Types of Managed Funds Available
Managed funds invest in one or multiple asset classes which suit different risk profiles. The most important thing to look at when considering a fund is the allocation of its assets. However, the name does not exactly explain what a fund does and two funds with the same name might perform differently. Here are some of the more famous fund categories.
Income funds can generate a flow of income with low capital loss risk. It is also called as a defensive fund and they are heavy on cash and investments with fixed interest rates. Meanwhile, a growth fund focuses on long term capital growth and it is ideal for those who can survive without accessing this money for at least five years and is centered on local shares, international shares, property securities or all three of those.
On the other hand, single sector funds invest in one asset class only and this could either be cash, property, fixed interest, Australian shares or international shares. Some of these funds specialize in one asset class like the funds of small companies, international resources and geared share funds.
In contrast, diversified funds place investments on more than one asset class. Different diversified funds will have different risk levels. Therefore, it is important to look at the allocation of every asset before investing.
Also, index funds or passive funds aims to get returns in connection with a certain market index just like the ASX Top 100. However, the manager only reflects the index that they are tracking and they do not make any judgment about the companies that have index funds or the movements in the market.
Active funds are maintained actively and it seeks to outperform the returns of a certain market index. This managed fund entails a lot of research about the market index that it targets and the buying or selling of assets in relation to the objective of the active fund.
Meanwhile, platforms are not managed funds but rather are structures which give investors a chance to diverse their money throughout a number of investment options such as master trusts, managed funds and insurance products. Platforms also keep track of your transactions through regular reports.
There also is a multi-manager fund which is often called the “fund of funds”. This managed fund lets you invest in a wide array of managed funds which are not cash, shared or fixed interest. The funds are managed by a number of fund managers and it may focus on one asset class or several classes.
Related posts:
