Direct investing versus Managed Funds

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

You can access assets and/or securities by buying the investment directly or via a managed trust.

Direct investments involve buying the security such as a specific share or property such that you are a part or full owner of the security. As an example, you can become an owner in a specific company by buying its shares on the Stock Exchange which entitles you to receive dividends and vote at General Meetings (depending on your share structure).

An alternative means of gaining exposure to assets is via a managed fund. A managed fund is a professionally managed investment portfolio that pools the money of multiple investors. A fund manager is appointed to manage the fund including selection of the underlying investments and maintaining client records. By pooling money with other investors you may gain access to investments not normally available if you invested directly or enable you to achieve a greater level of diversification.

If you invest money into a managed fund you will receive a number of ‘units’ in that fund. The number of units you receive is calculated as the amount of money you invest divided by the unit price on that day. This is why managed funds are also often called “unit trusts”. The unit price may increase or decrease in line with the value of the underlying investments.

Each investment approach has its advantages and disadvantages that you should consider. These will include the implications for fees and investment control.

Investing directly in securities may require you to actively review and manage the investments in your portfolio on a regular basis. You may be required to make decisions and changes to account for corporate action events in the case of buying shares directly such as takeovers, rights issues and share purchase plans. This can require you to have the time and inclination to manage your direct investments portfolio. On the flip side, the advantage provided by a managed fund is that you do not need to devote the time to be actively involved in the investment decisions.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

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