Managed Fund is a fund where individuals` investments are pooled, and managed by a professional Fund Manager. Investments include asset classes such as domestic and international shares, property, fixed interest securities and cash. The buying and selling of shares are in the hands of the experts, the Fund Managers. Your Advisor at Investlink Group can tailor an appropriate plan based on your investment profile.
A passive managment style tries to match its performace to a benchmark and is also known as index management. A passive management style seeks to provide returns equivalent to the relevant performance benchmark, with very low probability that returns will underperform the benchmark return. Usually a passive investment style has low-cost and low-risk alternative to active managmenet style. Passive portfolio management is a conservative style that consistently delivers benchmark returns. It does not provide the opportunity to achieve significant outperformace of benchmark returns but it also does not leave the portfolio exposed to the potential for significant underperformance.
An active management style objective is to add value for the investor or the fund. There are many styles of active management with considerable overlap and the skill of the manager is an important factor. Active managers rely on analytical reserach, forecasts and thier own judgment and experience is making decisions on what securities to buy, sell and hold. Hence, it can be argued that the highers fees for active managment are well spent as the investing style could be reqarded by potential higher returns. Some of the examples of active investing style includes the following listed hereunder:
GARP - Growth as a reasonable price
Business Cycle top-down analysis
Shares prices are determined by the ability of a company to generate earnings. The greater the earnings potential of a company, the higher the shares prices tend to go higher. If you look at shares prices at a short term basis, the prices of share prices rise and fall for no apparent reason. It comes down from a demand/supply point of view; prices go up if there are more buyers than sellers and prices of shares go down if there are more sellers than buyers. Market sentiments play a large part in daily fluctuations of the share price. Usually if investors believe the company is performing poorly (even if it is not) the share price can go down. Sometimes share prices reacts to specific news about the specific industry sector - Events such as the political news, government policies, new discoveries and inventions, wars, oil prices can all contribute to move a share price either way.
Most importantly Investlink Group views that share prices rise and fall with a companies ability to generate profits and usually a long term investment. Share prices are not a one way street and is and will always be subject to volitality. Generally, economies recover from recession as do companies and thier earnings. As earnings recover, so do dividend payments and share prices.
Dividend imputation recognises that a company has already paid tax on all or part of its profit before distributing dividends. To avoid double taxation on dividends in the shareholders hands, a franking credit is calculated, this is based on the amount of Australian company tax that has already been paid on the dividend by the company. Fully franked dividends are those on which full company tax has been paid.
Shareholders are required to include both the actual dividend and franking credits in their assesable income. After the tax liability has been calculated, the franking credits are used to offset the income tax payable.
Let us assume that we buy $100,000 worth of investments and the investments are full franked dividends at 5.00%.
Franked dividends = $100,000 * 5.00% = $5,000
Franking credit = $5,000 * 30/70 = $2,142 (Total yield = $7,142 / $100,000 = 7.14%)
Taxable Income = $5,000 + $2,142 = $7,1,42
Note: If the tax payable is less than $2,142 , a refund of the surplus credit is paid to the taxpayer.
A Dollar Cost Avergaing strategy is a popular way of addressing timing concerns. This strategy invests a fixed dollar amount periodically. By making purchases during a falling and rising market, this strategy lowers the total average portfolio cost.
The Table below demonstrates how dollar cost averaging works with a $1,000 per month invested into a volatile asset.
|Average Price Per unit||1.23976|
An investor who waits to save $10,000 to invest buys ($10,000 times $1.30 price) = $7,692.3077 units.
However with dollar cost averaging approach the investor buys an extra 373.7975 units. Given the unit price of $1.30 per unit, the investor is $485 better off.