Medium-risk robos - what are they and who are the top performers?
27 Jan, 2022
What is a robo?
A robo adviser is basically an online investment service which asks you about 10-15 simple questions.
How does it work?
The answers you give will determine which basket of investments (portfolio) you will be allocated. Once your robo portfolio is up and running, your provider will manage it on your behalf.
Comfortable with a few ups and downs?
If you're happy to take on some risk - but not too much - then you may want to consider a robo portfolio in the medium-risk category.
Just to recap: what exactly is 'medium risk'?
The financial industry has a habit of throwing about a bunch of words and phrases that can mean different things to different people. The term 'medium risk' might be a bit trickier to define than 'low risk' or 'high risk', because it's kind of like standing in the middle of the road or having your glass half empty/half full.
So here's a summary of what a medium-risk robo portfolio should look like and what sort of performance you might expect:
If you invest in medium risk funds, you will be exposed to a mixture of fixed income, cash and company shares
Basically, that means your portfolio will include a mix of high-risk and low-risk investments
Only a minority of your investments will be in company shares, whereas some high risk investments are almost exclusively held in shares.
The performance of medium-risk investments generally falls in the 'middle' of low- and high-risk portfolios.
Interestingly, in our latest robo data, some of our medium-risk portfolios actually produced better two-year returns than our worst-performing high-risk portfolios - although that isn't something that you should normally expect!
The investment industry often uses words like 'balanced' or 'confident' to describe medium-risk robo portfolios.
Three reasons to pick a robo adviser if you're a medium-risk investor:
You get a diversified portfolio, so you stand a better chance of getting the best returns for the lowest amount of risk (but this is not guaranteed)
If the low-risk portion of your portfolio isn't doing so well, you could still get inflation-busting returns if the high-risk portion is performing much better.
If you're new to investing or have always chosen low-risk investments, using a robo or ready-made portfolio may be much less stressful than picking the investments yourself.
So, here are the top-performing robos in the medium risk category in the last two years:
Figures shown after total returns (after charges) from 01-01-2020 to 31-12-2021.
In first place: Moneybox - Balanced fund
Two-year returns (after charges): 23.49%
Fund summary: 65% of this fund comprises the Fidelity Index World Fund, 10% is iShares Global Property Equity, and 25% is iShares Overseas Corporate Bond Index.
Moneybox is a great mobile-first option for newcomers who aren't too bothered about how their money is managed.
In our 2021 Best Buy Awards, Moneybox won:
Best Buy ISA 2021
Best for Beginner Investors - ISA
Best for Digital - ISA
Best for Customer Service
(read the full list of winners here)
Two-year returns for Moneybox balanced fund (after charges): in context
Setting up the Moneybox balanced portfolio
How does it work?
Get started from just £1
Costs vary from about 0.57 - 0.75% a year, plus a £1 a month subscription fee
The balanced option is a bit cheaper than the adventurous one, which has a bigger share % and slightly higher costs
Moneybox reviews
Runner up: HSBC My Investment - Balanced Fund 3
Two-year returns (after charges): 20.24%
There aren't many banks that can rival HSBC when it comes to brand visibility. That's one of the reasons it's such a popular option for virtually every type of investor. If you're new to investing and happy to take on a little more risk, you might consider this a relatively safe haven.
Fund summary: The majority of this fund is shares (59%) followed by bonds (33%), property (6%) and cash (2%).
Two-year returns (after charges) for HSBC Balanced portfolio in context:
Figures shown after total returns (after charges) from 01-01-2020 to 31-12-2021.
Setting up the HSBC My Investment Balanced portfolio:
How does it work?
You'll get a personalised investment recommendation report
Start investing from just £50 a month or one lump sum of £1,000
You'll pay a one-off advice fee of 0.5% (figures shown above are inclusive of charges)
HSBC reviews
Second runner up: Vanguard - LifeStrategy - 60% shares
Two-year returns (after charges): 18.21%
About Vanguard: Vanguard is a huge global player, so it's another relatively safe option if you're comfortable taking things up a notch.
Fund summary: This fund is 60% shares and 40% cash.
In our 2021 Best Buys Awards, Vanguard won:
Best Buy ISA
Best Buy Pension
Best for Beginner Investors
Best for Beginner Investors - Pension
Best for Low Cost - Pension
Read the full list of winners here.
Two-year returns (after charges) in context:
Figures shown after total returns (after charges) from 01-01-2020 to 31-12-2021.
Setting up the Vanguard LifeStrategy 60% shares robo portfolio
How does it work?
£500 initial monthly investment, £100 minimum monthly amount
Total charges are about 0.41% for an investment of £1,000 (figures shown above are after charges)
Vanguard reviews
Fourth place: Nutmeg - 5/10 portfolio
Two-year returns (after charges): 13.91%
About Nutmeg: It's the world's biggest robo adviser, shaping the scene since 2012. Great for busy people on-the-go, and you have far more data to play with compared to the new robos.
Fund summary: This fund is 53.3% shares.
In our 2021 Best Buys Awards, Nutmeg won:
Best Buy ISA
Best for Beginner Investors - ISA
Best for Sustainable Investors - ISA
Best for Sustainable Investors - Pension
Best for Digital - ISA
Read the full list of winners here.
Two-year returns (after charges) in context:
Figures shown after total returns (after charges) from 01-01-2020 to 31-12-2021.
Setting up the Nutmeg 5/10 portfolio:
How does it work?
You'll need to put in at least £500 for an ISA, pension or investment account (£100 minimum for a Lifetime ISA or Junior ISA).
You can arrange a call with their client services before setting up your account.
Nutmeg reviews
Fifth place: Vanguard - LifeStrategy - 40% shares
Two-year returns (after charges): 13.55%
About Vanguard: As stated above, Vanguard is a huge global player, and if you'd prefer your risk level to be low-to-medium level, this is a good option.
Fund summary: This fund is 40% shares and 60% cash.
In our 2021 Best Buys Awards, Vanguard won:
Best Buy ISA
Best Buy Pension
Best for Beginner Investors
Best for Beginner Investors - Pension
Best for Low Cost - Pension
Read the full list of winners here.
Two-year returns (after charges) in context:
Figures shown after total returns (after charges) from 01-01-2020 to 31-12-2021.
Setting up the Vanguard LifeStrategy 40% shares robo portfolio
How does it work?
Like the 60% shares fund, you need to make a £500 initial monthly investment and a put in a minimum of £100 a month
Total charges for this fund, as with all LifeStrategy funds, is about 0.41% for an investment of £1,000 (figures shown above are after charges)
Vanguard reviews
Other things to bear in mind when picking a robo or ready-made portfolio:
- Will it make your life easier?
- Will it save you time?
- How high are the fees? (ideally they should be less than 1%!) Higher charges can eat into your returns, so check these beforehand.
