As with all investing, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest, and of course, past performance is not a reliable indicator of future performance.
I joined Nutmeg on 6th January 2017 after hearing that some friends had a significant amount of money invested with them and they were performing well. I had been looking for something to do with my money after deciding to take control of my finances. To cut a long story short, I finally realised I was being taken for a mug when I received an email from my high street bank saying that my interest rate was going from 0.25% to 0.01%.
I would strongly advise checking if you are in the same position of receiving a measly interest rate on your cash – you should be putting your money to work.
It was after receiving that email that I started researching about how I could invest my money. To be perfectly honest, I had absolutely no idea. I had heard about investing before but didn’t know how to go about it, could you just invest in a stock like Facebook? Like I said, I was pretty clueless. I heard about Nutmeg and it seemed like a pretty easy way to start to understand about the world of investing, I had done some research about fixed savings, cash ISAs and stocks and shares ISA’s and thought I’d go for the stocks and shares option – this gave me a platform to do so.
I went for it.
As part of the sign-up process, you are asked a number of relatively simple questions to try and understand your appetite for risk, things like, how would you react if your portfolio dropped. I ended up having a high-risk tolerance. You are then prompted to choose a risk for your portfolio from 1-10. From what I can deduce, this determines your split between bonds and equities (stocks). With higher risk levels having a greater proportion of equities in their portfolio.
Within the sign-up process, you are also asked why are you investing, this can have a significant impact on the risk profile you should choose – if it’s a deposit for a house in 2 years, you’d probably not want to go as risky as you want to withdraw the cash in a relatively short time period. For me, this was about creating a retirement nest egg to live off of in my older years. I started out at around 6/10 risk but after a few months I moved up to a risk profile of 9/10. This translated into roughly 95% investment in equities with the rest across bonds, commodities, and cash.
Another factor with Nutmeg was its competitive fees, they have since changed but it charges 0.75% for portfolios less than £100,000 and 0.35% for investments thereafter. I will do a later article looking at all fees in this space.
I started off investing £1,000, it was an easy process of using my debit card, I also set up a direct debit of £500/month which was needed for investments of less than £5,000. I’m not sure why I only put £1,000 in to start with, I had over £10,000 sitting in my measly savings account, I think it was just to check it went in correctly and was invested successfully. It all went smoothly and within days my £1,000 was worth £1,011. If it had fallen after the first few days I’m sure it wouldn’t have made a difference, what I loved was the interface and how I could see changes day on day, I’ve since refrained from checking too often!
I proceeded to move the money I had in my saving account into Nutmeg as well as set up a monthly direct debit of £1,000. Over the course of the year, I invested £23,684 into Nutmeg. This is higher than the £20,000 annual ISA limit, but this investment straddled 2 financial years which made it all tax-free. I’ll write another article about what I see as the benefits of investing in an ISA, with the tax-free withdrawals being a major benefit.
My portfolio is currently worth £25,897 which represents a growth of £2,213. As I’ve been putting money in each month, to take the current value over the amount I’ve invested doesn’t give a true reflection of the performance – some money has been in there 11 months and some just 1 month. I, therefore, calculated a time-weighted return (TWR) to understand the true performance of my portfolio. The TWR came out at 12.26% which far exceeded my expectations and was a hell of a lot better than my 0.01%, over 1,000 times better in fact!
From reading up beforehand I was anticipating returns of 4-8%. However, it’s clear why the return was strong, in the year the FTSE 100 increased 7.1% and the S&P 500 increased 17.42% and these were two of the biggest investments in my portfolio. Yes, markets have gone up this year, but I had no idea on how to get in on this investment and Nutmeg gave me a platform to do this. I appreciate it’s been a bumper year, I’ll be interested to see how my portfolio performs which the markets fall, the portfolio is fully managed so I expect (hope) they will automatically move away from equities into safer investments.
To conclude, I’d say I was very happy with the performance in my first year, the return also factored in Nutmeg’s fees which I was happy to pay! I haven’t had any problems with the website or the app and my money has successfully been invested each month. Like I said previously, the real test may be when markets turn, I accept it will happen and will be interested to see how they perform through that period.