As you know, I am a big fan of easy, cheap index-tracking funds for long-term investing in shares. Studies have shown that they outperform managed funds in a majority of cases and they tend to be cheaper.
I’ve got money in a few different ‘trackers’ including FTSE 100, FTSE All Share and the FTSE 250, all wrapped in ISAs.
However last tax year I decided to ring the changes and put my ISA money into a new online platform called Nutmeg.com.
What is Nutmeg?
Nutmeg.com is like having your own stockbroker but online and without the extortionate fees! You can put as much or as little in as you like and they put together a portfolio of investments for you depending on your attitude to risk and other factors. The portfolios will include stocks, bonds, property, ETFs and other types of assets.
It was co-established by former stockbroker Nick Hungerford after he became frustrated by what he saw as the exclusivity and lack of transparency in the investment world.
In fact once they had been operating for a year they published the performance of their funds (once fees had been taken out) for people who had put in more than £25,000. This is not something that fund managers tend to do so it was pretty brave of them.
How it works
First they ask you about yourself
The point here is so that they can ‘tailor’ your investments to your situation, your age, your appetite for risk and your goals.
The questions are quite clever really. Not only do they ask the usual questions about your age, other assets, time-span for your investments etc, but they also include some multiple choice questions that are designed to work out if you really know the risks you are taking when you put money into stocks and shares and other fairly sophisticated products. You might say that you want a high risk portfolio but if your answers to these questions show that you don’t realise that you could lose a lot of money if the investments tank, then that shows Nutmeg that you don’t really want that much risk.
Their fees are OK
The amount they charge each year to manage your fund depends on how much you put in.
It ranges from 0.3% – for those who put in £500,000 or more – to 1% for those who put in £1,000-24,999.
Of course, because a lot of it is automated they are able to keep costs much lower than brokers in the City with big, plush offices. But also it’s part of the new wave of investment managers who realise that the super-high fees and charges levied by many City institutions have put far too many people off. Transparency and reasonable fees are the name of the game.
You can put your ISA money in
They say on their website: “You can open a Stocks and Shares ISA with Nutmeg.com in under 10 minutes. Contribute up to £11,880 (£15,000 from July) and we will build you a fully diversified portfolio, tailored to your goals and appetite for risk, regularly rebalanced and constantly monitored by our expert investment team.
Where will I put this year’s ISA money?
Hmm, I might put more into Nutmeg when the limit goes up to £15,000. It’s an interesting concept and, being the lazy type, I like the idea of someone else putting together a portfolio for me, particularly if it doesn’t cost too much.
I’m still happy with index-trackers, particularly the FTSE 250 one, but I have been meaning to diversify more and this seems like a quick and effective way to do it.
If you’re wanting to do the same then why not give it a go this tax year?
Go to Nutmeg.com and answer the questions. It doesn’t take long and you can put in as much as you like. Worth a go!