Concerns about Managed Schemes

  1. As Good As - The scheme is only as good as the underlying investment, so if the scheme invests in an asset that falls in price, it means the price of the units will go down.

  2. Diversification - Diversification may mean your profits are diluted.  The downside of diversifying across a number of companies is that your profits can be diluted.  If one particular company is doing well, then other companies that are not as successful may pull down your overall result.

  3. Control - You do lose control of your money.  Because a fund manager takes over full responsibility and control you do not have much say in the investments.  If the fund manager makes a bad decision you will suffer the consequences.  The other disadvantage is that the company may move a team working with one fund manager to a totally different fund manager. These changes can impact on the performance of the fund manager and the fund.

  4. Cost - It can be costly.  Some funds have high fees, which eat into your investment.  This can affect the long-term return you get from the fund and it should be watched.

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