How to Invest in Managed Funds in Australia

Managed funds in brief🔗

You put money in, a fund manager invests it (in shares, bonds, property or a mix), and you receive units representing your share of the pool. The key difference from an ETF: you transact directly with the fund provider, not on a stock exchange, so there is no broker, no live price and no brokerage. Managed funds can be actively managed (a team picking investments) or index-tracking (following a market index automatically).

Managed funds vs ETFs🔗

The right choice often comes down to how you want to invest, not what you are investing in.

For a deeper comparison, see our ETF vs managed fund guide.

Active vs index managed funds🔗

The biggest distinction is active versus index. Active funds employ analysts trying to beat the market, which costs money (fees typically 0.50% to 1.50% a year). Index funds simply track a market index with a rules-based approach, so fees are typically 0.10% to 0.30%. The honest truth is that the evidence is not kind to active management: the SPIVA Australia scorecards show most active Australian equity funds underperform their benchmark over 5, 10 and 15 years.

That does not make every active fund a poor choice, but it puts the burden of proof on the higher fee.

Step 1: Decide what you want🔗

Before opening any account, get clear on your goal. An index managed fund fits if you want broad market exposure at low cost over the long term. A specific active fund might appeal if you have a strong view and have done the homework on its track record and fees. A diversified multi-asset option (like a balanced or growth fund) does the asset allocation for you in one fund. Your time horizon, comfort with volatility and how involved you want to be will narrow it quickly.

Step 2: Pick how to buy🔗

There are three ways to access managed funds in Australia.

• Directly from a provider (Vanguard Personal Investor, Betashares Direct). Usually the cheapest, simplest route for self-directed investors.
• Via a platform or wrap account that aggregates funds from many providers. More choice, but often a platform fee on top of the fund's own fee.
• Via a financial adviser, who can access a wider range and tailor a portfolio. The most expensive route, but useful for complex situations.

For most people starting out, going directly to a provider is the easiest and most cost-effective path.

Step 3: Open an account and meet the minimum🔗

Opening an account is fully online and takes around 10 to 15 minutes. You will need photo ID, your Tax File Number and your bank details. Minimums vary: most unlisted funds need $500 to $5,000 to open, though some allow lower regular-plan contributions. Check the product disclosure statement for the fund you are considering. If you do not yet meet the minimum, consider starting with an ETF while you save up.

Step 4: Apply and fund your investment🔗

You submit an application for the fund and the amount. A few things to know: you will not know the exact unit price upfront, because managed funds are priced once a day after the market closes, so you are committing to invest at that end-of-day price. Funding is via BPAY or bank transfer using the reference provided, and units are typically allocated one to two business days after your money clears. Read the PDS first, paying attention to the fees and the buy/sell spread.

Step 5: Set up a regular plan and reinvest distributions🔗

This is where managed funds shine. Most providers let you set up an automatic regular investment plan that debits a fixed amount monthly or quarterly and invests it, no manual transfers or brokerage. It is dollar-cost averaging on autopilot. Reinvesting distributions rather than taking the cash buys more units, which generate future distributions, compounding over time. For building the habit, see how to start investing.

Fees to watch🔗

• Management fee (MER): the annual cost, deducted from the fund's assets. Index funds ~0.10% to 0.30%; active funds ~0.50% to 1.50%.
• Performance fees: some active funds charge extra if they beat their benchmark. Check the PDS.
• Buy/sell spread: the gap between the buy and sell unit price, covering the fund's trading costs. Often small (0.05% to 0.20%).
• Platform fees: if you invest via a wrap or third-party platform, expect an extra 0.10% to 0.50% a year.

Tax on managed funds🔗

Managed funds distribute income through the year, which can include dividends, interest, rent and realised capital gains. Distributions are taxable income in the year you receive them, even if you reinvest. Most funds are Attribution Managed Investment Trusts, so you receive an AMIT statement each year breaking down the components for your tax return. Selling your units at a profit triggers capital gains tax, with a 50% discount if you held for more than 12 months. Keep records of every purchase (date, units, price) from day one.

❓ Frequently asked questions🔗

Keep reading🔗

• ETF vs managed fund: which is better?
• What is a managed fund?
• The best ETFs in Australia
• How to start investing in Australia