Nutmeg - £200 sign-up bonus - vs. Vanguard?

fiisch

Martin's email this week has highlighted an offer from Nutmeg, giving £200 cashback on a £1,900+ investment with Nutmeg. To qualify for the offer, you have to keep your money invested with Nutmeg for 2+ years, and is limited to first 5,000 sign-ups.


Would this tempt anyone away from the likes of Vanguard? I am opening an S&S in the next couple of weeks and had planned to go with Vanguard VLS80, drip-feeding £200 per month (rather than deposit a £1,900+ lump sum as per the Nutmeg offer).


My inclination is to ignore it, and stick with Vanguard, however a 10% headstart is tempting... Obviously it's impossible to tell which fund would perform best over the next two years, but are robo-funds really able to keep with more established, traditional funds? Or is this just another sign-up gimmick and I should stick with my plan?


For me personally, I am looking to start investing with a view to helping pay school fees for my daughter (secondary). Fortunately, she's 1, so I have at least 10 years to invest (I am hoping to cover at least the first couple of years from salary/savings).

Alexland

I would imagine the investment performance of the Nutmeg fixed allocation and VLS funds would be similar if you match the risk levels.

Nutmeg cost to invest is 0.72% (0.45% platform, 0.17% fixed allocation ETF OCF + 0.10% investment costs) and Vanguard with VLS60 would be 0.48% (0.15% platform, 0.22% fixed allocation ETF OCF + 0.11% ETF investment costs. So Nutmeg are 0.24% more expensive.

So on £1900 for 2 years that difference would be £9.12 so the bonus is 'only' worth £190.88.

If you believe the market direction is generally upwards (otherwise why would you make mostly passive investments) then on balance it's better to get money and bonus invested earlier. Still you might be unlucky and catch the markets at a bad time. I like the Nutmeg ETF choices but I don't like that they are loss making at this time so, if you go for this offer, take regular printouts of your account balance.

We have had our bonuses with Nutmeg and now the plan is to move away to reduce cost.

Alex

dunstonh

Would this tempt anyone away from the likes of Vanguard?

Nutmeg is far more expensive than Vanguard. Indeed, they can be more expensive than a full advice option.

It may be worth qualifying by using the minimum investment to get the bonus. However, I wouldnt go any more than that.

Plus, Nutmeg's financials are not great. Deals like this are just going to increase their losses further (which have increased annually since they started). I wouldnt want much money with them.

but are robo-funds really able to keep with more established, traditional funds?

Its worth noting that Vanguard is not really classed as a more established traditional fund. It didnt launch VLS that long ago and has never been through a major crash. However, the methods of vanguard and robo-advice are very similar. Indeed, some robo-advice offerings use Vanguard or L&GMI behind the scenes as the invesmtents.

ricky_v

I've just signed up for this only to bonus bag like the £50 with Wealthify, £500 with Moneyfarm and £100 with Orbis. I'd just set up a GIA with them for the free money, set your profile to cautious and leave the ISA with cheaper platforms.

rather than deposit a £1,900+ lump sum as per the Nutmeg offer.

From my understanding to get the £200 you have to deposit £800 then pay £100 per month for 11 months, £1900 lump sums are not acceptable

To accept Nutmeg!!!8217;s offer, and receive the MoneySavingExpert £200 investment boost (the Investment Boost) you must do each of the following things during the Offer Period:

a. Sign-up via the link www.nutmeg.com/boost
b. Give us your email address, using the field provided; and
c. Fund your new Nutmeg product by:
i. (in the case of an ISA or GIA) paying a minimum opening deposit of £800, and giving a commitment to make 11 subsequent monthly payments of £100; or
ii. (in the case of Nutmeg pension) making a minimum investment of £5,000;

Alexland

Its good they are offering this on GIAs but cautious is too heavy on bonds (which carry their own risks) for my liking.

ricky_v

I'd prefer it if their cautious profile was too heavy on cash!

However for a ~5% PA return I can live with too heavy on bonds. Chances are the capital, bonus and possible gains will be moved on in excatly 2 years so as long as it's not too heavy on eqities

fiisch

Thanks chaps - I think I may have a dabble at Nutmeg's minimum levels (£800 + £100/month for 11 months just for the cash back), and another £100 in Vanguard ISA in April.

One point to clarify - if I open a GIA and have £2,000, as a higher rate tax payer, am I right to think - barring an investment miracle - I won't have to pay any tax on this investment?

ValiantSon

ricky_v wrote: »

I'd prefer it if their cautious profile was too heavy on cash!

However for a ~5% PA return I can live with too heavy on bonds. Chances are the capital, bonus and possible gains will be moved on in excatly 2 years so as long as it's not too heavy on eqities

What makes you think that you can expect around a 5% annual return on their cautious allocation? I'd be amazed if an asset allocation with 82.7% in bonds (51.6% in gilts) would return 5% p.a.

thenewcomer

after i read your post, i signed up to martins email lol

ValiantSon

fiisch wrote: »

Thanks chaps - I think I may have a dabble at Nutmeg's minimum levels (£800 + £100/month for 11 months just for the cash back), and another £100 in Vanguard ISA in April.

One point to clarify - if I open a GIA and have £2,000, as a higher rate tax payer, am I right to think - barring an investment miracle - I won't have to pay any tax on this investment?

You are liable for tax on dividends (allowance reducing to £2,000 in the new tax year) and capital gains tax when you sell (allowance of £11,700 in the new tax year). The size of your investment is not the issue, but how much you earn in dividends and the increase in value (the capital gain) between when you bought and when you sell.

eskbanker

ValiantSon wrote: »

What makes you think that you can expect around a 5% annual return on their cautious allocation? I'd be amazed if an asset allocation with 82.7% in bonds (51.6% in gilts) would return 5% p.a.

The way I read it, the expectation of the equivalent of 5% annually is from the one-off £200 cashback bonus on a minimum of £1900 over two years (i.e. the offer that this thread is all about!) rather than anything to do with pure investment return as such....