When choosing an investment fund, you must read the product disclosure statement before making a decision. Product disclosure statement details the style of investment, where it invests and performance data. Investment PDS are readily available online alternatively you can request a copy from your fund manager to be sent to you in the mail. All unlisted managed funds are required to have registered PDS with the Australian Securities and Investments Commission.
You can also access independent information sources such as ratings agencies that specialise in managed funds. There are also fund broker websites that allow you to compare funds. Additionally you can check the Australian Financial Review for regular updates.
Before speaking with a fund manager, you must always be clear about the objectives of your investment. You must determine the amount of risk you are comfortable with and how long are you willing to invest. From then on, you can keep an eye on funds that invest in the sectors that match your time frame and investment goals.
Checking on the personnel behind the funds to find out if they are reliable and stable is also worthwhile. It is better to be under a management team that adheres to its philosophy in investments as apposed to a team who are merely reactive to changes in the market. It is important also to be aware of the fees that are included in particular managed funds and to know whether it is possible to easily shift funds from one sector to another.
You must not compare a value fund manager to a growth fund manager as they do not excel at the same time. It may be difficult choosing between managed funds due to the high volume of availability. Therefore, seeking advice from your financial adviser will prove extremely beneficial.
It is essential that the advice you receive is free of bias by ensuring that any recommendation is from an independent financial planner as many advisers receive commissions for funds to which they prescribe. This commission may come from the entry fee that you pay or through a trailing commission which is a regular payment to them for as long as you are under the fund.
Despite the commission that the advisers receive, your interests will come first. However, there might be some that will be swayed by the fact that one fund has a better commission payout than the other. To maintain their independence, some advisers charge a consultation fee instead of relying on commissions. If they do receive commissions, it must be disclosed to you.
Finally, you must not make a decision on a managed fund based solely on recent performances for it is not a reliable indicator of future performance. Top managed funds of a current year essentially may not be the top performing funds of the next year. Therefore, you must look at the performance of a managed fund over a lengthy period of time and look at its average returns.
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