Taking The Long View - What A Managed Fund Can Do For You

Markets can fluctuate from time to time. Investing in managed funds with a long term outlook is the key to achieving sustainable long term capital appreciation.

Long Term Capital Appreciation

Stock markets have been shown to outperform other asset classes over the long term. Investing earlier rather than later should ensure that your money has more time to work for you. Investing in a diversified managed fund means that you are not over-exposed to any one sector. As the outlook for an economy improves (or continues to be positive), so too does the likelihood of a diversified managed fund performing well. Whilst timing your investment can affect your overall returns, a long term view makes timing less important.

Smoothing Out Volatile Periods

Markets can be volatile beasts. The recent global financial crisis is a great example. Some markets dropped over 50 percent from their peaks. Many have subsequently recovered over 50 percent from their lows. Many experts have difficulty timing when to enter investments. While being able to pick a low to enter an investment is a wonderful skill, the truth is this is difficult. Stock markets do recover from their lows, and continue on to reach new highs as economies improve, meaning that investors can benefit from this upside, even without investing close to a low point. Even if one had invested at the absolute peak just before the huge 1987 stock market crash, that investment would be worth many times the initial investment today.

Compounding Returns By Re-investing Distributions

Companies often pay dividends to investors (after all, you are lending them your money!). Likewise, managed funds may distribute such dividends from the underlying companies in your managed fund to you (like an interest payment). By re-investing these distributions back into your managed fund, you will end up with additional units which in turn participate in the future performance of your managed fund. Do this over the long term, and you will end up with substantially more units than you started with.

Enforced Savings Plan

An investor is less likely to withdraw from a managed fund than from a bank account, or even a term deposit. Having your funds tied to market leading companies, through a managed fund means that as these companies prosper, so should you. Set up an automated system where you contribute regular amounts to existing managed fund investments (for example, on a monthly basis), and you will do even better.

Beating Inflation

Prices go up over time, sometimes substantially, such as with petrol prices over recent years. While managed fund performance can fluctuate from year to year, a decent managed fund’s long term trend is upwards, ensuring that over such a period, your invested capital increases. As a managed fund investor, you are a part owner in many companies. As they raise prices for their products, you, as a shareholder, benefit. This ensures that you don’t lose, and actually most likely gain purchasing power over the long term.

Share Trading involves both risks and rewards. A long term approach, as outlined above is the lower risk option for steadier returns.

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Top 6 Most Indebted Countries (And Why)

This is a nice read that I got from the net.

You’ll be surprised at the countries that are most indebted right now.

The recent financial crisis and recession have been a worldwide occurrence. The events in the United States since 2008 have garnered most of the headlines because the U. S. has the world’s largest economy and national debt, but the reality is that many countries in Europe are in worse financial shape and continue to deteriorate.

1. Ireland - Debt/GDP: 997%

The days of Ireland enjoying one of the fastest growing economies in Europe are over, at least for now. The story is all too familiar, as easy credit fueled a housing bubble that burst and damaged consumer confidence.

After recording budget surpluses in the prior two years, the economy reversed course in 2009 and contracted 7%. This eroded tax revenues and sent the annual deficit to a record 14.3% of GDP. The European Union set a target for Ireland to reduce that figure to 3% by 2014, but the International Monetary Fund has indicated that the deadline will be missed. Moody’s has subsequently lowered its bond rating.

2. Netherlands - Debt/GDP: 467%

The national debt in the Netherlands has reached record levels as a result of the world financial crisis and recession. Much of the added burden was caused by significant government support for the country’s banking sector. The increase in debt per capita is second only to that experienced in Ireland.

The Netherlands joined the eurozone with a hard guilder a decade ago, but its current debt would likely disqualify it for membership.

Read more here

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