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Investing can feel easier once you get started; the hard part is knowing where to start: does it suit you? Ready-made portfolios for beginners
Investing can feel easier once you get started; the hard part is knowing where to start. After all, there are tens of thousands of investment opportunities, offered by a growing number of investment platforms.
I think ready-made portfolios can be a good starting point. These are ready-made portfolios offered by most investment platforms. They are ideal for people who don’t want to spend time manually selecting funds and learning the ins and outs.
They do not require you to make decisions about what to invest in. The only questions you need to answer are how much risk you are willing to take. As a rule of thumb, the more risk you take on, the greater the chance of a higher return in the long run.
At investment website Boring Money, where I am founder and CEO, we regularly test all major investment platforms and independently evaluate their turnkey portfolios.
We crunch the numbers to see which ones have delivered the best returns for investors. Our figures cover the two years to the end of December 2022 and are total returns after all costs. Two years is a relatively short time frame when it comes to investing and performance in the future could be very different. But at least this gives a snapshot of how the platforms are doing.
Ready made: The only questions you need to answer are how much risk you are willing to take
We also have over 25 test accounts, which we use to find out for ourselves how they are for the customer experience. In addition to our own experiences, we also take into account the thousands of investment platform reviews on the boringmoney.co.uk website.
As a result, we have found the ready-made portfolios for investment Isas that we believe offer the best experience combined with the highest returns in recent years. We have grouped them into three categories: high, medium and low risk – see the tables opposite. Only you know which category is right for you.
However, if your investment horizon is 10 years or more, you may want to consider the highest risk profiles, as described in the first of our tables.
And if your horizon is closer to five years, then you should consider lower risk profiles – those are the tables of medium and low risk options.
Less than five years and cash may be your best bet.
Only three of the 10 medium-risk portfolios analyzed had risen in the past two years.
That’s because they tend to hold a large share of bonds, which have seen their value plummet as interest rates have risen rapidly.
However, most have had a better start this year and hopefully should recover further if interest rates do not continue to rise.
For those people who invest with a shorter time horizon, or who don’t like alarming ups and downs, the low risk portfolios should be a good option.
In theory, they should offer a smoother investment; they will earn less in the long run but face less short-term volatility.
However, many underperformed last year as they hold a large share of bonds, which struggled in the face of rising interest rates and the effects of the mini-budget. They should start behaving more calmly again and started to improve in the last three months of 2022.
The four chosen low-risk options have performed best – or least badly – over the past two years.
Holly Mackay is the founder of Boring Money website