How to invest in a managed fund in Australia [2025 Guide]

Read on to discover why some people invest in a managed fund, and the step-by-step guide to getting started.

Reasons to invest in a managed fund

Here are the top reasons some investors choose to invest in a managed fund:

1. Access to professional management 

One of the primary benefits of investing in a managed fund is having professional portfolio managers call the shots on how people’s money is invested. They’ll typically have access to resources, data and research that individual investors don’t. 

This access and expertise allows them to make more informed decisions and help identify opportunities, mitigate risks and actively manage the portfolio’s investments to potentially maximise returns.

2. Saving time 

Investing in individual stocks and other assets requires significant time and effort to research, analyse and track market trends.

However, with managed funds, the fund's portfolio managers who conduct the research and make investment decisions on behalf of investors take on those responsibilities. 

3. Potential for compound returns

Some managed funds offer automatic reinvestment of distributions into the fund. This can cause a compounding effect that can exponentially increase over time. As an investor’s position in the fund grows, so does the potential reinvestment. Learn more about the power of compound interest on investments.

4. Easy to get started

Thanks to emerging technology and the adoption of online wealth-building platforms, discovering, accessing and investing in managed funds is easier than ever. 

Other key features for a number of managed funds is low minimum initial investments and the allowance of additional, smaller contributions which assists in building consistent growth in their position.

5. Opportunity to make regular investments

Many managed funds offer the flexibility to set up automatic contributions, weekly, monthly, quarterly or annually. This can be beneficial for individual investors who want to build a position over time through dollar-cost averaging, which involves investing a fixed amount regularly, regardless of market conditions.

6. Potential for long-term growth

Some managed funds can use the appreciation in assets, dividends and interest on their underlying holdings to build wealth over the long term. This potential is influenced by a number of factors, including the assets held in the fund and the strategy of its portfolio managers.

It’s important for individual investors to thoroughly understand the strategy of the managed fund they are researching to decide if its investment strategy aligns with their own.

7. Liquidity and flexibility

Managed funds with daily liquidity allow for more flexible “redemptions”.

Having this liquidity makes it easier to adjust investing strategies fairly swiftly and maintain easy access to money if needed. 

Managed funds with daily liquidity allow deposits or withdrawals from the fund to occur once per trading day, typically by a specified cut off time. You’ll typically be able to find the redemption procedure and times in each fund’s Product Disclosure Statement (PDS).

8. Transparency and regulation

Managed funds, particularly registered schemes open to retail investors, are held to strict regulatory standards and are required to provide regular updates on the fund’s performance, holdings, and fees. This transparency ensures investors have access to key information and can make informed decisions.

9. Access to niche markets 

Some managed funds give unique exposure to asset classes and investment strategies that would be otherwise difficult for individual investors to get on their own, such as private equity or certain debt instruments. 

By diversifying with managed funds catering to niche markets, some investors can have a much more dynamically exposed portfolio. 

10. Professional risk management

Professional fund managers use sophisticated risk management and advanced investment strategies to minimise losses and protect the fund's value. They may use techniques such as strategic asset allocation, hedging, short selling and rebalancing to manage volatility and ensure the fund remains aligned with its investment objectives.

This level of oversight aims to mitigate risks that individual investors may overlook or not have the expertise to handle.

How to invest in a managed fund in Australia?

If you’re thinking of investing in a managed fund, there are some key factors and considerations to take into account before making the first move.

Set your investment goals

• Determine your investment horizon: Consider the length of time you’re considering for this particular investment.
• Consider your risk tolerance: It’s important to assess how much risk you're comfortable with before investing, whether it’s in stocks, ETFs, managed funds or any other asset. Market fluctuations can impact any investment, so being aware of your current financial circumstance and risk appetite is an important consideration. 
• Establish your desired return: Setting a desired outcome for your investment will help you explore managed fund opportunities that align with your time horizon and desired return. Remember, this is a desired return and not a guarantee.
• Set a budget: Determine how much you’re willing to invest initially and how much and how often you’re thinking of contributing to your position.

Find an investment platform 

• Research investment platforms: There are several platforms that offer access to managed funds in Australia including CommSec, Vanguard, Stake and more. It’s best to choose one that aligns with your preferences.
• Check licensing: Ensure your chosen platform has adequate licenses and is regulated to offer financial services in your region. This information will often be found in the platform’s Financial Services Guide which would usually be available via their website. Be sure to search ASIC’s Professional Register to independently check that your chosen platform is appropriately regulated.
• Consider user experience: You should consider factoring in the user experience when choosing a platform. Knowing the types of features, look and feel and general usability of a platform counts for a lot. Consider trialing out a few platforms first or search on forums for reviews from other users on your prospective platforms. 

Research and select a managed fund

• What type of fund: There are many different types of managed funds available, each with its own unique strategy and underlying focus.  For instance, there are a number of managed growth funds available that have heavy exposure to equities but carry a higher risk. Then there are managed income funds that could have more exposure to assets with lower volatility and yield, but aim to pay regular distributions.
• Look at the fund’s past performance: While past performance isn’t indicative of future results, it can give you an idea of how the fund and its underlying assets have been managed previously and the level of experience of the investment team.
• Understand the strategy: Read and consider the fund’s PDS to get a better understanding of the fund’s strategy and how the portfolio manager approaches the investments within the fund.

Consider the fees

• Management fees: These are the annual fees that fund managers charge for managing your investment. It’s expressed as a percentage of your total investment, typically ranging from 0.5% to 2.0% per year.
• Performance fees: Some managed funds charge an additional fee based on the fund’s performance. This is generally when returns exceed a certain benchmark.
• Entry and exit fees: Some funds incur fees when you deposit or redeem money. Research whether the platform you are accessing charges this fee or has discarded it.
• Platform fees: The platform you use might charge fees as well for accessing the managed fund, such as an annual account maintenance fee or trading fees.

Please note, these are general fees that apply to some managed funds. To get a more accurate representation of the fees and charges of the managed fund you’re considering, it’s important you read that fund’s Product Disclosure Statement (PDS) as additional fee types may apply.

Consider seeking advice

• Consider seeking financial advice: Whether your chosen managed fund is appropriate for your needs, financial situation, and investment objectives.

Ensure suitability under Target Market Determination (TMD)

• Target Market Determination: All managed investments schemes available to retail investors are required to issue a Target Market Determination (TMD) to ensure a product is suitable for an investor’s needs, financial situation and investment objectives. This is often achieved by requiring investors to answer a few questions about their investment objectives with an investment in the fund before being allowed to invest.

Make the first deposit into the fund

• Make your first deposit: Once you’ve chosen your managed fund and the fund issuer or distributor has taken reasonable steps that will, or are reasonably likely to, result in distribution being consistent with the TMD, it’s time to make your first deposit. Common methods include bank transfer or credit card/debit card. Ensure you consider the minimum investment amount for your chosen fund.

Monitor the performance of your investment

• Track your investment regularly: Use the platform’s tools to monitor your managed fund's performance and its performance against the target benchmarks.

• Stay informed: Monitor for any changes to the fund's management or investment strategy as changes to the fund manager, their philosophy or the assets they hold can affect performance. Always keep an eye on any updates to the fund’s PDS or TMD.

Consider regular top-ups depending on your goal

• Consider contributing regularly: Based on your investment goals, you may wish to continue growing your position in the fund with regular top-ups to your contributions.
• Consider reinvesting dividends: Some managed funds provide distributions to investors which you could reinvest into your original position to further increase your position. Not all funds offer a distribution reinvestment plan - read the fund PDS for more information.
• Reassess periodically: Review your investment plan and risk tolerance regularly, especially if there are changes to your objectives, financial situation or needs (e.g., career shift, retirement).

How much can I invest initially?

The initial investment amount for a managed fund can range anywhere from hundreds to thousands of dollars, depending on the specific fund and provider. When looking at minimum investment amounts and subsequent minimums, you should consider funds that align with your financial goals and risk tolerance. 

One strategy could be to start with a small investment and gradually increase it over time as you become more comfortable with the fund's performance and management.

Remember that many managed funds allow you to make regular, smaller contributions after the initial investment, which can help you build your investment over time.

Investment time horizon for a managed fund

The investment time horizon for a managed fund refers to how long you plan to keep your money invested before redeeming it. Every fund is different and most will stipulate a suggested time horizon on their PDS. 

The suitable time horizon for holding units in each will depend on individual circumstances, risk tolerance and financial goals.

Key considerations before investing

Evaluating performance and fees

When assessing the suitability of a managed fund for your portfolio, it's important to evaluate factors that could have a direct impact on the fund’s return such as performance and fees.

• Assess historical performance: Review the fund’s past returns over multiple years, and compare it to relevant benchmarks (e.g., the ASX 200 for Australian equity funds). The fund issuer or distributor should report on performance - remember to look for total or “net” return after fees and costs and make sure that distributions are included in the returns reported.
• Understand fee structures: Consider management fees, performance fees, and other charges, as these can significantly impact net returns. Management fees are charged annually, while performance fees are deducted from returns. 

As an example, Stake Accumulate has a management fee of 0.51% p.a (inclusive of GST, less any RITC or ITC), of the net asset value of the fund referable to Class A units, plus recoverable expenses (which are capped at 0.36% p.a). Transaction costs also apply. You can also move your money in and out, with no exit fee. Please read the PDS for details available on the Stake website.

Tax implications

When a managed fund distributes income to investors, the investors may be required to pay tax on the gain. Even if your income is reinvested, managed funds may still distribute earnings, and you must report these distributions as income.

Capital gains are taxed based on the holding period of the asset, with long-term capital gains (for assets held over a year) often taxed at lower rates than short-term gains. If the asset is held for more than 12 months, investors may receive a 50% discount on the capital gains tax, effectively reducing the taxable amount. Exceptions apply.

Overall, tax liability for managed funds can vary depending on the type of fund it is. To get a more accurate reading of the fund’s tax policy, you should read the PDS of the fund you intend to invest in and consider seeking tax advice specific to your personal circumstances.

Risk factors and market conditions

Market conditions and risk play a crucial role in the performance of managed funds. This includes economic factors – such as inflation, interest rates, and GDP growth –, market volatility, geopolitical events, and industry-specific risks. The fund PDS will disclose risks relevant to your fund.

The role of risk in managed funds

Risk is an inherent part of any investment, including managed funds. The risk level depends on the fund’s investment strategy and objectives. Some funds focus on high-risk high-return opportunities, while others focus on more conservative, stable returns.

How to align risk with investment goals

Aligning risk with investment goals begins by understanding your own risk tolerance. This can depend on factors like your financial situation, time horizon and how comfortable you are with market volatility. 

It’s always recommended you consult a financial professional to get a more accurate sense of your risk tolerance and financial circumstances. 

After you’ve done that, you should define whether you’re aiming for long-term growth, steady income or capital preservation.

🎓 Related: Should you invest in a managed fund or ETF?

When to invest in managed funds and why

Timing the market vs time in the market

Timing the market, which involves attempting to buy and sell based on short-term market fluctuations, can be difficult to execute successfully, even for seasoned investors. 

On the other hand, long-term commitment is a more widely adopted investment strategy, especially for individuals and those building wealth for the long term. 

By staying invested over the long haul and maximising time in the market, you may benefit from the potential growth and the magic of compounding returns while minimising the impact of short-term volatility.

When asked about Berkshire Hathaway’s investment philosophy, Oracle of Omaha Warren Buffett answered with, ‘Our favourite holding period is forever.’

Things to consider before adding a managed fund to your portfolio

Managed funds provide diversification, professional management, and  exposure to a broad range of assets without requiring you to manage individual investments yourself. 

This may be beneficial for investors with limited time, expertise or interest in selecting and managing individual securities. 

Managed funds also offer scalability, flexibility, and the ability to invest according to different risk levels, financial goals and strategies.

Disclaimer

This information is prepared by Stakeshop Pty Ltd (ACN 610 105 505 [CAR 001241398]) (Stake), who is an authorised representative of Stakeshop AFSL Pty Ltd (AFSL 548196). The Stake Accumulate Fund ARSN 680 653 374 (Fund) is issued by K2 Asset Management Ltd (ABN 95 085 445 094 AFSL 244 393), a wholly owned subsidiary of K2 Asset Management Holdings Ltd (ABN 59 124 636 782).

This information is produced in good faith and does not constitute any representation or offer by K2 or Stake. It is subject to change without notice and is for general information purposes only and is not complete or definitive. K2 and Stake do not accept any responsibility and disclaim any liability whatsoever for loss caused to any party by reliance on the information contained in this article This information is not financial advice. Any advice and information contained in this article is general only and has been prepared without taking into account any particular circumstances and needs of any party.

Read and consider the Fund Product Disclosure Statement (PDS) and Target Market Determination (TMD). Consider seeking independent financial advice on whether the Fund is appropriate for your needs, financial situation, and investment objectives. All investments carry risk. Past performance is not a reliable indicator of future performance. Offers to invest will only be made in the PDS, and this material is not intended to substitute the PDS. Both the PDS and TMD are available on the Stake website, or on request from K2.