Nutmeg: A review of a new way to invest

I first heard about Nutmeg Investments after seeing an advert for it recently on the tube.

I work in the financial industry, so it’s always intriguing to hear about new products and see what they are all about.

I’ve always had a passing interest in finance. If I could relive my youth, I’d have chosen to go into the financial sector far earlier than I did.

However, even as someone who now has over a decade of finance work behind him, I’m still wary of the areas of finance I don’t deal with directly. Ask me about pensions, loans, current account - even (dare I say it?) PPI - and I can happily witter away for ages.

When it comes to stocks and shares, however, I don’t know a great deal. Certainly not enough to commit much money to. That’s where Nutmeg comes in.

Nutmeg - How investing should be - Nutmeg investment - Taken from a review of Nutmeg by DannyUK.com

An easy explanation is taken from the Nutmeg website.

Nutmeg are, in their own words, the UK’s first online discretionary online investment management company.  They claim to do away with a lot of the negative points of investing and wealth management.  In other words, they don’t charge high fees, there are no sneaky charges. There’s no hiding where you’re invested or how your funds are performing.

They also claim that they “don’t obfuscate with jargon”, which, in my opinion, is a sentence in itself that obfuscates.

The meaning of obfuscate - Nutmeg investment - Taken from a review of Nutmeg by DannyUK.com

I looked it up so that you don’t have to!

Nutmeg use your information to build and manage a portfolio for you.  In order to keep your risk as low as possible, they diversify your investments so that they are spread out.

They have an experienced investment team which monitors your portfolio and adjusts the asset allocation appropriately, rebalancing every month, which again mitigates risk and supposedly keeps your investments safer, and this is done at no extra cost.

In this way, they aim to produce their best return, at low cost, for the risk level you choose.

Another easy explanation taken from the Nutmeg investment website - Taken from a review of Nutmeg by DannyUK.com

Another easy explanation is taken from the Nutmeg website.

So what do they offer?  Well, the main investments can be seen on their website.  You can view the ISAs offered by Nutmeg and see the Nutmeg Personal Pensions.

There are minimum investment levels, which are £1,000 for each fund you create,  For portfolios below £5,000, a minimum monthly contribution of £50 is also needed.  The Nutmeg pension has a minimum investment of £5,000.

There is no minimum investment period, so you can get to your money as and when you need to.  It should be noted that investing is a long-term strategy, though, so bear that in mind.

Their returns have historically been quite good.  Ranging from 2% (annualised over 27 months from Oct 2012 to Jan 2015) for ultra cautious (ie, you are aiming to preserve capital and minimise your risk of losses) to 11.9% (annualised as above) for ultra speculative (where the aim is for high growth by accepting very high volatility.)

How Nutmeg Investment investing compares to other online investment management service. Taken from a review of Nutmeg by DannyUK.com

A quick comparison chart is taken from the Nutmeg website.

Nutmeg provides an easy platform for investing and is ideal for ease of use.  Nutmeg themselves admit that you could probably replicate their portfolios on your own, but they point out that rebalancing and monitoring your portfolio could result in high trading charges, not to mention time and hassle. Plus, Nutmeg can make trades in bulk across clients, so their costs are even lower.

Whilst on the subject of fees, if you have less than £25,000 invested with Nutmeg, you can expect to pay 1% as an annual management fee which is calculated according to the total value of your portfolio (also known as your Assets Under Management, or AUM.) Although the fee starts at 1%, the more you invest, the lower it goes - as low as 0.3%.

Nutmeg Assets Under Management (AUM) fees - Nutmeg Investment annual fees - Taken from a review of Nutmeg by DannyUK.com

The annual fees work on a sliding scale.

Charges for cash withdrawals only apply if you want your money faster than usual. The professional discretionary investment management, monthly rebalancing, reports and support are all included in the AUM.

As for safety, they use Pershing Securities Limited as their custodian bank to hold your money. It’s a part of BNY (Bank of New York) Mellon, the world’s largest custodian with £16 trillion in assets under custody.

Nutmeg are also covered by the FSCS - The Financial Services Compensation Scheme, which means you may be entitled to compensation if they cannot meet their obligations.  This only covers you up to £85,000 per person, per firm.

Signing up and getting started takes only 10 minutes.

Before entering into any arrangements, you should do your homework and make sure that you are happy to invest your money and that you are aware of the risks involved!

Lastly, a couple of other things to bear in mind here. Firstly, you can get Quidco (get £5 for joining up to Quidco) or join up to TopCashback for cashback on this.

Secondly, if you’re looking at stocks and shares, your money can go down as well as up.  This post is not a recommendation for the services advertised.

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Disclosure policy.

by DannyUK

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