Managed funds can be a great way to invest, especially if you’re after a “set and forget” investing tool. The key to getting the most out of your managed fund is to find one that will make you as wealthy as possible by the time you withdraw your money, without exposing you to too much unnecessary investment risk along the way. To achieve this, your fund must earn consistently strong rates of investment returns – year in, year out.
To give you a better chance of building your retirement savings, it helps if your managed fund charges reasonable fees. That’s because what you get in your pocket is what’s left from the investment returns after all the fees are taken out; it is no more complicated than that.
So, the higher the fees, the higher the returns have to be to leave you with more money in your pocket.
An example will highlight why this is so important. If two investors achieve identical investment returns but one pays only 1% in fees each year while the other pays 2%, then the member in the fund with the higher fee will have 10% less in their account after 10 years and 19% less after 20 years.
So, paying higher fees can cost you big money. And this means if you are paying higher fees, you should make sure you use the managed fund shrewdly, so that you more than make up the fees through better investment mixes that lead to higher returns.
What to look for
There are six main types of managed fund fees you should know about:
1 Establishment fees, also known as entry or upfront fees, may be paid when you set up your managed fund account.
This story is from the June 2023 edition of Money Magazine Australia.
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This story is from the June 2023 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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