If you’d like to invest without having to choose individual investments, a ready-made portfolio could be a great option for you. These are put together and managed by experts, so all you need to do is choose a portfolio to invest in, fund your account and sit back. There are plenty of providers that each offer a range of ready-made options, including dedicated “robo-advisors”, which specialise in these investments and traditional brokers.
Ready-made portfolios are bundles of investments that are put together by experts. They’re well diversified, which means they hold lots of different investments, including different types of asset, worldwide shares, shares in different sectors and of differing sizes. These portfolios are given a risk level based on how they’re made up – for example, a portfolio that doesn’t hold much cash and has a large holding in equities (shares) would be riskier than a portfolio that has a large cash holding, investments in bonds and a small number of equities.
Your chosen provider will have several portfolios with a few different risk profiles, so you can read about them and choose the one you like the sound of most, like choosing a delicious investment smoothie off a menu. They will usually work to a certain risk parameter: low, medium or high, sometimes with an added creative flair to how they’re named.
There are two big benefits to investing in ready-made portfolios:
There’s very little work involved, but you need to work out the right option for your particular investing needs.
However, many platforms and advisers will help you to work this out, sometimes with a quick quiz. The rule of thumb is that if you have years and years to invest, you can often choose a higher risk portfolio as you have the time to ride out the highs and lows of stock markets.
If you think you’ll need the money soon, you should gravitate to low-risk portfolios. Bear in mind your risk level will change as you get older, which may mean changing your options.
The main drawbacks of ready-made portfolios are:
There are a couple of different ways to access ready-made portfolios — traditional stock brokers often offer them alongside individual investments, and there are dedicated platforms called robo-advisors that only offer ready-made options. On the face of it, these seem very different, but the types of investments you have access to are very similar. It’s typically best to choose a robo-advisor if you’re not interested in choosing individual investments down the line, and a stock broker if you think you’d like to give it a go once you gain confidence.
Some stock brokers offer ready-made portfolios, often at cheaper prices than robo-advisors. There isn’t typically a huge range of options available (for example, Hargreaves Lansdown offers just 9 portfolios, while Nutmeg has 38 available).
Sometimes you’ll have more flexibility with a stock broker. For example, AJ Bell allows you to play around with the fund choices or asset allocation weightings in its ready-made fund offering. This can be useful as you grow your confidence, particularly if you think you’d like to choose individual investments in the future.
Robo-advisors don’t often have individual investments available, so the only investment options you’ll have when you sign up are from their range of portfolios. Because of this, these providers may have a larger range including additional options, such as ethical portfolios.
How much you’ll pay to invest in a ready-made portfolio depends on the provider you choose. Some providers charge a pretty low fee, such as Dodl‘s 0.15% fee or Hargreaves Lansdown’s 0.45% fee. Those with more choices, such as Nutmeg or Wealthify, charge a little more (0.75% and 0.6% respectfully).
The exact process will depend on the provider, but here’s the process that you’ll usually follow to invest in a ready-made portfolio:
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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