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Managed investments, also known as managed funds or unit trusts,
allow you to pool your money with that of many other investors so that
you can buy a wide range of investments managed by a professional team.
Because of its size, a managed investment lets you invest in assets
that may not ordinarily be available to individuals - like global
companies, overseas government bonds or office towers.
Getting started in managed investments
Getting started in a managed investment is easy - and you don't need
to have a large sum of money!
Essentially there are two ways you can invest in a managed
investment:
- you can invest a lump sum of $5,000 and leave it to accumulate,
adding amounts whenever you are able to invest; or
- you can invest a lump sum of $1,000 and an amount on a monthly
basis (often as small as $100 a month).
Managed investments deliver two types of investment return: unit
price growth and distributions. Unit price growth is the increase, over
time, in the price of your units. When the investments in the fund
generate income such as interest or realised capital gains, this is paid
out via regular distribution. The performance of your fund includes the
growth of the unit price and the value added to your investment by
re-investing all distributions. It is normally shown as a percentage
over a specific period of time.
Investment performance for general investment products is calculated
in accordance with industry guidelines. These guidelines allow the
following commonly used method of performance calculation:
 | the calculation uses the withdrawal value of an investment at the
beginning and the end of a stated period,
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| where funds distribute income, it is assumed to be reinvested,
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| entry fees are not included,
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| management fees are included (but any dollar charges made to your
account are not included),
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| any additional amounts you invest are not included (except for
reinvested distributions),
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| no allowance is made for tax. |
The performance figures that are published will often not exactly
match your own investment's return. Some reasons for this include:
| fund performance is calculated by comparing the withdrawal value
of an investment at the beginning and end of a standard period such
as a quarter. As prices change daily, the performance of your
investment will obviously be affected by the exact dates on which
you invest and withdraw.
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| entry fees are not applied when calculating performance, as these
fees can differ from investor to investor and fund to fund.
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| where funds distribute income, it is assumed to be reinvested. If
you are not reinvesting distributions, you will have a different
result.
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| quarterly returns published by some surveys are based on the unit
prices at the last day of each quarter (e.g. June quarter returns
use prices at 31 March and 30 June). Returns we quote are based on
the unit prices at the first day of each quarter (e.g. June quarter
returns use prices at 1 April and 1 July). This concept also applies
to returns over other periods (e.g. monthly, yearly etc). |
On average, Australians change jobs every five to six years1.
So over your whole working life you could have six or more different
superannuation accounts.
Many people are pleasantly surprised when they add up their total
super from all their different jobs, and realise that this is a
significant amount of money that's worth looking after. The easiest way
to look after your super is to consolidate it into one place.
1Australian Bureau of Statistics: Labour Mobility
Statistics: February 1999
Advantages of consolidating your super
| Reduce your paperwork, and your fees!
If you have more than one super fund, each fund will send you
statements and other information on a regular basis - this adds up
to a mountain of paperwork every year. You may also be paying
multiple sets of fees. Consolidating your super into one account
means that you will only be charged one set of fees, and it may also
help save a few trees by reducing the paper shuffle.
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| Maximise your earnings
With your super money in different funds, your investment strategy
may not be effective. Without a clear investment strategy you may
not be getting the earnings you need to accelerate your super.
Consolidating your super allows you to have a more focused
investment strategy which can lead to a better return.
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| Use it or lose it - lost super money
Many of us have money sitting in super funds from jobs we left years
ago. If your old employer loses track of you, your money can
eventually end up in Government coffers. Indeed, Government
statistics suggest there is more than $6 billion worth of
"lost" super2. Perhaps some of it is yours! |
2Statistics as at Oct 2002.
Investing in the fund that had the best performance last year may be
a big mistake!
It is unlikely that the same asset class will have the best
performance for two years running. It has only happened twice in the
last 20 years. So if you invest in the asset that performed the best
last year, it is unlikely to have the best performance again this year. |
