Ten investing truths

Employ experts

It's difficult to do well by yourself

The world is increasingly complex and specialised.

Ten years ago, many of us could comfortably service our own car. But today's high-tech engines require specialised computer tools, not a wrench and a screwdriver, so you take your car to the specialists.

It's the same with investing. Even the smartest investors use managed funds. Why? Because, with their extra research resources, investment training and experience, fund managers tend to do it better.

The methodical, systematised approach taken by most fund managers helps them avoid many of the mistakes individual investors are prone to.

Take a lesson from the discipline of 'behavioural finance'

Since the 1980s, investment experts have paid increasing attention to a scientific field called behavioural finance.

According to academics like Nicholas Barberis and Richard Thaler of the University of Chicago, many investors don't behave rationally when they invest and that can prove expensive!

How rational are your financial behaviours? Test yourself!

Steadying the ship

Fund managers often outperform individuals because their investment approach is more structured and they are trained to avoid poor investment behaviours.

They're also in a better position to gather and process the information that reveals hidden investment value.

Three reasons why..

Of course managed funds have other advantages.

  • Safety in numbers
    Managed funds make it easier to diversify your investment and reduce risk. You pool your money with that of other investors so you have the capital to invest in a wider range of assets.
  • Better investment management
    Economies of scale means managed funds have the technology, people and research capacity to invest more successfully than most individual investors.
    For example, researching and understanding the companies they choose to invest in.
  • More convenient investing
    Managed funds also offer you services, choices and investment information that make investing easier.
    For example, most modern managed funds can be accessed via the phone and the internet and offer a range of investment choices to suit different needs.

Regular statements and investment information also make it easier for you to monitor your portfolio and fill out your tax return.

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