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Just wondering if a downturn could eat in to the incentive, and worse, the £400 investment.
Originally posted by OceanSound
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Certainly it could, as with any stock market investment. One of the Wealthify portfolios was down nearly 8% over a 1 year period in 2018, for example (according to that comparison page; I didn't check myself). I'd say that sort of fluctuation is to be expected for such a short time period.
If you invested £400 and they gave you £40 on top, and then it went down 8% again just when you wanted to take your money out, you'd come out with a ~£4 profit. If it went down further than 8%, you'd make a loss.
You could also get lucky and make some kind of decent return, however.
It's unfortunate that that comparison webpage didn't cover longer time periods, because it's only really then that you see how abysmal these robo-advisor portfolios are.
Wealthify
claim their lifetime best performance (over 3 years) was +25.5%.
If you had invested in a global index tracker over the same period, you'd have made about 46%. Comparing more established robo-advisors over longer periods shows the same story. They all greatly underperform the average stock market return.
Now, as per the comparison page, the negative swing of a global index tracker could be larger than that of a particular robo portfolio in a particular short time period. But if you're after a long term investment, your future self will thank you if you switch from robos as soon as you're able.