Book Review > Managed Funds for Dummies, Australian edition

The For Dummies series of books has an enviable reputation. Since 1991 they have helped millions make the subject of their choice both more interesting and easier to understand. The assumption that they are written for individuals of limited intelligence could not be further from the truth. They are meant to be easy-to-understand introductions to subjects that the reader has little knowledge of, and in this endeavour they succeed admirably.

Managed Funds for Dummies, written by Colin Davidson, is an excellent example of the above principle. Colin has worked in financial services for more than 20 years, both in Australia and overseas. He has managed a major bank’s online stockbroking business and Australia’s largest direct managed funds broker. Currently he works for one of Australia’s largest full-service retail stockbrokers.

Managed funds – also known as unit trusts – are vehicles that allow an investor to pool their money with others into a single fund that can invest in assets that might be out of an individual’s reach. Managed funds, as the name suggests, are funds that are taken care of by others – generally professionals known as fund managers. They invest in a variety of assets, including shares, property and fixed interest, or a combination of these. Two advantages of using managed funds as an investment vehicle are that they are managed by professionals and that the investment is diversified, which reduces exposure to risk.

Davidson has divided the book into six parts, named as follows:

Part I:  Coming to grips with the basic of managed funds
PartII:  Doing the research for your peace of mind
PartIII:  Choosing, buying and selling managed funds
PartIV: Determining how funds are labeled
PartV: Following some sensible ideas for happier returns
PartVI: The part of tens

Each part is divided into a number of chapters, which then flesh out the central theme. For example, Part II has four chapters and they cover assessing one’s appetite for risk, setting one’s financial goals, understanding research and making sense of performance measures. The author makes minimal use of jargon, and all topics are dealt with in an easily understandable way. The book is arranged in such a way that the interested reader can read it from cover to cover or, if he so desires, dip into a particular subject that he wishes to brush up on or learn about. Some topics are relevant to more than one part of the text, and they are cross-referenced appropriately.

I found this book a joy to read. It will certainly be of great benefit to investors contemplating a foray into the world of managed funds but, equally, it will reward reading by those who have already dipped their toes in the water. Its coverage is comprehensive, and reading it will reward investors at all levels. My only regret is that there is not a short bibliography of other publications/websites etc. that refer the enthusiast to publications of a more specialised or focused nature. This would be a useful enhancement to the next edition.