20151118 - Shares or Managed Funds

Two popular assets Australians invest in, either directly or through their superannuation, are direct shares or managed funds. But how do you decide which is the better option for you?

While there is no easy answer to this question and this decision should always be based on many other questions, it’s important to recognise that each option has its merits, and that their suitability (or otherwise) is often a matter of personal preference.

Shares and managed funds are similar in that they provide a useful means of generating investment growth; however, there are some major differences between each that should be considered carefully:

  • Access to investment options. Those who wish to invest in local shares are limited by the size of the Australian Stock Exchange (ASX); however, managed fund investors can pool funds and access a range of investment options not ordinarily available to individual shareholders.
  • Ownership. Share investors own a share of the company, so they are entitled to have a say (by vote) in the management of it; whereas investors in managed funds own units in the underlying investments, and have no say in how their investments are managed.
  • Entry to the market. Investors are often required to purchase a minimum number of shares in each transaction, which can prove costly; however, for managed funds, investors can gain access to a parcel of units relatively cheaply.
  • Fees. Share investors are charged a brokerage fee every time they buy or sell shares, but pay no ongoing fees. However, fund managers charge fees to investors if they want to switch between investments, plus there is an administration fee to cover the costs of the ongoing management and reporting on the funds.
  • Diversification. To diversify a share portfolio, investors can purchase shares in different companies across various business sectors within the Australian and international share markets. However for managed funds, investors can select a range of asset classes, including domestic and international shares plus fixed interest, listed property, hybrids and cash.
  • Investment selection. Share investors are responsible for their own investment selection; managed funds employ professional fund specialists to manage the stock selection.

 

This Information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances. Liability limited by a scheme approved under professional standards legislation. Before you decide, investigate all of the options or speak to us. We will help you to determine what suits your personal circumstances best. If you have a friend who is wondering the same questions, please feel free to pass on our name so that we can have a confidential chat with them too.