Managed Fund
An investment fund run by a professional fund manager who decides what to buy/sell. You invest money and the manager does the rest. Higher fees than index funds but potentially higher returns.
A managed fund pools money from many investors and is run by a professional fund manager who actively decides what assets to buy and sell. Your money is invested alongside others, and returns are shared proportionally.
In NZ, managed funds are offered by banks (ANZ, ASB, BNZ), investment firms (Fisher Funds, Milford, Harbour), and KiwiSaver providers. Fees are typically 1-2% per year.
The debate between managed funds and index funds (passive investing) is ongoing. Some managed funds outperform the market; many don't. The higher fees mean a managed fund needs to consistently beat the market just to match an index fund's returns.
Why this matters
Understanding the difference between managed funds and index funds helps you make better investment decisions. If you're choosing a KiwiSaver provider, comparing fees between actively managed and passive/index options can make a significant difference to your balance over decades. Even a 1% difference in fees compounds dramatically over 30+ years.
Related Investing terms
ETF (Exchange-Traded Fund)
A type of investment fund that trades on the stock exchange. Holds a basket of shares, bonds, or other assets. Popular in NZ via platforms like Sharesies, InvestNow, and Hatch.
Index Fund
A type of fund that tracks a market index (like the NZX 50 or S&P 500) rather than trying to beat it. Lower fees than managed funds. Warren Buffett's recommended approach for most people.
Dividend
A payment made by a company to its shareholders, usually from profits. In NZ, dividends come with imputation credits that reduce your tax. Some investors build portfolios around dividend-paying stocks.
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