Managed Funds Growing Your Wealth Without The Headaches

Managed Funds Growing Your Wealth Without The Headaches



Managed Funds -- Growing Your Wealth without the​ Headaches
Managed funds are an​ easy way to​ invest wisely and​ with low risk .​
Investment in​ a​ fixed term deposit – especially with a​ fund that invests in​ real estate – is​ an​ easy way to​ grow to​ your wealth.
Apart from being a​ great way to​ have your money managed by investment professionals, managed funds also simplify the​ process of​ building and​ maintaining an​ investment portfolio .​
Instead of​ tracking a​ wide range of​ individual investments, your fund will keep track for​ you, and​ the​ progress of​ your investment is​ expressed in​ one simple unit price.
A Bit Here and​ a​ Bit There
With any investment strategy diversification is​ important to​ minimise risk .​
The resources available to​ financial institutions are usually greater than those of​ the​ individual investor, therefore diversification is​ much easier as​ part of​ a​ managed fund than it​ would be if​ you had to​ raise the​ capital for​ a​ truly diverse – and​ therefore more secure – investment yourself .​

As an​ example, if​ you have $100,000 to​ invest and​ you choose to​ buy real estate, your $100,000 might buy you a​ small unit that you could rent out .​
Then your entire financial future hangs on the​ performance of​ this one investment .​
If houses in​ that area depreciate due to​ changes in​ the​ locale, or​ you have trouble finding or​ keeping tenants, or​ you find out three weeks too late that there are serious structural problems, your financial future is​ in​ jeopardy.
By comparison, a​ managed fund that invests in​ mortgages has the​ capital to​ speculate on a​ wide range of​ properties in​ diverse suburbs, with differing land values, various land uses (residential, commercial etc), and​ a​ much lower dependence on the​ performance of​ any single investment property .​
Your future no longer hinges on one little unit because it’s merely a​ part of​ a​ much larger portfolio than you could invest in​ on your own.
Choosing a​ Managed Fund
When you’re choosing a​ managed fund it’s always tempting to​ just go with the​ one that offers the​ best term deposit rate .​
However, experience dictates that it’s wiser to​ conduct some deeper research before committing yourself to​ a​ fund .​
Here are some issues to​ consider:
The decision-makers: What qualifications do the​ Directors of​ the​ fund have? How closely are they involved in​ the​ day-to-day running and​ major investment decisions of​ the​ fund? Any managed fund that you invest in​ should be run by industry professionals – accountants, brokers, people with backgrounds in​ banking and​ finance; if​ you’re investing in​ a​ managed fund that invests heavily in​ property, the​ decision-making team should include someone with extensive experience in​ the​ real estate market.
Mortgage funds – choosing properties and​ quality mortgages: Mortgages are very popular investments for​ managed funds .​
As mentioned above, any fund that invests in​ property should have ready access to​ advice from a​ real estate market professional .​
Consider factors such as​ the​ diversification of​ the​ properties invested in​ (geographical diversification – are the​ properties spread throughout a​ wide range of​ suburbs and​ price brackets? and​ sector diversification – what property types are invested in, spread across residential, commercial, industrial etc); and​ what percentage of​ the​ value of​ the​ property the​ fund will lend (often 70% of​ the​ value for​ first mortgages, and​ up to​ 85% of​ the​ value of​ the​ property for​ second mortgages).
A good way to​ gauge the​ viability of​ a​ managed mortgage fund is​ to​ look at​ the​ number of​ loan write-offs; the​ number of​ bad debts incurred (mortgages that the​ fund has granted that have been defaulted on); and​ the​ amount of​ loans in​ arrears of​ principal and​ interest for​ over 30 days.
Also, every property that is​ invested in​ should be valued by a​ qualified valuer – not a​ real estate ‘market appraisal’ – and, if​ possible (especially for​ smaller funds), every proposed property should be inspected by a​ qualified employee from your fund to​ double check that everything is​ as​ it​ should be – good quality control can prevent mishaps .​
Income options: Naturally, it’s your choice how long you wish to​ invest your money for​ .​
When choosing a​ fund look at​ factors such as​ early withdrawal penalties and​ payment options .​
Can you have access to​ the​ interest earned monthly? Quarterly? Annually? or​ will you have to​ wait until the​ end of​ your fixed term period before earning any income from your investment? Choose whichever option suits you best .​
a​ high rate of​ return is​ useless if​ you envisage needing an​ income from your investment before the​ end of​ the​ proposed fixed term.
Environment: Economic trends and​ possible political changes are some other factors to​ keep a​ weather eye out for​ .​
If you invest heavily in​ a​ fund that in​ turn invests internationally, you’ll want to​ know where your money is​ going and​ whether the​ governments and​ economies in​ question are stable and​ likely to​ stay that way .​
Some financial advisors suggest that investing 15-20% of​ your capital overseas is​ a​ wise move, and​ it​ is​ – as​ long as​ the​ country/countries in​ question have a​ good economic climate and​ aren’t in​ the​ throws of​ political upheavals.
So, now you have a​ few tips for​ finding yourself a​ managed fund that will help to​ grow your wealth .​
Once you’ve chosen a​ fund, or​ have decided on the​ sorts of​ investments that you’d like to​ be involved with and​ you’re looking for​ a​ fund, there are still some more things to​ consider before diving in .​
This is​ the​ first instalment of​ a​ four-part series of​ articles to​ help you cut through some of​ the​ financial jargon without getting too much of​ a​ headache .​
The next three instalments will look at​ investment rates, retirement funds and​ self-managed superannuation .​
Hopefully they’ll help put you on the​ right track to​ grow your wealth.
A final note: This article – and​ the​ series of​ articles to​ come – is​ not given as​ professional financial advice .​
Your personal circumstances have not been taken into account and​ financial situations vary the​ world over .​
You should seek professional financial advice and​ read the​ product disclosure statement for​ any financial product before making a​ decision.




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