Wednesday, 10 September 2014

Investing In Actively Managed Funds

I've been reading a couple of Finance blogs mostly by Singaporeans, and I noticed that one of them (name shall not be mentioned) has chosen to invest with OCBC Blue Chip Investment Plan (BCIP)

I did also talk about OCBC BCIP on a previous blogpost, http://teenageinvesting.blogspot.sg/2014/08/the-beginning-of-your-investment.html

Feel free to check it out!

Anyway, the point of this blog post today is to talk about Actively Managed Mutual Funds.

Now, what are they? Simply put they are funds that are managed by a Fund Manager or a team of Managers. You invest your money into this fund, and pay the manager a fee to invest on your behalf using the combined funds of multiple investors like yourself.

This works out fine if you're not into passive investing, and do not want to adopt a DIY style.

The thing is, not all mutual funds may be beneficial to you. Some fund managers simply hug the index and then charge you exorbitant funds that eat into your otherwise decent profits.

Here, I will talk about various tips in choosing the best fund that you want to invest in.

1. Search for funds with relatively low cost / operating expenses.

Reason: If you are paying high operating expenses each month, and these are eating into your profits you're effectively throwing your money down into the drain. It's just not worth it.


2. Research into your fund and the manager's performance before making a decision. Never invest on a moment's impulsiveness.

Reason: Like I said, there is no point in paying a fund manager to follow the index and then charge you high prices for something you could have done yourself.

3. Does the fund have diversification?

Reason: If the fund invests in mostly stocks and high risk at that, one crash in the market may effectively wipe out your investments and others as well.

Of course, I still adopt the DIY strategy because I have the time. But when I don't in the future I may consider moving on to Actively Managed Funds. Some Investing is still better than none. And for those that took the first step, hurrah for you! You had the courage, now persevere!

Signing off,
Teenage Investor

4 comments:

  1. First time visiting your blog! I think Phillips Security also have similar product called "Shares Builder Plan"... taking advantage of the dollar cost averaging for stock investment is kind of good idea.

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    1. Hi Richard!
      Yes I'm aware of the Philips Security Share Builder Plan!
      But it's not ideal for those with small amounts to invest monthly! Students and teens as well as young adults fall into this range :)
      The fees will only be ideal if we invest at least a few thousands each month.

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  2. Investing always seems a great trouble. But i will ask myself the three points you stated before investing in any plans in future. Good Read Thanks
    __________________________________________________________
    www.placematch.sg

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    1. Hi there! I agree that investing can be a great trouble. However it doesn't have to be with index investing where by it's mostly DIY :) Hope everything works out fine for you :)

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