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  • FIRST POST
    • fiisch
    • By fiisch 14th Mar 18, 9:39 AM
    • 270Posts
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    fiisch
    Nutmeg - £200 sign-up bonus - vs. Vanguard?
    • #1
    • 14th Mar 18, 9:39 AM
    Nutmeg - £200 sign-up bonus - vs. Vanguard? 14th Mar 18 at 9:39 AM
    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).
    Save £6k in 2018: £1651.19 / £6000
Page 1
    • Alexland
    • By Alexland 14th Mar 18, 10:26 AM
    • 2,389 Posts
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    Alexland
    • #2
    • 14th Mar 18, 10:26 AM
    • #2
    • 14th Mar 18, 10:26 AM
    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
    Last edited by Alexland; 14-03-2018 at 10:38 AM. Reason: basic maths error
    • dunstonh
    • By dunstonh 14th Mar 18, 11:10 AM
    • 92,656 Posts
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    dunstonh
    • #3
    • 14th Mar 18, 11:10 AM
    • #3
    • 14th Mar 18, 11:10 AM
    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.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • ricky_v
    • By ricky_v 14th Mar 18, 9:50 PM
    • 304 Posts
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    ricky_v
    • #4
    • 14th Mar 18, 9:50 PM
    • #4
    • 14th Mar 18, 9:50 PM
    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
    • By Alexland 14th Mar 18, 9:55 PM
    • 2,389 Posts
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    Alexland
    • #5
    • 14th Mar 18, 9:55 PM
    • #5
    • 14th Mar 18, 9:55 PM
    Its good they are offering this on GIAs but cautious is too heavy on bonds (which carry their own risks) for my liking.
    Last edited by Alexland; 11-05-2018 at 5:45 PM.
    • ricky_v
    • By ricky_v 14th Mar 18, 10:11 PM
    • 304 Posts
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    ricky_v
    • #6
    • 14th Mar 18, 10:11 PM
    • #6
    • 14th Mar 18, 10:11 PM
    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
    • By fiisch 14th Mar 18, 10:24 PM
    • 270 Posts
    • 144 Thanks
    fiisch
    • #7
    • 14th Mar 18, 10:24 PM
    • #7
    • 14th Mar 18, 10:24 PM
    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?
    Save £6k in 2018: £1651.19 / £6000
    • ValiantSon
    • By ValiantSon 14th Mar 18, 10:36 PM
    • 1,892 Posts
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    ValiantSon
    • #8
    • 14th Mar 18, 10:36 PM
    • #8
    • 14th Mar 18, 10:36 PM
    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
    Originally posted by ricky_v
    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
    • By thenewcomer 14th Mar 18, 10:39 PM
    • 93 Posts
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    thenewcomer
    • #9
    • 14th Mar 18, 10:39 PM
    • #9
    • 14th Mar 18, 10:39 PM
    after i read your post, i signed up to martins email lol
    • ValiantSon
    • By ValiantSon 14th Mar 18, 10:41 PM
    • 1,892 Posts
    • 1,758 Thanks
    ValiantSon
    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?
    Originally posted by fiisch
    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
    • By eskbanker 15th Mar 18, 12:42 AM
    • 7,167 Posts
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    eskbanker
    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.
    Originally posted by ValiantSon
    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....
    • george4064
    • By george4064 15th Mar 18, 9:05 AM
    • 942 Posts
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    george4064
    Do Nutmeg usually do a sign up bonus around every tax year end?
    "If you arenít willing to own a stock for ten years, donít even think about owning it for ten minutesĒ Warren Buffett

    Save £12k in 2016 - #045 £10,358.81/£12,000 (86%)
    Save £12k in 2017 - #003 £12,427.51/£12,000 (104%)
    Save £12k in 2018 - #004 £3,330.20/£12,000 (28%)
    • bowlhead99
    • By bowlhead99 15th Mar 18, 9:26 AM
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    bowlhead99
    Do Nutmeg usually do a sign up bonus around every tax year end?
    Originally posted by george4064
    They have done sign up bonuses before but they have not been going many years; the investment in marketing and freebies is inevitably going to be strong at the beginning but you can't assume that if there's an offer this year there would also be an offer next year.

    Sometimes there can be more than one offer to choose between, for example last year there was a hread running on what you can can get from Nutmeg by going through Quidco or Topcashback. (http://forums.moneysavingexpert.com/showthread.php?t=5603564)

    A friend of mine is doing the offer for him and partner (he does lots of cashback stuff) and I pointed out that Nutmeg are not the best or cheapest investment house in town - but at the end of the day the rate of return on the cashback (assuming you are doing the bare minimum to qualify and are not 'locking up' your ISA allowance that you could put to better use elsewhere) is pretty good.
    • stphnstevey
    • By stphnstevey 15th Mar 18, 1:15 PM
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    stphnstevey
    Surely, with fees as well, there is a potential for the investment to go down in value, which could wipe out the gain and not make this very worthwhile
    • bowlhead99
    • By bowlhead99 15th Mar 18, 4:13 PM
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    bowlhead99
    Surely, with fees as well, there is a potential for the investment to go down in value, which could wipe out the gain and not make this very worthwhile
    Originally posted by stphnstevey
    Yes of course there is potential for the investment to go down in value but the "free money" enhances the returns you get for the risk you take; as such, you get the potential of higher returns on the upside while cushioning your downside.

    Effectively if you compare it with investing in a portfolio of underlying assets elsewhere with equivalent risks, this would be delivering an extra x% return per y unit of risk because there is someone on the outside throwing in extra cash to your pot as a boost.

    Where that money comes from is the marketing team's budget, which is in turn funded by a combination of money from the backers of the Nutmeg business and the fee revenue they take from the punters (including the punters who didn't participate in the promotion).

    The fees at nutmeg might be a bit over the odds and so if you're investing tens of thousands in a mediocre product and locking yourself into it for just £200 free cash, it's not a no-brainer at all. That's what they hope you'll do in an ideal (for them) world. However if you are just sitting on the fringes of the promotion putting the bare minimum cash into it to qualify - you maximise the percentage enhancement to your returns, which will be substantially higher than the platform and management fees they take and so you are a "winner" even if the fund loses value. Because if you had invested without the boost, then losing the same underlying value is much more painful.

    No real reason to invest in this at a higher risk profile than you would have invested in a similar product elsewhere, just because you're getting the bonus. You don't get a bigger bonus if you choose a higher risk product.
    Last edited by bowlhead99; 15-03-2018 at 4:15 PM.
    • LesLittle
    • By LesLittle 15th Mar 18, 8:40 PM
    • 5 Posts
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    LesLittle
    Not been impressed with gains on my S&S ISA with Nutmeg when compared to others over the same period, however I got a similar £200 (through quidco) which has more than made up the difference - given the small amounts i have invested!
    • stphnstevey
    • By stphnstevey 15th Mar 18, 9:29 PM
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    stphnstevey
    Not been impressed with gains on my S&S ISA with Nutmeg when compared to others over the same period, however I got a similar £200 (through quidco) which has more than made up the difference - given the small amounts i have invested!
    Originally posted by LesLittle
    Can you quantify your gains?
    • stphnstevey
    • By stphnstevey 16th Mar 18, 8:49 AM
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    stphnstevey
    Not discounting the incentive, but looking at what they invest in, seems to be tracker index ETFs

    So their business model seems to be to charge active manager fees of around 1% to provide a fund of diversified index trackers weighted to their "expert" preference

    An expensive Vanguard clone?
    • chockydavid1983
    • By chockydavid1983 16th Mar 18, 10:55 AM
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    chockydavid1983

    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.

    Alex
    Originally posted by Alexland
    Thanks for posting this OP. I'm considering doing this with a GIA with the minimum invested.
    • bowlhead99
    • By bowlhead99 16th Mar 18, 12:15 PM
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    bowlhead99
    Not discounting the incentive, but looking at what they invest in, seems to be tracker index ETFs

    So their business model seems to be to charge active manager fees of around 1% to provide a fund of diversified index trackers weighted to their "expert" preference

    An expensive Vanguard clone?
    Originally posted by stphnstevey
    They have two offerings. One invests in ETFs in broadly fixed allocations at a few different performance levels which you could say was somewhat similar to what a Vanguard Lifestrategy fund would do.

    Their charge for that - at 0.45% for their fee and under 0.2% for the operating charges of the ETFs themselves - would be not really any more expensive than going to (say) Hargreaves Lansdown and paying a 0.45% platform fee and then buying Vanguard Lifestrategy on that platform and being exposed to the 0.2something percent operating costs of VangLifeStrat. Granted it's more expensive than going direct to Vanguard and paying their platform fee of only 0.15% plus the fund charge. Still, they don't claim to be the absolute cheapest on the market.

    The other offering is the more "active" one where you have a wider choice of risk targeted portfolios and the 0.45% is replaced with 0.75% to cover the active management /robo-advice they do. If you went to a 'conventional' IFA you might pay 0.5% ongoing for the advice (more on a small pot) and would have platform fees as well as the fund operating fees. So their offering is pitched cheaper than that.

    I say "pitched" cheaper than that, but if you have a large pot you could beat the costs with an IFA, and you could certainly beat it if you DIY'd because there wouldn't be any advice fee, and if you did pay for an advisor you would actually get personal advice which you don't get here.

    So the two offerings do have their place within the full gamut of what is available in the UK financial services market, but neither are trying to be the very cheapest DIY thing you can buy, nor the very best advice you can buy.
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