51% of Aussies hold investments in addition to their home and super fund*, and are using these investments as a way to grow wealth, save for a house deposit, or diversify their assets.
But it pays to do your research, understand the different options available, and consider how they align with your risk appetite.
In this article, we explore opening an investment fund, what it is, and who should consider one. We also share a case study so you can see the potential benefits.
What is an Investment Fund?
An investment fund is a collective pool of money belonging to numerous investors and is used to purchase securities. The pool is managed by professional portfolio managers who allocate the pooled resources across a diversified portfolio of assets including equities (stocks), fixed-income securities (bonds), and real estate.
The primary goal of diversifying is to spread risk and enhance potential returns. Opening an investment fund involves allocating a sum of money, typically starting at $5,000, into a managed portfolio of assets. Types of investment funds include mutual funds, exchange-traded funds (ETFs), money market funds, and hedge funds.
What are the benefits of opening an investment fund?
Investing as a strategy can potentially grow your savings over time through professional fund management and diversification.
Some benefits are:
- Experts making investment decisions on your behalf.
- The potential to reduce risk through diversification.
- You can access investing if you have $5000 in savings.
- It’s convenient because you don’t have to do research on individual stocks.
What are the potential risks of opening an investment fund?
All types of investing come with risk, which is why it’s essential to choose one that aligns with your financial goals and risk tolerance.
Some potential risks are:
- Management fees and other expenses can erode overall returns.
- You do not have direct control over individual investment decisions.
- Diversification can potentially mean more modest returns.
- Despite diversification, investment funds are still subject to market fluctuations and economic conditions.
It’s important to make an informed decision before opening an investment fund.
This is where financial advice can play a crucial role because it looks at:
- Your financial goals
- Your risk appetite
- The investment choices available
It then designs a personalised and effective strategy that helps you reach your investing goals.
Opening an investment fund: Emily’s case study
Read about Emily, a 28-year-old Graphic designer who uses a digital financial adviser to help her decide how best to grow her savings for a house deposit in 10 years.
About Emily
Emily has managed to save $10,000 and is interested in exploring investment opportunities to grow her wealth. She plans to use the money as a house deposit in 10 years. She is also currently saving $250 per month.
She has limited investment experience and wants professional management to ensure her money is invested wisely. Emily decided to seek single-topic financial advice from moneyGPS, a digital financial adviser, on how to open and benefit from an investment fund.
Single topic financial advice
To begin, Emily completed the Money Check-Up Report, a free financial health check that analysed her current financial situation and goals. It then gave her a roadmap with the best way to achieve them.
One suggestion was that she purchase a Savings and Investment Statement of Advice, otherwise known as a financial plan, for just $198+gst.
After moneyGPS’ technology completed its analysis, which included investment knowledge and risk tolerance, it recommended an appropriate investment fund that aligned with her preferences.
moneyGPS offered Emily the option to implement the advice herself by opening up the investment fund and making her first deposit, or get help from a GPS Coach to guide her through the process. Emily chose to meet with the GPS Coach via Zoom who helped her get set up.
How using a digital financial adviser helped Emily
- Greater confidence that she has made the right choice. moneyGPS technology adheres to the same rules and regulations as face-to-face financial advisers.
- Reduced risk by investing in a diversified portfolio compared to individual stocks or bonds.
- Potential for higher returns compared to traditional savings accounts.
- Ability to access a broad range of investment opportunities with a minimum investment of $5,000.
Is this advice for you?
Generally, this kind of advice is most appropriate if you:
- Have a minimum of $5,000 in savings and want to invest but have limited experience or knowledge.
- Want professional decision making and diversification for your investments.
- Are looking for a balance between risk and return to grow your long-term savings.
- Prefer a hands-off approach to investing while still participating in the financial markets.
Find out if an investment fund is right for you
Complete a FREE Money Check-Up. Create an account, spend 10-15 minutes inputting your financial information, and you’ll receive a report recommending your best financial strategies and how to progress them.
And you can do it in the knowledge it’s safe and compliant as your accountant or financial adviser partners with moneyGPS to offer this service.
accountantsGPS and moneyGPS are owned by Fiduciary Financial Services (AFSL: 247344) ABN: 76 003 624 888
*ASX
