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  • FIRST POST
    • fiisch
    • By fiisch 3rd May 17, 9:03 PM
    • 85Posts
    • 18Thanks
    fiisch
    Robo Investing - too good to be true?
    • #1
    • 3rd May 17, 9:03 PM
    Robo Investing - too good to be true? 3rd May 17 at 9:03 PM
    I'm 30, a new dad, and hate my job/career. I'm a contractor and extremely well paid, to the point where a career change would represent a significant drop in salary.

    I've been investigating ways of putting my income to good use, after I've paid off a couple of smallish debts by the end of the year. I've opened a Moneyfarm account to see how it works with a modest sum, and am getting the investor buzz.

    However, it seems too good to be true. 20-28% returns depending on your risk profile, which by my calculations could replace my income after 10 or so years if I continue to deposit £250/month. Obviously there is the risk of a drop in the stock market, and ultimately I'd look to diversify with a P2P and second S&S ISA in my wife's name but.....

    What am I missing? Surely those returns aren't consistently possible, and if it's that easy why does anyone invest themselves?

    I may have got carried away after my first £1.24 in interest and drooling over the possibilities with the help of a compound interest calculator , but before I get carried away - what these robot investors are offering simply doesn't seem feasible, yet reviews I've read seem to support 20%+ returns...?!

    What are your thoughts on these new boys? Would I be better off placing my money in P2P (Bond Mason).

    Plan to save around £750/month in addition to overpaying mortgage and being otherwise debt free (except car payments, my one vice...!!)
Page 3
    • moneyfoolish
    • By moneyfoolish 15th May 17, 12:51 PM
    • 423 Posts
    • 252 Thanks
    moneyfoolish
    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.
    Originally posted by jamesd
    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?
    • DragonQ
    • By DragonQ 15th May 17, 1:38 PM
    • 1,981 Posts
    • 664 Thanks
    DragonQ
    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 ..
    Originally posted by adindas
    The T&Cs for the cashback offers are here. I got an email a few days ago confirming that I'm eligible for it and with a link to the T&Cs.

    The most interesting and confusing bit is this:

    7. Cashback will be paid into the customer’s Moneyfarm account in the ‘available cash’ section after a minimum of three months of the initial investment reaching Moneyfarm. Cashback will be paid after three months providing the investment has reached the minimum invested amount threshold of £5000 or £10,000.

    8. Once in the customer’s Moneyfarm account, customers are welcome to withdraw their cash but their portfolio value of £5,000 or £10,000 must stay invested for a minimum period of 12 months – in accordance to the promo code applied.

    9. If a customer withdraws their remaining account balance within 12 months of funding their Moneyfarm account, in the event of the £500 cashback being issued, Moneyfarm reserves the right to withdraw the equivalent value from the portfolio before disinvestment is complete.
    I was told that by putting in £2.5k and then putting in £250 for 10 months, I'd get the cashback after 12 months. Point 7 suggests that'll be 13 months. However, point 8 then suggests you need the whole £5k in the account for 12 months. Point 9 is not clear either - does it mean I can't take the money out in the first 12 months after the initial £2.5k deposit or in the first 12 months after the £5k total is reached??

    EDIT: Had a chat with them, turns out the 12 month timer is always from the initial deposit, even if it wasn't the full £5k upfront. Cashback should appear in month 10-11, and can be taken out after month 12.
    Last edited by DragonQ; 15-05-2017 at 1:56 PM.
    • bigadaj
    • By bigadaj 15th May 17, 7:32 PM
    • 8,946 Posts
    • 5,687 Thanks
    bigadaj
    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?
    Originally posted by moneyfoolish
    Different companies operate under different models, what you suggest is what is operated by firms like Zopa and Ratesetter, but the returns aren't great. You're maybe looking at 4-5% at most, lending unsecured and no idea of who the money is lent to.

    The other platforms such as moneything and Ablrate offer typical returns of 10-12%, secured but you have to bid on individual loans, take responsibility for the business plan and security offered and potentially deal with defaults, capital losses or maybe early repayment.

    Good opportunities but requires some knowledge and effort and there will almost certainly be defaults on some investments at some point.
    • ricky_v
    • By ricky_v 15th May 17, 7:51 PM
    • 220 Posts
    • 109 Thanks
    ricky_v
    If anyone is interested, this is what wealthify has done with £500 (£50 cashback)

    £17.59 Fidelity Index UK
    £11.28 Fidelity Index US
    £17.65 BlackRock Mid Cap UK Equity
    £9.90 BlackRock Japan Equity
    £11.23 Vanguard Developed Europe ex U.K. Equity
    £10.07 Vanguard UK Inflation Linked Bonds
    £149.09 BlackRock Sterling Liquidity
    £7.49 L&G Global Emerging Markets
    £7.49 L&G Pacific Index
    £60.12 L&G Short Dated Sterling Corporate Bonds
    £9.99 L&G Global Inflation Linked Bonds
    £33.73 Vanguard UK Government Bonds
    £74.91 BlackRock Ultra Short Bond
    £40.10 BlackRock Corporate Bond 1 to 10 Year


    And this is what Moneyfarm has done with £5k (£500 cashback)

    Sterling Cash LU0321464652 £ 1,466.64
    UK Sovereign Bonds Short Maturities IE00B4WXJK79 £ 939.19
    Global Sovereign Bonds Sterling hedged LU0641006290 £ 848.64
    UK Investment Grade Corporate Bonds 0-5 years IE00B5L65R35 £ 321.09
    Global High Yield GBP Hedged IE00B8KQFS66 £ 914.40
    UK Inflation-linked Bonds IE00B1FZSD53 £ 330.12
    Cash
    - £ 192.05

    Both set as cautious or conservative, I'm just in it for the cashback
    Last edited by ricky_v; 15-05-2017 at 8:02 PM. Reason: Sorting out the table
    • eskbanker
    • By eskbanker 15th May 17, 7:54 PM
    • 4,471 Posts
    • 4,210 Thanks
    eskbanker
    Both set as cautious or conversative
    Originally posted by ricky_v
    Perhaps they'll invest in TalkTalk
    • bigadaj
    • By bigadaj 15th May 17, 7:55 PM
    • 8,946 Posts
    • 5,687 Thanks
    bigadaj
    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.
    Originally posted by Brand
    I'm not sure you wholly understand what you've written.

    Times are very different to the late 90s, interest rates are far lower, and stock markets now yield a far higher amount than any safe savings account, again very much the opposite of that time.

    Stock markets are at highs but as above where else are you going to keep large amounts of capital, cash will be eroded by inflation, bonds are in bubble territory, much property is very much over priced etc

    It's a reasonable argument to make that you prefer active fund management over passive, teh sensible view is probably both have their place, especially in different markets and/ or sectors, but you seem to think that lifestratgey and multi index are active funds, they aren't. Multi index has a little more discretion but is still a long way from being an active fund, in the manner of fund smith or a huge number of others. Compared to the fund of funds options then the robo options only really save a stage in the process, using a set if questions to ascribe a risk rating rather than leaving teh investor determine their own.

    In terms of a downturn then there will no doubt be a crash in the next year or two, history shows that many active managers fail to spot this and fare no better or often worse than trackers.

    You are welcome to your opinion but disinvesting is also a risk, drip feeding is good if your money comes from salary or regular income, it can reduce volatility but will generally result in lower returns.
    • ricky_v
    • By ricky_v 15th May 17, 7:56 PM
    • 220 Posts
    • 109 Thanks
    ricky_v
    Perhaps they'll invest in TalkTalk
    Originally posted by eskbanker
    I've only had 1 glass of wine! haha
    • bigadaj
    • By bigadaj 15th May 17, 8:01 PM
    • 8,946 Posts
    • 5,687 Thanks
    bigadaj
    If anyone is interested, this is what wealthify has done with £500 (£50 cashback)

    11/05/2017Purchase Fidelity Index UK
    £17.59 11/05/2017 Purchase Fidelity Index US
    £11.28 11/05/2017 Purchase BlackRock Mid Cap UK Equity
    £17.65 11/05/2017 Purchase BlackRock Japan Equity
    £9.90 11/05/2017 Purchase Vanguard Developed Europe ex U.K. Equity
    £11.23 11/05/2017 Purchase Vanguard UK Inflation Linked Bonds
    £10.07 11/05/2017 Purchase BlackRock Sterling Liquidity
    £149.09 11/05/2017 Purchase L&G Global Emerging Markets
    £7.49 11/05/2017 Purchase L&G Pacific Index
    £7.49 11/05/2017 Purchase L&G Short Dated Sterling Corporate Bonds
    £60.1211/05/2017 Purchase L&G Global Inflation Linked Bonds
    £9.99 11/05/2017 Purchase Vanguard UK Government Bonds
    £33.73 11/05/2017 Purchase BlackRock Ultra Short Bond
    £74.91 11/05/2017 Purchase BlackRock Corporate Bond 1 to 10 Year
    £40.10

    And this is what Moneyfarm has done with £5k (£500 cashback)

    Sterling Cash LU0321464652 £ 1,466.64
    UK Sovereign Bonds Short Maturities IE00B4WXJK79 £ 939.19
    Global Sovereign Bonds Sterling hedged LU0641006290 £ 848.64
    UK Investment Grade Corporate Bonds 0-5 years IE00B5L65R35 £ 321.09
    Global High Yield GBP Hedged IE00B8KQFS66 £ 914.40
    UK Inflation-linked Bonds IE00B1FZSD53 £ 330.12
    Cash
    - £ 192.05

    Both set as cautious or conservative, I'm just in it for the cashback
    Originally posted by ricky_v
    That's a very different approach, are you sure you were profiled in the same way?

    Moneyfarm looks incredibly conservative, wealthify moderately risky.
    • ricky_v
    • By ricky_v 15th May 17, 8:07 PM
    • 220 Posts
    • 109 Thanks
    ricky_v
    I gave moneyfarm the impression that I'd melt at any sort of loss on paper and that I'd want to withdraw the money in 1 year's time. I thought I'd gave wealthify the same impression although it does set my style as cautious. It is "only" 16% in equities, who knows, that 16% might give me an extra few quid in 1 year.
    • ricky_v
    • By ricky_v 15th May 17, 8:15 PM
    • 220 Posts
    • 109 Thanks
    ricky_v
    I fogot to add, as a general point, both Wealthify and Moneyfarm send an email out confirming you're eligible for the cashback. So if there's no email then chances are that there's no cashback coming (although check with them first before taking your money out).
    • AndyT678
    • By AndyT678 15th May 17, 8:39 PM
    • 654 Posts
    • 863 Thanks
    AndyT678
    That's a very different approach, are you sure you were profiled in the same way?

    Moneyfarm looks incredibly conservative, wealthify moderately risky.
    Originally posted by bigadaj
    I was about to agree that £150/£500 (30%) in an emerging market tracker was nowhere near cautious but I've noticed that the original table has been corrected now and looks a lot more suitable for widows and orphans.
    • Thrugelmir
    • By Thrugelmir 15th May 17, 9:20 PM
    • 53,421 Posts
    • 46,041 Thanks
    Thrugelmir
    Stock markets are at highs but as above where else are you going to keep large amounts of capital, cash will be eroded by inflation, bonds are in bubble territory, much property is very much over priced etc

    It's a reasonable argument to make that you prefer active fund management over passive, teh sensible view is probably both have their place, especially in different markets and/ or sectors, but you seem to think that lifestratgey and multi index are active funds, they aren't. Multi index has a little more discretion but is still a long way from being an active fund, in the manner of fund smith or a huge number of others. Compared to the fund of funds options then the robo options only really save a stage in the process, using a set if questions to ascribe a risk rating rather than leaving teh investor determine their own.
    Originally posted by bigadaj
    However we live in a world where companies can raise cheap debt by issuing bonds. (With Central Banks being major buyers of same). Then use the proceeds to buy back their own shares. Given most executive and company share schemes operate on an EPS mechanism. The prophecy becomes self fulfilling. Though in reality the genuine growth is very low. While investors remained focused on the share price.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • elephantrosie
    • By elephantrosie 15th May 17, 11:20 PM
    • 269 Posts
    • 64 Thanks
    elephantrosie
    hey guys.. i joined wealthify for the cashback too. i have transferred 250 quids to wealthify and can see it on my account.. but all of them are in the form of cash.
    when does wealthify start investing my money?
    I am constantly dreaming of retirement and financial independence.
    I would like to have enough money to open an animal farm and a charity vegetarian restaurant.
    I am good with savings, but not investments. I am a keen learner, but can be disappointed by my laziness.
    • elephantrosie
    • By elephantrosie 15th May 17, 11:22 PM
    • 269 Posts
    • 64 Thanks
    elephantrosie
    btw, i have also set my investment risk on wealthify to cautious.
    I am constantly dreaming of retirement and financial independence.
    I would like to have enough money to open an animal farm and a charity vegetarian restaurant.
    I am good with savings, but not investments. I am a keen learner, but can be disappointed by my laziness.
  • jamesd
    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?
    Originally posted by moneyfoolish
    Yes with BondMason. With the others you would need to do something to reinvest or withdraw the income. In general you're not tied in to a particular term provided a willing buyer is available and one usually is. So not entirely hands-off but also not particularly hard or time-consuming.
    • fiisch
    • By fiisch 18th May 17, 1:08 PM
    • 85 Posts
    • 18 Thanks
    fiisch
    Thanks for the advice chaps. What I'm reading seems to suggest proceed with extreme caution, and certainly don't put all my eggs in the robo investment basket! I'm very reluctant to use an IFA - I simply don't have a big enough portfolio to justify it (they'd probably laugh me out the office), plus what I have read suggests a "robo" account could easily out-perform an IFA.


    I've opened an account with Moneyfarm and am loving the app - checking yesterday's performance is the first thing I do when I wake up.

    About to take a big drop in salary (going permanent having worked as a contractor for a spell), so monthly contribution will go down - trying to keep a ratio of approximately 4:1 regular savings to Moneyfarm investment.


    Put in an initial £1000 (no cashback), followed by current £250 monthly contributions to take advantage of Pound Cost Averaging. Monthly contributions will drop significantly when I hit £2,000 (probably to around £75 / month plus a few ad-hoc topups). Performance in the first three weeks has peaked at 1.22%, but dropped yesterday back to 0.31%.


    Obviously much too early to tell, but will update as time goes by. I'd stress that this is strictly "play money", so I have other savings and am over-paying the mortgage simultaneously (currently £1,250 into savings, £40 monthly overpayments on mortgage). I've already had my portfolio "re-balanced", so would seem the robots are working hard in the background....


    If I have enough left over, will also look to open a Bond Mason P2P account later in the year to spread the risk.


    Edit - >£10k is 0% cost (just the standard 0.2% management fees). This jumps to 0.6% if over £10k, but this seems reasonable to me? OK, 0.6% on the higher side, but if I hit £10k in a reasonable 3-4 year timescale I wouldn't have any qualms in paying this.


    (P.S.: Just in case anyone is wondering, I've no affiliation to Moneyfarm or any other Robo-Investors - just looking to dip my toe in the market, and as an 80s child, obviously the first thing I look for is how many Facebook likes something has......).
    Last edited by fiisch; 18-05-2017 at 1:16 PM.
    • JohnRo
    • By JohnRo 18th May 17, 1:40 PM
    • 2,305 Posts
    • 2,046 Thanks
    JohnRo
    This jumps to 0.6% if over £10k, but this seems reasonable to me?
    Originally posted by fiisch
    It is very expensive.

    Their cost comparison info-graphic is intentionally misleading.
    'We can't solve problems by using the same kind of thinking we used when we created them.' ― Albert Einstein
    'Facts do not cease to exist because they are ignored.' ― Aldous Huxley
    • fiisch
    • By fiisch 18th May 17, 2:03 PM
    • 85 Posts
    • 18 Thanks
    fiisch
    It is very expensive.

    Their cost comparison info-graphic is intentionally misleading.
    Originally posted by JohnRo
    I may be being incredibly naïve here, but 0.6% annual charge on £10k equates to £60 / year... right?!


    As I'm well under that mark, it's not something I'll need to worry about for a while - might be worthwhile stopping my monthly payments as I draw near, then blasting through the £10k limit when I have a decent amount saved up... or indeed pulling my investment and finding another advisor, but if they're returning 20%, what's 0.6% between friends?!
    • adindas
    • By adindas 18th May 17, 3:00 PM
    • 3,087 Posts
    • 1,449 Thanks
    adindas
    The T&Cs for the cashback offers are here. I got an email a few days ago confirming that I'm eligible for it and with a link to the T&Cs.

    The most interesting and confusing bit is this:

    I was told that by putting in £2.5k and then putting in £250 for 10 months, I'd get the cashback after 12 months. Point 7 suggests that'll be 13 months. However, point 8 then suggests you need the whole £5k in the account for 12 months. Point 9 is not clear either - does it mean I can't take the money out in the first 12 months after the initial £2.5k deposit or in the first 12 months after the £5k total is reached??

    EDIT: Had a chat with them, turns out the 12 month timer is always from the initial deposit, even if it wasn't the full £5k upfront. Cashback should appear in month 10-11, and can be taken out after month 12.
    Originally posted by DragonQ
    "This offer is capped at a maximum of 500 funded accounts, "


    As I explained it previously, this has all gone on the first day of the offer on MSE ...

    So if you invest now, no chance to get the £500 cashback.
    • DragonQ
    • By DragonQ 18th May 17, 3:07 PM
    • 1,981 Posts
    • 664 Thanks
    DragonQ
    "This offer is capped at a maximum of 500 funded accounts, "


    As I explained it previously, this has all gone on the first day of the offer on MSE ...

    So if you invest now, no chance to get the £500 cashback.
    Originally posted by adindas
    Correct. I was within the 500 as I signed up during the evening after it was announced. The following morning the offer was gone.
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