We all know there is no such thing as a free lunch but when it comes to investing, diversification is the closest thing to it. But the cost of investing in 50, 200 or 1,000s of companies individually is prohibitively expensive. This is where managed funds come into play. You can combine your money with others and pay an ''expert'' to manage the money for you. :thumb:
If the fund manager you choose is an ''active'' manager of your money they are likely to be investing in 20-80 stocks and may be turning over 80% or more of the portfolio each year (turning over means selling companies and buying others). This level of active management incurs high transaction costs and often results in a significantly worse after tax result as any investment sold within a 12 month period is not eligible for the 50% discount that assets held for longer than 12 months are.
To make matters worse, active managers often charge 1.5% - 2.00% or more for actively managing the fund. In some cases they also charge a performance based fee in the case they outperform certain criteria. :annoyed:
To rub salt into sore wounds caused by the high fees, the returns achieved by active managers, particularly after fees and taxes, are on average lower than the benchmark index returns.
If the fund manager you choose is an ''active'' manager of your money they are likely to be investing in 20-80 stocks and may be turning over 80% or more of the portfolio each year (turning over means selling companies and buying others). This level of active management incurs high transaction costs and often results in a significantly worse after tax result as any investment sold within a 12 month period is not eligible for the 50% discount that assets held for longer than 12 months are.
To make matters worse, active managers often charge 1.5% - 2.00% or more for actively managing the fund. In some cases they also charge a performance based fee in the case they outperform certain criteria. :annoyed:
To rub salt into sore wounds caused by the high fees, the returns achieved by active managers, particularly after fees and taxes, are on average lower than the benchmark index returns.