Investment & Investing

Cheers man.
Would anyone be patient enough to explain the basics of Nutmeg to a massive financial novice?!
Is it a sensible place to invest £1000?!
Cheers :-)

No, Nutmeg fees are too high.
Read this: https://www.langcatfinancial.co.uk/isa-guide-2019/

Would anyone be patient enough to explain the basics of Nutmeg to a massive financial novice?!

Nutmeg profile your attitude to risk and return and 'advise' appropriate funds in to which they allocate your money.

They do fixed allocation where they pick stuff then run it, and yearly they review your attitude and adjust things.

Or you can chose to have stuff actively managed where a real human evaluates performance and makes adjustments as things change.

Your actual 'purchases' via Nutmeg are held by a custodian bank.

NM offer ISA products, non ISA and a Pension. It's all the same 'stuff' but with different 'wrappers', i.e. ISA gives you tax free gains, LISA is the weird govt. ISA for gig economy workers, and the Pension gives you tax free gains and govt. top-ups but the normal pension rules apply.

Is it a sensible place to invest £1000?!

You could do worse. As above, they not the cheapest, medium and long term. They think people will pay their fee because they are easy to use and understand, and to an extent that's true.

Not investing the money for example will cost you whatever the rate of inflation is.

A good idea might be to Nutmeg stuff now, then 'skill up' over this year then make more optimal decisions next year. This is my referral link if you want to Nutmeg.

Interesting but, for those in the Managed class like Nutmeg it seems to miss out the other side of the equation; what are the returns?

Do they all return similar amounts or do some perform better than others? I don't mind higher fees if the returns are worth it. I've not really seen anywhere that does such a comparison.

what are the returns?

If NM are buying in to off the shelf funds, bonds, cash whatever - which IIRC in most cases they kinda are - then it doesn't matter who you go with - all things equal they will return the same, the deciding factor is the fee.

the deciding factor is the fee.

absolutely.
this is why you should follow the advice in the lang cat guide.

Is there no management involved in what proportions of each should be purchased or do all of these just invest in the same? Wouldn't there be some investment decisions around things such as Brexit and the various stuff that's going on at the moment?

If I put £20k into Nutmeg and £20k into evestor would the difference really be minimal at the end of the year or is it something that evens out over many years and the compounding effect of the fees is what makes the cheaper one better?

the management is which fund you take.
for example, vanguard has the ls20/40/60/80/100
check out their historical returns on the site

Is there no management involved in what proportions of each should be purchased or do all of these just invest in the same?

Yeah there is, and no, not all inactively managed funds allocate the same way for a given risk profile. But they should invest equivalently.

Wouldn't there be some investment decisions around things such as Brexit and the various stuff that's going on at the moment?

If you are buying allocations in inactively managed funds, then no, there wouldn't be, unless it coincided with the end of year review, and even then, the fund manager needs to think longer term.

If I put £20k into Nutmeg and £20k into evestor would the difference really be minimal at the end of the year

If they both offered inactively managed funds, and they profiled your attitude to risk in the same way, then in theory, they should perform too close to call it between them.

the compounding effect of the fees is what makes the cheaper one better?

Yes.

Managed funds is a bit of a different kettle of fish.

for example, vanguard has the ls20/40/60/80/100

Fundamentally, Vanguard and Nutmeg are different 'things' - however with the LS stuff I guess the line blurs a bit.

Isn't Nutmeg's (and I assume a few of the others) selling point that they are actively managed though?

You can chose between Fixed (passive - with a yearly review) and Managed, Managed has the higher fee, obvs.

This is what I was getting at with my kinda apples / oranges - Nutmeg / Vanguard comparison. No point chasing the lowest fee if it pulls you in to platforms that fundamentally do not meet your requirements as an investor.

Thanks @Howard for taking the time to share your knowledge. Really appreciated :-)

Cheers, that's a bit clearer but I guess doesn't really clear up @platypus original assertion that Nutmeg isn't a sensible place to invest as the fees are too high.

Basically I'm wondering whether to stick with Nutmeg or not and whether the benefit from their actively managed fund (given I'm not going to be researching what to invest in myself) offsets their higher fees.

I bought, read and digested the RESET book linked above. If anyone wants my copy to read then shout, based easts

As a result I now have a consolidated Fidelity SIPP, HL LISA and Vanguard ISA. It would be great if they were all with the same company but hey.

consolidated Fidelity SIPP, HL LISA and Vanguard ISA. It would be great if they were all with the same company but hey.

"consolidated" but not with the same company? What do you mean?

Cheers, that's a bit clearer but I guess doesn't really clear up @platypus original assertion that Nutmeg isn't a sensible place to invest as the fees are too high.

If you look at the Lang Cat report, they actually call out NM as a fairly good choice - providing you are happy to use what they describe as Do It For Me products.

Comparing NM and Vanguard is a bit curious because NM Do Stuff For You and buy across funds (they even buy Vanguard funds). Vanguard on the other hand only let you invest in their funds and do very little for you - except in the cases where you can buy in to their Funds of Funds which give you pre-packaged diversification. But they aren't recommended to you - you need to do your own research and do your own balancing and make adjustments if your attitude to risk or goals change.

As in three old workplace pensions with different providers now in one wrapper.

Ah, I see.

the benefit from their actively managed fund (given I'm not going to be researching what to invest in myself) offsets their higher fees.

My understanding of the concensus position on this is that fees outweigh any potential benefit of active management, in aggregate, over time.

If we could know whether one thing would do better than another thing in the near term, we wouldn't be writing about it on here.

If it all comes out in the wash over time, how do you choose funds? I've got pension contributions I want to allocate to something. Everyone says go for boring trackers but which boring trackers? Anything else?

how do you choose funds?

You just chose the right funds, duh!

Everyone says go for boring trackers but which boring trackers?

Cheap boring trackers.

The more diverse / generic, the cheaper they tend to be - FTSE all share is cheaper than FTSE250, is cheaper than FTSE100 etc...

Over the course of 25+ years, the more diversified indices will likely track higher for the funds that you or I might buy (as in, we're not putting money in funds that charge 2 & 20 or 3 & 30, and make alpha returns of 20% per year)

I tend to go with exchange traded tracker funds...specifically ticker ISF ishare ftse100.