80 percent of actively managed funds perform significantly better than the average mutual fund. These types of funds are not new to investors, however, and they have been steadily growing in popularity over the past decade. There are many reasons for the rising popularity of these types of funds. For the most part, however, the popularity is based on the following factors.
Diversification. Many actively managed funds focus on a wide variety of different investments, ranging from stocks, bonds, options, and other assets. A lot of mutual fund companies use the same type of investment, and their mutual funds share similarities. The more assets in your fund has, the more diversified it becomes. In addition, there are more investments you can make in your fund, meaning you are investing more in each one.
Tax-efficiency. Some mutual fund companies include fees and commissions as part of the overall cost of the fund. While this may be a good deal for the fund company, you may have to pay more in taxes than you would if you were to invest your money on your own. Actively managed funds are often tax-efficient as well, which allows you to pay less in taxes.
Easy access. Most of these fund companies provide you with an online investor portal. You simply visit the portal and fill out the necessary information and then click on the “buy” button. This process makes it easy for anyone to invest in the funds that they prefer.
Diversification. The larger your fund, the more investment opportunities you have. As you add more investments, you become diversified in all areas of your portfolio and you can even invest in different industries.
Low maintenance. Many fund companies offer low management fees and very little paperwork to track. There is less risk involved, meaning that your fund manager does not have to worry about stock price fluctuations or the market. The funds’ overall performance remains consistent.
High return. Active managed funds offer a high return on your investment, due to the diversification of the funds and the lower investment expenses. They also allow you to invest in more investments and increase your overall investment portfolio at one time.
As you can see, there are many reasons why actively managed funds are increasing in popularity. You should consider the following factors before making your final decision when choosing the fund you want to invest in.
Fees and Expenses. While there are a few fund companies that charge a fee for each investment, the majority charge a set commission based on the investment you make. The fee and expense vary depending on the company. There are some that charge an annual fee and others that charge a monthly fee. Some companies are also free of any fee, while others require you to pay a small annual fee.
Security and safety. Investing in an actively managed fund, means that you will be assured of your investment’s safety and security. If you choose a company with the best security, you will have peace of mind that your investment will stay secure and won’t be subject to market changes.
Higher returns. When you invest in an actively managed fund you’ll have access to a large and diversified range of investments. Which means you will receive a higher return on your investment.
Less maintenance. There are also less fees involved with managing the portfolio. There’s no need to monitor the stocks or the performance of the stocks to ensure that the investments are working for you. Instead, the money stays invested in place and grows without you having to worry about any of the aspects of managing your portfolio.
Finally, the benefits of investing in an actively managed fund will also allow you to invest in more investments without paying an annual fee. You can invest in other investments as well.