What is a Managed Fund?

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When you think of investing, what comes to mind? Depending on your age and experiences, it could be a rental property, your Sharesies account, or even visions of men on Wall Street. However, few people consider their KiwiSaver, and even fewer think of non-KiwiSaver Managed Funds – yet every woman should include one as part of her overall financial strategy.

For many women, the idea of investing can feel like it belongs to the realms of an elite few. Dry, vague terminology like ‘Managed Fund’ doesn’t help!

So, before I explain why they are an essential part of your financial strategy, let’s clarify – almost everyone reading this will already be investing in a Managed Fund through their KiwiSaver. A managed fund is simply an investment where your money is pooled with that of other investors and spread across a range of investments, which is precisely what we all do with KiwiSaver, often without realizing it.

So, now that you know what it is – why should you have one?

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Why Invest in a Managed Fund?

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Diversification

Managed funds provide diversification, which is the process of spreading your investment across a variety of assets. This can mitigate risk, as the performance of the fund doesn't rely on a single investment or even a single type of asset. Most Managed Funds will have exposure to four main asset classes; these are:

• Cash – which is essentially just cash in bank accounts, similar to your savings but spread across multiple organizations.
• Fixed Interest – this includes instruments such as bonds and term deposits, which provide a 'fixed' return but are still impacted by factors such as interest rate changes or inflation.
• Equities – another term for stocks or shares, equities refer to investing in businesses. This is what we often think of when we talk about investing and is where most of the volatility or 'risk' in investing comes in. It’s also where most of the growth happens. This part of your fund will be most affected by geopolitical events (think pandemics and wars), business cycles, government regulations, and the businesses or business owners themselves (think Tesla stock when Elon Musk starts being vocal).
• Property – This is the last major asset class you're likely to find in your fund and is where you can have exposure to the property market without directly investing in houses. It is still diversified both in the location of any properties included and also the type of property.

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Although you can achieve this same level of diversification with KiwiSaver, what you can’t get is…

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Accessibility

Managed Funds are not locked in like KiwiSaver; there are no penalties for withdrawing money when you need it, as there are with Term Deposits, and it’s certainly much quicker and easier than accessing the equity in your property (with some exceptions if your mortgage has been structured for ease of access). Most of the Managed Funds we recommend allow you to withdraw part or all of your money within 10-15 working days, and some are as quick as 3-5 days. For many women who have multiple accounts, squirreling money away for that possible rainy day when they need to access cash quickly, this can be a fantastic option. It provides one level of distance between you and your money, making you less likely to dip into it without need, but with the knowledge that if you do need it, you can access it quickly and easily.

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Affordability

Managed funds often have lower entry points compared to other investment options, making them accessible even for those starting with smaller amounts. This is crucial for women who are looking to start investing, as it allows for the potential growth of wealth over time, regardless of the initial investment size. Many people believe that they should pay down their mortgage before starting to invest. However, knowing that you can start with, say, $1,000 and contribute as much or as little as you want, either regularly or sporadically, makes it a much more reasonable prospect to start small while still channelling surplus funds towards your mortgage. It also means for women who don’t have enough to get on the property ladder (thanks to the pay gap, career gap, financial education gap…), they can still begin building some wealth for the future and take steps toward financial freedom down the track.

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Values and Financial Goals

Managed funds can be aligned with various financial objectives, whether it's saving for retirement, a child's education, or building an emergency fund. For women, this flexibility means they can tailor their investments to meet their specific life stages and goals. Managed Funds also give women the opportunity to invest in a way that aligns with their values. More and more providers are incorporating an 'ethical' approach to building Managed Funds or are offering specific SRI (Socially Responsible Investment) or ESG (Environmental, Social, Governance) fund options. For many women, there is a tension between using their money for good and to help others, or to try and get ahead themselves and be financially savvy. The current explosion of options in the investment space allows more women to find a balance between those two motivations.

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Low Maintenance

Lastly, we know that women are increasingly time-poor, overwhelmed, and trying to juggle obligations across personal and professional settings. With managed funds, professional fund managers oversee the portfolio, making informed decisions to maximize returns and minimize risks. This means women don’t need to have the time or expertise to manage individual investments and can instead take a hands-off approach by leveraging the expertise of these professionals to ensure their money is working effectively for them. Having an adviser who facilitates it also means you have someone to reach out to with questions, for updates, or for assistance when making withdrawals.

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Conclusion

In conclusion, managed funds offer a strategic, flexible, and accessible way for women to engage with the financial market, build wealth, and secure their financial future. They can work alongside your mortgage repayments, your investment properties, your emergency fund, and your Sharesies account. A Managed Fund can help you work towards any goal because the contribution, the timeframe, and the risk involved are all completely customized to your situation.

If you know this is a gap in your plan and you are keen to fix that but still unsure how to take the next steps; do book in with me or come along to my Investing for Women workshop on the 2nd of July.

Elizabeth.

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My Role as Your Adviser

I see my role as a Financial Adviser not just to advise on individual aspects of your finances, and certainly not to simply transact on your behalf. My role is as a guide, to help chart the course, provide scaffolding and support as you progress and redirect you if you’re getting lost in the weeds. Most of our regrets, I have found, come from not having started sooner. So, let’s start today.

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‍About Elizabeth

Hi, I'm Elizabeth, one of the Financial Advisers here at Velocity Financial. Day-to-day, this involves engaging in conversations with clients about their lives, families, aspirations, and, of course, financial goals. In a big picture sense, though, I'm driven by my perpetual desire to improve outcomes for individuals and, eventually, communities. At Velocity we aim to bolster the financial literacy of Kiwis, helping to alleviate financial anxieties, and opening up the possibilities of what can be achieved. We empower our clients to formulate a plan for the future. I'm particularly passionate about assisting women in reaching their financial goals and feeling confident in managing their money. To aid in this, I write a monthly blog on topics that affect women and maintain an Instagram page @what_would_she_do.vf. This platform provides financial content for those who might not be prepared to consult with an adviser yet but still require and deserve sound advice. In my past life, I was a nurse, so helping people is essentially my modus operandi (I'm also quite resilient and not easily grossed out!). During my spare time, I'm likely attempting to keep up with my energetic kids. If I do manage to find some time for myself, you'll find me curled up with a coffee and a book.

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Book in a meeting with Elizabeth here

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What Would She Do?

Elizabeth is the author of the monthly blog What Would She Do? A column for women, by women.

Follow What Would She Do on Instagram

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Disclaimer: Elizabeth Moloney-Geany (FSP693611) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Elizabeth’s disclosure statement on our website.

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Always get professional advice

The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation.  As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures  https://www.velocityfinancial.co.nz/disclosure-statement.