The investment world is a risky place where even the experts lose money. Even so, with interest rates on cash pitifully low more and more people want to take a chance on investing to getting a better return from the markets.
But if you haven't got a clue what you are doing - where do you start? One idea is to dodge all the complexity of stock-picking or asset allocation by opting for a ready-made portfolio, built by experts.
"This approach is ideal for those who do not want to monitor their portfolio constantly or make complex decisions," says Ali Hussain in The Times.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
With a ready-made portfolio you pick an 'off-the-peg' range of investments, based upon your appetite for risk. The investment company monitors the portfolio of stocks, bonds and funds on behalf of all the clients and readjusts it as necessary.
“If you want your decision-making to be as simple as possible then have a look at some of the newer online services such as Nutmeg, which offers ready-made baskets of investments,” says Holly Mackay in The Times.
"This is an investment 'ready meal' where you get someone to decide which countries you should invest in, what investments you should invest in and which shares you should hold."
Not only does this take away the hassle of monitoring and worrying about your individual investments, it can also work out cheaper.
That's because firms such as Nutmeg or Vanguard that offer these ready-made portfolios tend to invest in passive funds that simply track a stock market index, such as the FTSE 100. These are much cheaper than actively managed funds who have to pay a fund manager’s bumper salary, and rarely outperform the stock market.
As an investor, you are also getting an expert-managed package of investments without having to pay for the full formal financial advice treatment.
If you decide you want to give a ready-made portfolio a try then you need to choose your provider wisely. The first thing most people look at is the cost of investment, but you should also factor in the level of assistance you'll receive – especially important if you are a first-time investor – and how secure is the firm, as this is online investing so cyber security is important.
Here are two firms to consider:
You can invest your pension or ISA with Nutmeg, or just open a standard account. You choose a portfolio depending on how much risk you want to take and it will be selected and automatically rebalanced for you. The annual fee is 0.35% if you hold more than £100,000 with the company.
You can choose from five funds. "The least risky has 20 per cent in shares and 80 per cent in bonds, while the most risky has 100 per cent in shares,” says Laura Suter in The Telegraph. The annual charge is 0.22 per cent.
The fee has been repeatedly cut as more money comes into the fund. Management at Vanguard say costs will continue to be cut if the fund attracts more money and therefore benefits from economies of scale.
Continue reading for free
We hope you're enjoying The Week's refreshingly open-minded journalism.
Subscribed to The Week? Register your account with the same email as your subscription.