In managed investing, you give a financial advisor the discretion to buy and sell investments on your behalf. This is often done through a separate managed account that is held at an investment manager (also called a money management firm). Investment managers typically have a fiduciary duty to the principal client, meaning they must act in their best interests at all times. As a result, they will be required to disclose all material facts about the investments, including performance.
Managed accounts offer a level of diversification that can be difficult or impossible for individual investors to achieve on their own. This diversification can help reduce risk by reducing the impact of any single investment, or group of investments. This can be helpful for investors who are not comfortable with taking a big risk or have a low tolerance for loss.
A managed account can also allow for a more structured approach to investment planning, helping to keep costs down and allowing for a higher level of service. This can be useful for investors who do not have the time or expertise to undertake an investment plan themselves. It can also be useful for people who are trying to build wealth over a long period of time, and may benefit from the discipline of regular payments into an investment account.
As with any type of investment, managed investments are subject to risk. The risk is the potential that an investment will not perform as expected and that you could lose some or all of your capital. When selecting managed funds it’s important to read the Product Disclosure Statement, or other relevant disclosure document, and ensure that the risk profile of the fund matches your own.
The main advantages of managed investing are that a professional will make investment decisions on your behalf, and that they can be more cost-efficient than self-directed investment options. They can also help with the process of investment planning and provide a wider range of investment products than are available for self-directed accounts.
There are some downsides to managed investing as well, notably the potential that the management fees will eat into your returns. Additionally, a managed investment may require a higher minimum investment amount than a self-directed account.
Countless individuals find that, at some point in their lives, they no longer have the time or expertise to manage their own portfolios. For these reasons, many investors opt to switch from a self-directed account to a managed investment. Whether this is worth it for you is ultimately a personal decision that you should make on your own. However, the benefits can be significant, and can outweigh any drawbacks that come with managed investing.