A Checklist for Managed Fund Investing

Part of the Managed Funds For Dummies Cheat Sheet (Australian Edition)

Use this checklist for investing in managed funds as a quick reference point for each step of the managed fund investment journey. These pointers are a guide to what to watch out for and where you may need to do a little more work before making your investment decisions.

  • Set out your goals: Work out what you’re trying to achieve with your investments. Are you saving for retirement or for a deposit on a house, for example? Different goals are achieved through different managed funds.

  • Decide whether to go it alone or take advice: Work out if you want to make your own investment decisions or seek advice from a professional.

  • Figure out your timeframe: The time period you’re investing for will affect likely returns and the risks needed to achieve them.

  • Think about whether to invest via superannuation or outside super: For tax reasons, investing in your superannuation makes a lot of sense. But, in most cases, you won’t be able to get your money out until you retire.

  • Know what type of investor you are: Whether you’re conservative, aggressive or perhaps a mix of the two, the type of investor you are affects how you invest and in what types of funds.

  • Do your research: Know what types of funds are available and which ones are likely to suit your needs. Be very wary of investing in anything you don’t understand.

  • Consider using a master trust or wrap account: If you decide to use a financial planner, chances are you’ll be offered the use of one of these structures to help administer your investments. Although extremely useful, wraps and master trusts do cost money and may not suit all investors.

  • Understand the risks: Make sure the investment strategies of the fund you choose match your investing goals, and make sure you understand the risks involved in investing in any fund.

  • Read the product disclosure statement (PDS): Make sure you understand what the fund is offering by reading the PDS. This document tells you what the fund does, how much it costs to invest and a little about the fund manager. The legal information contained in the PDS may not be at the top of everyone’s must-read list but it does set out who does what in the fund.

  • Consider setting up a regular savings plan: Work out whether you want to invest money all in one go or build your investment over time with a regular savings plan. The amount of investment money you have to start with will obviously be a deciding factor!

  • Watch out for tax: Like most investments, managed funds are not immune from tax and you need to understand the quirks. Invest in a fund at the wrong time — for example, just before the fund distributes its income — and you could find yourself with a tax bill shortly after.

  • Check out the costs: Most funds charge you a fee for any initial investment in the fund plus ongoing management fees. You could also be charged a performance fee if the fund does well. The PDS sets out the fees.

  • Fill out the forms: When you’ve decided on a fund to buy into, complete the application form at the back of the fund’s PDS. If you’re a first-time investor with that fund manager, you need to include certified copies of your identification (passport, driver’s licence and the like).

  • Time your investment: Don’t be too concerned about trying to time the market — in other words, trying get the best price — but think about strategies such as dollar-cost averaging to help you get into choppy markets at a reasonable price.

  • Follow up your money: After you’ve sent in your application you should have something back from the fund manager within 14 days. If not, follow up.

  • Monitor your fund: Although the fund manager does most of the investment work for you, keeping track of what your fund is doing is always a good idea. If performance isn’t matching your expectations, you may need to rethink your strategy.

  • If you want to sell your fund, do it in writing: A fairly straightforward process, but you or your financial adviser need to let the fund manager know in writing. You should receive your money within ten days of the sale.

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Managed Funds For Dummies Cheat Sheet (Australian Edition)

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