Pooling your money with other investors for a return is the object of managed investment schemes, so they can be worth a look.
Also known as managed funds or collective or pooled investments, these types of schemes mean your money and others' contributions are put together or used in a common enterprise - hopefully, for financial benefit.
However, it also means you hand over the reigns of the day-to-day control of your investment - thus, it being referred to as 'managed'.
Different types of managed investment schemes include:
- Cash management trusts
- Property trusts
- Equity (share) trusts
- Agricultural investment schemes (such as aquaculture and commercial horse breeding)
Such schemes must be registered with the Australian Securities and Investments Commission before operating.
Safely, safely
Unfortunately, there are some managed investment schemes that have been set up illegally and have cost Australians hundreds of millions of dollars in the past decade alone. So, it's worth checking out who you're dealing with.
There are a few safety checks you can do by visiting the Australian Securities and Investments Commission website. This includes checking if a company actually exists, if it holds a license or if the scheme is registered.
A registered managed investment scheme must be set up as a public company, registered with the Commission, and have a licence in the company's name to run the scheme.
Managed funds vs. DIY share buying
Managed funds may cost in terms of annual fees and other ongoing expenses, but they can save time and money in the long run, compared to doing it yourself.
Day-to-day portfolio management can take time when it comes to such things as researching markets and picking the right timing for buying and selling. There are also other transaction costs to consider, such as stamp duty, brokerage and trading fees.
In addition, managed funds can allow you to diversify into areas you might never have thought of, such as commercial property or international shares.
For those who are well-versed in the share market, however - and have the time and energy to spend on doing the hard yards - doing it yourself is still a viable option.
