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Robo vs DIY: What's right for you?

28 Jan, 2022

Should you go for a robo/ready-made portfolio or pick your investments yourself?

If that's a million dollar question for you, here are some top tips on how to decide!

What is a robo adviser?

This is hands-off investing. You put your money away into a readymade portfolio and get on with your life.

A robo adviser is not actually a financial 'adviser', strictly speaking, but an online investment company that chooses a portfolio on your behalf. You answer a series of questions - typically 10 to 15 - and you get allocated a nice basket of funds (the portfolio) that's tailored to the level of risk you're comfortable with.

Find out much more in our Robo Adviser guide or compare providers here.

What is DIY investing?

This is hands-on investing. You're in charge of picking the funds, so you'll want to keep an eye on your investments regularly.

It can be more exciting to research different funds and build your investment portfolio on your own - but this approach is not for everyone. You'll need to invest plenty of time in researching your funds before you part with your cash.

The pros of choosing a robo/readymade portfolio:

  • Robo portfolios are based on Nobel Prize-winning theories and use pioneering investment research technology to help people achieve the biggest returns for the smallest risk.

  • Once you've answered the questions, a readymade basket of funds will be waiting for you.

  • Your investments are managed by the pros, who have years, perhaps decades, of experience in this arena.

  • Once you're up and running, there's little else you need to do, so you can get on with your life.

  • Robos can be very cost-effective. You can sometimes set up an account for just £1!

The cons of robo-readymade portfolios:

  • You can't 'hand pick' your investments, so if there's anything you want to steer clear of, such as fossil fuels, your options may be more limited.

  • There isn't much human interaction. If you prefer face-to-face meetings, this may not be the best option for you - although more investment platforms are moving away from face-to-face meetings in general.

  • If you get a lot of joy out of researching and choosing your own funds, you may find the robo option less appealing.

  • Robo portfolios are still an evolving 'segment' of the investment industry. There isn't a lot of long-term data to draw on yet.

The pros of choosing a DIY investing approach:

  • This is the free market in full swing. Basically, you can invest in whatever appeals to you.

  • Because you're doing it yourself, there are no portfolio management fees or other 'middlemen' expenses to worry about.

  • When you want to switch things up, you can amend your portfolio instantly. There's no loss of independence or control.

  • You get to choose companies and/or sectors that you're passionate about, such as sustainable energy.

  • If you're an experienced investor, you may believe you can get better returns picking your own funds.

The cons of DIY investing:

  • The cost of making your own trades can eat into your returns if you're not careful.

  • You don't get the knowledge of wisdom of experienced portfolio managers. That can come in handy when you need to quickly switch things up when markets take a tumble or something unexpected happens.

  • If you don't have much experience or knowledge of investing, you may find the DIY approach time-consuming and a lot of hard work.

  • If you don't manage your investments carefully, you could lose out on exciting investment opportunities and miss out on better long-term returns.