Nutmeg named top-performing robo-portfolio, but FTSE 100 beats it

Analysis of robo-advice websites found FTSE 100 beat eight leading providers.

Nutmeg has been named the top-performing robo-investment service of the past year, according to financial advice site Boring Money.

Analysis of eight leading robo-advice sites found Nutmeg was the top performer in terms of risk and returns over the past 12 months. Boring Money investigated portfolios offered by evestor, IG, Netwealth, Nutmeg, Moneyfarm, Scalable Capital, True Potential Investor and Wealthify (which recently launched ethical investment options).

You can find Money Observer analysis of the major robo-advice sites here

Nutmeg’s Portfolio 10 – its most adventurous option – came out top, with a return of 7.92 per cent in the year to 30 June 2018. It was followed by IG’s 5 Aggressive portfolio with a return of 7.46 per cent over that period and True Potential Investor’s Aggressive Portfolio at 7.24 per cent.

But investors would actually have been better off simply choosing a tracker fund to follow the UK stock market. The FTSE 100 delivered a return of 8.4 per cent over the same period.

Higher-risk portfolios across the robo-advice sites delivered an average return of 6.38 per cent over the year. The worst performer among the higher-risk portfolios returned 4.15 per cent.

Returns among low-risk portfolios ranged from a high of 2.49 per cent to a loss of 0.41 per cent, while among the medium-risk portfolios returns ranged from 5.27 per cent to 1.88 per cent.

But investors should not just consider returns, warns Boring Money. It also assessed the volatility that investors in each of the portfolios would have had to endure, looking at the greatest troughs in performance over the course of the year.

Among the higher-risk portfolios, investors could have lost a maximum of £283 on a £5,000 investment if they had been forced to sell at the lowest point. While the FTSE 100 delivered the stronger return overall, it was also far more volatile, with a potential maximum loss of £364.

Holly Mackay, chief executive at Boring Money, says: ‘A less discussed benefit of robo-advice is how it can help to reduce the risk investors are taking by providing diversification.’

She points to the first three months of the year as an example, when the FTSE 100 fell more than 7 per cent. ‘The higher-risk portfolios performed significantly better than this index over this period. As the robo-advice sites have short track records to date, I find considering these risk measures just as important as the overall returns,’ adds Mackay.

Boring Money also looked at the total cost of investing through the sites. On a £5,000 investment, Evestor came out cheapest with total costs of £27, followed by IG at £39. True Potential Investor was the most expensive option at £58. Meanwhile the iShares Core FTSE 100 ETF charges just 0.06 per cent, or around £3 on a £5,000 investment.


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Pear with Apple

Comparing a fully diversified portfolio with the FTSE 100 (index or ETF?) is comparing apples with pears as the 2 allocations have a different risk profile, furthermore in a 1-year context is not informative at all... You should compare data of at least 5 years using some return/risk ratio rather than just the return. Very poor (and cheeky)!

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