What are managed funds? Investing in managed funds explained
Think you're new to investing? Chances are, you're already an investor!
If you're one of 3 million New Zealanders in KiwiSaver, you already invest in what's called a managed fund. So what is it? Today I’ll be explaining managed funds, and how to invest in one.
If I were describing what managed funds are to a friend, I'd say, 'A managed fund is like KiwiSaver, except you can access your money whenever.'
Of course, there's more to it. KiwiSaver is a type of managed fund, it's just got different rules and benefits.
So how do they work?
A managed fund (also called an 'investment fund') is a fund where your money is pooled with other investors and managed by a fund manager to invest in assets such as shares, bonds, and property. Just like with KiwiSaver, you can adjust it to match your personal risk tolerance.
What are the benefits?
You don't need to be an investment expert to invest in a managed fund. It's taken care of by a professional investment expert, your fund manager, including admin like taxes!
You don't need to have a lot of money to start investing, as you can sign up with as little as $100 to $1000.
You get diversification across different industries + access to investments and markets that would normally cost you a lot of money to buy into directly.
You can access your money earlier. Apart from Kiwisaver, where you typically have to wait until you're 65, you can make a withdrawal whenever you want.
If you invest in a PIE managed fund, the maximum tax rate on your investment income will be 28%. This is beneficial if you are a high income earner and would otherwise pay 33% on income over $70,000, or 39% on income over $180,000.
While these benefits are great, you've also got to be aware that:
you won't get to directly pick and choose your investments
fees differ between providers, so make sure to compare to make the most of your earnings!
'I'm ready! Where do I sign up?'
Here are some banks & companies you can check out:
I hope this has been helpful!
For more personal finance know-how, grab your copy of Mindful with Money and follow me on Instagram @mindfulwithmoneynz.
Sophia
