How do I managed fund?

Solvent

Hi finance gurus!

I've started full time work this year, and being the prudent type I will soon have a bit of cash stashed in my savings account. I'm interested in putting some of this into a managed fund.

I'm an economics graduate, so my knowledge of finance extends to the efficient markets hypothesis and things of that nature, but I'm not really down with the mechanics of how investing and all that actually takes place. At this stage I'm willing to take a fair bit of risk, since I'm young and I plan to be investing long-term. I would be happy with a fairly hands-off fund, I don't presume to be able to luck out with a fund manager who is going to take my money and turn it into millions overnight by picking unknown and underpriced equities.


By the way, I'm in Australia, so specific advice tailored to that would be awesome.

I found this website InvestSmart which seems pretty good, and I've been hunting around trying to educate myself. Basically I'm looking to invest $1000 or so up front, and I'd be happy to make small fortnightly contributions to that as well. This seems to be around the minimum required for a great many "small investor" type funds.

Now some things I found out, but would like further advice on (if anyone would like to give it):

Growth vs Income: in the short term I don't mind going for capital growth, however I don't aim to have this investment just sitting there gaining value until I'm forty. I think in a year or two I would like to be getting some form of income from it. So I guess I'm looking for a fund with a combined growth and income aim?

Standard entry fee appears to be around about 4% for a lot of the funds I looked at. Is that about right?

Management expense ratio seemed to be around about 2% or a little lower for many of the funds I had a preliminary look at. So does that seem about right? If a fund has a higher MER, should I be looking for something extra it provides as a trade off?

Listed or unlisted: This is one I'm most curious about. I was able to find the difference between these (listed is, well, listed, and the units' pricing is set by supply and demand, unlisted can be sold as the fund manager sees fit), but I wasn't able to find any sort of for/against for me to think about which would better suit my interests.

Performance fee: What do I need to know about this? A fund manager takes his share of the booty when the fund performs well, yes. I understand that this makes fund managing incentive compatible. How much is too much?


And of course, how do I actually go about purchasing units? I've never used a broker before.

Any advice on the specifics listed above or even just general advice would be great. Thanks in advance everyone!

His Corkiness

Find out how much post-tax income you can contribute to your super. It may be more effective to keep everything in the one fund if possible.

Edit: Sorry, just saw that you want to access the profits. This doesn't really apply, then.

Serpent

Find out if you can get an ETF (Exchange Traded Fund). ETFs are 'basically' mutual funds that are traded on the stockmarket. This gives them a variety of advantages (and a few cons too) over a standard fund.

The biggest advantage is that most ETFs have MERs of around 0.1% to 0.5%.

In Canada, mutual funds usuually have MERs of 2% or more (like you quoted for Australia). This makes ETFs a much better investment.