The myth
Managed funds make investing easy even when you don’t know much about it. Putting money into one can make investing convenient, simple and affordable, and even tracking the performance isn’t difficult.
You don’t even have to worry about researching and analyzing to find the right decision, because this and many other tasks are done by your fund manager for you.
That’s why some people believe that managed funds are the best choice for investing newbies
Why do people believe it?
Managed funds have many advantages. For example, you won’t need to keep an eye on the business landscape and current events to see how they could affect the underlying assets in the fund.
That’s because a professional manager does all those when deciding how to run/navigate the fund. Once you’ve invested in a fund, you won’t really have to do anything (although consistently adding to your investment is always a good idea to achieve peso-cost averaging).
Most managed funds are also already diversified as part of the manager’s strategy. This helps lessen your risk when you put money in. Also, the range of UITFs and mutual funds available in the Philippines means that you’ll find options that match your budget and risk profile.
Such funds are usually affordable, so you don’t need a large amount to get started. Feeder funds, which have small minimum investment requirements and low required monthly payments, are a great example.
That doesn’t mean that managed funds are only good for beginners. These are all benefits that even experienced investors can enjoy, especially if they’d rather leave the fund management to someone else.
Risks of believing this myth
While managed funds offer great advantages, new investors who look only those products can miss out on other opportunities. Government securities like RTBs, for example, are very accessible and come with their own benefits.
Remember also that you’ll have to pay for the work and expertise of the fund’s manager, as well as other fees. Also, the fund’s performance is determined by how well it has been run, and that’s something that you don’t control.
Since you don’t have to make decisions on the fund’s management, you might also think that you don’t have to learn about investing. However, having this knowledge can help as you progress through your journey.
Verdict: It depends.
Managed funds are great for new investors because they are easy to get into, even without much previous knowledge. In fact, these products can also be good even for the most experienced of investors because it gives them instant diversification, and allows them to funnel their money into focused direction, strategy, or sector.
Money Market funds, for example, provide savvy investors with a parking facility for their idle funds to earn better than deposits while waiting for an investment opportunity. That doesn’t mean, of course, that these are the only options available.
If you’ve decided to invest in a managed fund, remember to check your risk profile and time horizon when looking at your options. That’ll help you choose the one that fits your needs best.
Don’t forget that, like any other investment product, returns from managed funds aren’t guaranteed. So you should also make it a point to check the historical performance of the fund to get a good grasp of the fund manager capability versus the fund’s benchmark.
