A managed account is a portfolio of stocks or bonds chosen and managed by a professional investment manager who makes the buy and sell decisions.
Each managed account has an investment objective, and each manager oversees multiple individual accounts invested in the same basic portfolio to meet the same objective.
While managed accounts resemble mutual funds in some ways, with a managed account you own individual securities rather than shares of a common fund.
You may also be able to request that the manager avoid certain investments, which you can't do with a mutual fund. And, through your broker you might ask the manager to sell certain holdings in your account to realize capital gains or losses.
There are no phantom gains in managed accounts. Those gains can occur if a mutual fund realizes a profit from selling an investment and credits you with a capital gain even if there's no actual increase in your account value.
However, the minimum investment is usually substantially higher for a managed account - often $100,000. Plus, the annual fees, which are included in the amount you pay the financial professional who recommends the account, may be higher than the fees on a mutual fund of similar value.
A management fee is the percentage of your account value that an investment company or manager charges to handle your account.
Fees for passively managed index funds typically cost less than the fees for actively managed funds, though fees differ significantly from one fund company to another.