Robo Investing - too good to be true?

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  • elephantrosie
    elephantrosie Posts: 467 Forumite
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    i find robo investing suitable for inexperienced investor like myself.

    i have always heard of how important it is to diversify, but only truly learnt the meaning when i recently drip feed money into ratesetter pot. i have now stop the drip feeding because of the low rate provided by ratesetter, but you get my point.
    Another night of thankfulness.
  • adindas
    adindas Posts: 6,813 Forumite
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    ricky_v wrote: »
    I signed up for the £500 cashback and set up the profile as low risk, invest for 1 year. The portfolio came out with 70% as cash and government bonds, the other 30% as corporate bonds and inflation linked bonds. A risk definitely but a risk worth the cashback IMO when you just set it up as cash and bonds, no equities.

    "Where is the catch ??"

    There was only 500 sign ups avaliable, which went in 24 hours, plus you have to keep the investment in for a year to get the cashback.

    Does anyone know whether you could take out your money easily , close the account or at least leave it a minimum amount (say £1 ?) once one year has elapsed or it will need to be reinvested ??
  • adindas
    adindas Posts: 6,813 Forumite
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    edited 7 May 2017 at 3:34PM
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    elephantrosie wrote: »
    i find robo investing suitable for inexperienced investor like myself.

    i have always heard of how important it is to diversify, but only truly learnt the meaning when i recently drip feed money into ratesetter pot. i have now stop the drip feeding because of the low rate provided by ratesetter, but you get my point.

    I have not tried Robo fund still asking opinion or experience from other people.

    About ratesetter I share the same opinion with you. I was investing £1001 last year just to get £100 incentive and now my investment has turned to about £1140. I am about to close the account or leave it with £1.

    For sensible people, there is no point to invest in capital at risk product for the return of lower than 3% where you could still relatively easy to get 2%+ risk free.
  • eskbanker
    eskbanker Posts: 31,066 Forumite
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    elephantrosie wrote: »
    i have now stop the drip feeding because of the low rate provided by ratesetter, but you get my point.
    Your point being that you feel comfortable continuing to tout for paid referrals (via your signature) for a product that you're no longer happy to fund?

    Nice.
  • elephantrosie
    elephantrosie Posts: 467 Forumite
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    ricky_v wrote: »
    I signed up for the £500 cashback and set up the profile as low risk, invest for 1 year. The portfolio came out with 70% as cash and government bonds, the other 30% as corporate bonds and inflation linked bonds. A risk definitely but a risk worth the cashback IMO when you just set it up as cash and bonds, no equities.

    "Where is the catch ??"

    There was only 500 sign ups avaliable, which went in 24 hours, plus you have to keep the investment in for a year to get the cashback.

    i too have signed up for it. how do i know if i am one of the fortunate first 500?
    Another night of thankfulness.
  • ricky_v
    ricky_v Posts: 330 Forumite
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    elephantrosie wrote: »
    i too have signed up for it. how do i know if i am one of the fortunate first 500?

    If you've put the £5k in, the £500 will go into the fund after 3 months, which is repayable if you withdraw within the first year. By the time I signed up for it (about 9pm on the day the MSE email went out with the link) a page advised me that there was less than 100 left and if moneyfarm says it's gone then it's gone.

    You can either email moneyfarm asking them if the £500 will be credited in due course, or wait for 3 months (assuming you've put the £5k in 1 lump sum).
  • elephantrosie
    elephantrosie Posts: 467 Forumite
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    thanks guys. i joined wealthify for the cashback, but did not know moneyfarm is doing it too. anyway i must have missed the boat! i dont intend to invest such large amount of money in moneyfarm at present anyways. i have already set up an account with moneyfarm previously and going to be drip feeding it monthly. they do cashback via TCB too!
    Another night of thankfulness.
  • adindas
    adindas Posts: 6,813 Forumite
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    edited 8 May 2017 at 4:45PM
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    adindas wrote: »
    Their contact information is available here
    https://www.moneyfarm.com/uk/contacts/

    I have emailed them.
    .

    The investment is geographically spread across the world and mainly in Bonds.
    https://www.moneyfarm.com/uk/investment-strategy/

    Got Reply from them. The incentive has all gone to the first 500 people who signed it uo on day one.

    I should have done it earlier but I just got this info a few days ago ..
  • Brand
    Brand Posts: 79 Forumite
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    dunstonh wrote: »
    . . .
    They are only two of a number we use. VLS was around before L&G in terms of their option. So, some of that is historical. There are a number of managed funds we use as well and some of those have blasted both L&G and VLS out of the water. Although some managed funds do end up disappointing.

    Structurally, I prefer the L&G over the VLS because it has a wider spread and allows for economic data and long term assumptions and will adjust the holdings on a more fluid basis.

    Remember investing is about opinion. There are some things you can do wrong (and actually still end up getting lucky for a period) . . .
    Thanks for your interesting post DunstonH

    Where I fear robo-funds may end in tears in the next year or so, is because, as I've said, that today stockmarket reminds me of the complacency of the late 1990s. The logic behind share index ETFs is that it allows a "stupid" fund to make gains instead of employing a "thinking" fund manager, and and ETF makes gains only by expensive shares getting even more expensive. This can last for a while, but eventually there will be a fall, who knows, 10%, 20% or more.
    Robo funds use index ETFs and investors in Robo-funds, when they chose a risk profile, are in effect saying to the robo-fund managers, whatever happens, keep me in shares to a particular percentage, e.g. 0%, 10%, 25%, 33%, 50%.

    The problem of judging what to do in an "expensive" phase of the market passes to the robofund managers. Do they dare adjust those percentages downwards and miss out on extra stockmarket gains. . . or do they dare not to!?
    A multi-asset fund such as l&G and VLS is I guess would feel less tied to those percentages and make a less constrained judgment, and also, if they are good managers, may respond more quickly, do you think?
    Although ETFs have done well over the last few years, after the good run, and the various economic headwinds, I wonder if in 2017-18 the stockpicking value fund managers will beat the index ETFs and hence the robo-funds will disappoint.

    Anyway, my view is that it is a time for taking money out of the stockmarket rather than putting it in, and so for those using robo-funds choosing a risk level halfway or higher, I think it is wiser in the next few months to invest monthly rather than large lump sum.
  • moneyfoolish
    moneyfoolish Posts: 681 Forumite
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    jamesd wrote: »
    It is too good to be true. Their portfolio 4 example would long term be expected to grow at about 3% plus inflation because it's only about half invested in equities.

    One with a higher equity mixture could easily have done more than twenty percent in the last year, helped by the devaluation of the pound. But that's only one year and an unusual one.
    You might consider waiting until the Ablrate P2P ISA is open, hoped to be by the end of May or soon after but not certain yet. Ablrate are one of the P2P firms I normally recommend. They genuinely offer deals typically paying about 12% before bad debt and compounding, about ten percent after allowing for bad debt.

    Bond Mason anticipates paying about 7-7.5% with their new charges so you can beat them if you're willing to do more loan picking work. They are a potentially good choice for pension money for those who want a hands-off option and for hands-off in general but don't have an ISA option.

    So far as mortgage overpaying goes, why, when you can probably make two or three times as much as the mortgage interest cost at the moment? You could invest the money, take enough out to pay the mortgage interest on the amount invested and leave the rest invested to carry on growing.

    The interesting P2P deals might well not last long term but that's OK, you can switch to something else when they become less attractive. A really interesting time to switch would be into equities after a big equity drop of say 40%. A good chance to switch in at relatively low prices, unlike the current above average ones in most places.
    Will you be able to get a decent rate with one of these P2P ISAs if you merely want to put money into a 1 or 3 year deal and forget about it?
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