Managed Funds

A managed funds is an investment that will allow you to put your money into an assortment of securities that tend to cover one specific industry. Like with any other type of investment strategy, it is important to look before you leap into the world of managed fund investments.

Setting Personal Goals

The first thing to consider before applying for a managed fund is your personal goal. Are you looking for quick gains or a long=term investment strategy? The performance of managed fund investments are not guaranteed. Something can always go astray with your managed fund investment and if you are not in the game for the long haul, you risk not having enough time for your investment to recover from the blow.

Do you consider yourself a conservative investor, or a risk taker? If you are not comfortable with risks, managed funds may not be in your favor. The returns of a managed fund are directly correlated to the stock market and if you opt into an aggressive fund, you heart may drop along with stock values.

Managed Fund Selection

Once you analyze your investment personality and decide to invest in a managed fund, you need to consider specific managed funds in which to invest. You must take the time to review the prospectus that accompany each managed fund. A prospectus is the literature that accompanies the managed fund and includes the product disclosure for each fund. You need to consider the history of the investment (although that is not a reflection of future performance), the fees associated with it and the industry sector your managed fund will be focusing on.

Investors who have relied on the security of a guaranteed money market mutual fund may be disappointed to learn that their investments are no longer government-backed. On Friday, September 18, 2009, the Obama Administration put an end to a program that was to guarantee as much as $3 trillion in money market mutual funds. The program ended on schedule.

At the height of the financial crisis in September 2008, a large money market mutual fund "broke the buck," which means the value of its shares dropped below $1 for each investor dollar that was put in. Then investors saw major losses when the Primary Reserve Fund said that $785 billion that it invested in Lehman Brothers (which went bankrupt in the summer of 2008) became worthless.

Money market mutual funds are popular financial management tools on Wall Street because they are viewed as safe (funds typically invest in secure debts like short-term commercial bonds and Treasury Bills) and easily accessible with better returns than traditional savings accounts. They are different from money market accounts, which are more like high-yield savings accounts and are found in banks and credit unions.

While $3.5 trillion is normally held in money market mutual funds, with the news that the guarantee program would be ending, that figure dropped by $62 billion a few weeks ago. Now that funds have lost their "insurance policy" per se, investors are expected to begin moving their money to the "sidelines" or to even safer options like CDs, which are still FDIC insured for up to $250,000 until the end of the year.

Do you currently have any money market mutual funds? If so, how has the loss of the guarantee affected your decision to stick with them?

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