Investment Apps for Beginners: Which One Offers the Best Features?

RAchel Reeves and her fellow government officials are eager to promote stock market investments among more Britons. She recently stated, “When you invested in stocks and stock markets, you could achieve better returns and had a substantial amount in your cash savings account.”

The encouraging news is that the emergence of DIY tools and mobile applications has made investing simpler than ever. However, the extensive range of options can make it challenging to determine where to begin.

For novice investors lacking the time or confidence to manage their portfolios, a “robo-advisor” is a wise choice. These may seem like concepts from sci-fi films, but they are essentially online platforms that utilize technology to automate processes. Most are app-based and typically provide pre-designed investment portfolios customized to individual preferences.

Generally, you complete a brief questionnaire to identify your objectives and determine the level of investment time and risk you’re comfortable with.

In most cases, the longer your investment horizon, the more risk you can afford to take. However, it’s crucial to assess your personal approach to risk. Historically, stocks have generated more significant returns than savings accounts, but they also carry the potential for losses and fluctuations.

A pre-assembled portfolio usually invests in a range of exchange-traded funds (ETFs). These low-cost funds track the performance of specific indices, such as the UK or US stock markets, government bonds (like UK gilt or US Treasury bills), or commodities such as gold.

The app consolidates these fund selections to formulate a balanced portfolio that distributes funds across diverse assets.

So, which app (if any) is the right fit for you? We’ve explored some of the most popular options and compared their offerings.

Nutmeg

Who? Nutmeg, one of the pioneers in the robo-advisor market, launched in 2012 and was acquired by investment firm JPMorgan Chase in 2021. The UK platform boasts over 200,000 users and has seen more than £4.5 billion invested through the app.

Minimum investment: ISAs and pensions start at £500, while lifetime ISAs and junior ISAs require £100.

Investment Choice: Nutmeg offers various service tiers that influence costs. With fully managed options, investors can select from 1 to 10 risk levels, and the team actively monitors and adjusts the portfolio. The fixed allocation option features five risk levels, with the portfolio determined by the investment team annually.

Fee: For the fully managed option, Nutmeg charges a total fee of 0.98%. If investing £3,000, the annual fee would be about £29.40. The fee for fixed allocations is 0.65%, roughly £19.60 in the same scenario.

We like: Nutmeg’s transparency regarding performance allows users to see how a fully managed portfolio has performed over the past decade. For instance, a 6/10 risk portfolio yielded 43.4% over ten years, significantly exceeding the average return of 36.7% with similar funds. The 5/10 risk portfolio grew by 31.9% during the same timeframe, against a comparison of 36.7% with its peers.

Any other? Those seeking additional assistance can access complimentary guidance for general inquiries or receive full financial advice starting from £900.

MoneyBox

Who? Founded in 2016, MoneyBox focuses on savings and investment, boasting over 1.5 million users and overseeing assets exceeding £10 billion.

Minimum investment: You can initiate an account with just £1.

Investment Choice: MoneyBox provides three primary options: cautious, balanced, and adventurous. The cautious option minimizes risk with a portfolio comprising only 15% company stock, 40% bonds, and 40% cash, whereas the adventurous option allocates 80% to stocks, 15% to cash, and 5% to bonds.

Fee: A single monthly subscription fee encompasses transaction costs. Subsequently, in addition to a platform fee of 0.45%, there’s an actual investment cost of 0.17% for core funds. Thus, anyone investing £3,000 in a balanced fund will incur approximately 0.85% in total costs, around £25.60 annually.

We like: The Roundup function. By linking your bank account or credit card to the app, you can round up your spending to the nearest pound, automatically investing the difference. For instance, if you spend £1.87, 13p will be rounded up to £2 and invested. This is a convenient method to enhance your contributions.

Any other? Confident investors may opt to select their own ETFs to invest in rather than choosing a pre-made portfolio. Alternatively, those interested in picking specific companies have limited options, as only US stocks are currently available.

Doddle

Who? DODL, a newcomer that debuted in 2022, is operated by wealth management powerhouse AJ Bell, established in 1995. DODL simplifies the process with lower minimum investment amounts than its parent firm, although it offers limited investment choices.

Minimum investment: Direct debits can start from £100 or £25 per month.

Fee: The annual fee includes 0.15% for management, £1 monthly, and 0.31% for core investments, totaling around £19.30 yearly for those investing £3,000.

Investment Choice: DODL offers a selection of off-the-shelf funds categorized by risk, from cautious to global growth. You can also pick individual stocks, browsing by region (UK or US) and sector (financial, health, technology, etc.).

We like: The variety of themed investment options. This enables access to relevant ETFs based on emerging trends. For example, the “Above the World” theme invests in the HSBC FTSE All-World index, comprising multiple large companies globally, with a fee of 0.13%. Other themes include the “home team” for UK-centric investments and the “robo revolution” for funds focused on robotics companies.

Any other? Enjoy competitive interest rates of 4.25% (variable) on uninvested cash.

Wealthify

Who? Established in 2014 and currently owned by insurance leader Aviva, Wealthify serves around 100,000 users with a strong emphasis on simplicity and avoiding jargon.

Minimum investment: Currently, ISAs start at £1, and pensions require £50, but from June 25th, junior ISAs will also start at £1 while stocks and shares ISAs and pensions will begin at £500.

Investment Choice: Wealthify has five risk levels: cautious, tentative, confident, ambitious, and adventurous. The cautious portfolio contains 85% government debt assets and just 5% company stock. In contrast, the adventurous options comprise 74% stocks and 14% government bonds, including investments in real estate and infrastructure.

Fee: A platform fee of 0.6% covers portfolio management costs. The investment cost can be 0.16% for typical portfolios and 0.7% for ethical options. This results in an annual fee of £22.80 for a £3,000 investment in a standard portfolio or £39 for ethical options. There’s no minimum fee.

We like: The Outlook page provides a concise overview of investment regions and assets, offering a convenient way for investors to gain insights without extensive research.

Any other? Wealthify showcases numerous customer service awards on its site—a reminder to consider factors beyond fees and investment variety. Always conduct your own research and review independent evaluations before choosing a provider.

MoneyFarm

Who? Originating in Italy, MoneyFarm expanded to the UK market in 2016. It currently supports around 160,000 active users and manages over £5 billion in assets, backed by major investment firms including M&G and Allianz.

Minimum investment: £500.

Investment Choice: Managed funds feature seven risk levels, regularly revised by their investment teams. For example, the 6/7 risk option includes 72% developed market company assets and 10% from emerging markets, while the 2/7 risk option primarily invests in bonds.

Fee: Those investing £3,000 in a proactively managed option incur a 0.3% fee in addition to a 0.75% management fee, totaling approximately £31.56 a year. For fixed allocation options adjusted annually, the management fee ranges from 0.17% to 0.45%, resulting in a total of around 0.62% or about £18.60 annually.

We like: The platform provides a clear breakdown of each portfolio, detailing investments by asset type, region, and sector, along with concise explanations.

Any other? Similar to many of these apps, MoneyFarm allows you to apply environmental, social, and governance (ESG) criteria to your investments, which can lead to tailored options excluding industries like heavy polluters and companies with poor human rights records. However, opting for this may increase costs.

You need to know

• Before opting for a robo-advice app or service, ensure that the firm is regulated by the UK’s Financial Conduct Authority (FCA).

• Make sure the provider is a member of the Financial Services Compensation Scheme (FSC), which safeguards up to £85,000 in funds should the provider collapse.

• Most platforms have various account types available, but ISA stocks and shares typically offer the best returns. You can contribute up to £20,000 per year into an ISA, allowing all interest and growth to be exempt from HMRC, keeping all your earnings intact.

• Regarding fees, expect a percentage of your investment to be charged. For instance, investing £1,000 with a 1% fee would incur a £10 annual charge. However, be sure to verify the exact fees, as minimum charges may apply.