieve the best out of your managed funds, there are some details that you should consider: 

• Management Fees – All managed funds charge fees. Always compare the fees between similar funds before you invest in it. Don’t assume that higher fees deliver a better performance. 

• Performance versus Benchmark – Want to check how a managed fund is performing? It’s a good idea to compare it to a benchmark, like the NZX 50. This can show if the managed fund you’re considering might be consistently underperforming compared to the rest of the market. 

• Liquidity – Liquidity explains how easily you can withdraw your money from the managed fund. Different funds might have different options. Make sure you read the terms and conditions to understand how, and when, you can access your money. 

Finally, do you prefer an index or active managed fund? It’s important to match your choice to your investment style: 

• Index funds aim to track the market. These usually have lower fees. 

• Active funds try to beat the market. They tend to charge more, but they can’t guarantee they’ll deliver a better than average performance. 

Decide which approach suits your goals and how comfortable you are with investment risk. 

Want to discuss your options with a specialist? 

When it comes to deciding the best managed funds for your needs, it’s well worth talking to a specialist. To speak to one of our experts at IFAA, simply get in touch. A quick conversation could give you all the confidence and insights you need.