A portfolio is just a collection of investments. We will build and manage your portfolio based on your investing goals.
InvestEngine’s sophisticated algorithms will select the best investments for your portfolio – investing your money passively in low-cost, index-tracking exchange-traded funds (ETFs).
And by taking on the right level of investment risk for your portfolio, we improve your chances of higher returns.
We also aim to offer truly diversified portfolios. This means avoiding risks associated with investing too much in a specific asset class, industry, company or country.
InvestEngine uses model portfolios as an efficient way of managing your money. A model portfolio is a carefully selected number of funds that work together to achieve a target return for a given amount of risk. It is our job at InvestEngine to produce the best mix of funds to have the best chance of meeting the model portfolios target return.
Your investor profile is based upon the questions we ask you when you open your account and any subsequent updates we have about your financials situation and goals. Your investor profile is matched to one of our model portfolios and investments will be managed in line with that model portfolio.
No, we are a discretionary investment manager which means that we build, manage rebalance your portfolio for you.
When you first create your account, our sophisticated algorithms will allocate you a portfolio based on your financial situation, risk tolerance, financial experience and age.
Once we have selected a portfolio for you, the only way to further customise it is by changing your asset allocations. If you choose to overlook our recommendations, we will alert you with a warning stating that you may not have selected the most optimal portfolio.
We will periodically ask you to provide us updates on your financial situation, risk tolerance and financial experience – if there have been any significant changes, we will determine a new optimal portfolio for you. And of course, you retake our smart questionnaire at any time.
Modern Portfolio Theory (MPT) earned its pioneer Harry Markowitz the Nobel Prize in economics in 1990.
And the investment methodology continues to serve both institutional and individual investors well through all kinds of markets.
MPT allows us to construct an optimal portfolio taking into consideration the relationship between risk and return. One of MPT’s principles states that the more risk you are willing to take on, the greater the returns you are likely to achieve.
So once we know your particular level of risk, we can construct a portfolio that maximises the expected return of that portfolio for a designated level of risk.
Another of its principles states that asset class diversification is crucial to enlarging your returns for the amount of risk that you are comfortable accepting. Under MPT therefore, it is incorrect to consider the potential returns and risks of just a single stock.
This can be illustrated in the following example. A portfolio has two stocks: one that does well when it rains and another that performs well when it doesn’t rain. This means that the portfolio will realise gains come rain or shine. Although this is a simplified example of diversification, it also highlights the importance of choosing the right combination of assets to diversify a portfolio.
To reap the true benefits of diversification, we invest in a blend of asset classes, industries, companies and countries to lower your overall market risk. This is because no single asset class performs best in all economic environments and different asset classes tend to react differently to the same event.
Having a diverse portfolio will – by definition – be inherently less risky than holding just a single stock. That is why ‘don’t put all your eggs in one basket’ is sound investment approach that we always apply to your portfolio.
And it is why we use exchange-traded funds (ETFs) – which can track anything from stock indices to stock market sectors, commodities, currencies and bonds – to help us achieve true diversification.
In addition, long-term market data continues to validate MPT. It even performed better than most other strategies during the financial crisis. Of course, MPT does not protect you from losses in all markets and does not claim to be able to mitigate ‘systemic risk’. But MPT investors who held fully diversified portfolios saw their losses in 2008 cushioned by holding certain asset classes that weathered the financial storm better.
It makes sense to diversify your investments because no single asset class performs best in all economic environments and different asset classes tend to react differently to the same event.
‘Don’t put all your eggs in one basket’ is sound investment approach.
Although we would go further and say diversification is the most important factor in achieving long-term investment goals, as it reduces the risk associated with a given expected return.
Thus, diversification enables you to achieve a higher return for the same level of risk.
And ETFs play a crucial role in all of this, as they provide instant diversification – if used correctly.
That is why we build you a robust, globally diversified portfolio using a carefully selected blend of ETFs tailored to your individual risk tolerance; avoiding risks associated with investing too much in a specific asset class, industry, company or country.
There is nothing preventing you from replicating an InvestEngine portfolio but monitoring and rebalancing a portfolio takes significant time, effort and money. Trading fees alone for an individual investor looking to set up or alter their portfolio could dwarf any InvestEngine fee.
We operate and buy ETFs in bulk, which means we can keep our fees low.
InvestEngine’s style of investing is a bit like servicing a car. A car may remain roadworthy for some time, but when it needs fixing it can become quite technical and expensive to remedy before it works properly again. Similarly, a portfolio may stay on track for a few months, but if, for instance, you don't rebalance you will end up with an asset mix that does not match your risk tolerance.
Very few people fix their own car themselves today. Similarly, most investors prefer experts to manage their money for them, so they can focus on the important things in life - that is why it is our mission to make expert investment management accessible to all and not just the wealthy few.
We make no bones about it, we do not attempt to time the markets.
Unless you have a time-travel machine, there is no sure-fire way to time the market. Studies have shown that even professional investors cannot time market highs and lows. Investors who do try almost always hurt their performance over time.
Instead, we like to keep things simple and invest your money passively in index-tracking ETFs. We spread your portfolio across key asset classes with buy-and-hold investments for the long term. You just sit back and reap the market’s returns.
But if you do want to play the markets, we suggest you seek out an active investment manager or a brokerage that allows you to execute your own trades instead. Be warned, though, when it comes to investing, slow and steady usually wins in the long run.
When you fund your account at InvestEngine, your money is used to buy ETFs in the proportions that you have agreed to as part of the on boarding process.
Over time, various securities and asset classes within your portfolio will earn different returns due to market movements. This has the effect of altering your portfolio’s asset allocation.
Rebalancing is the important process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state.
Essentially, rebalancing will help you stick to your investing plan regardless of what the markets do.
Your portfolio is monitored continuously. Each ETF position within your portfolio has allocation tolerance range in which the value of that position can go up or down; if the value of the ETF breaches this range, then a corrective buy or sell order may be triggered. Corrective actions are taken as long as it makes sense to do so with due regard to the total portfolio allocation positions.
When you add or withdraw money from your InvestEngine portfolio, InvestEngine will take this as an opportunity to rebalance your portfolio, again if it makes sense to do so. For example, if you had a portfolio worth £10,000 and there was a cash deposit of £100, transactions would only be undertaken if the deposit and the value of ETF positions necessitated it, otherwise the £100 would probably be used as part of the optimal cash balance held for each portfolio. Similarly, if you wanted to withdraw £100 from this example portfolio, it would probably be taken from the cash position of the portfolio rather than any rebalancing transactions.
Rebalancing restores portfolio weightings to their target allocations by selling assets that have appreciated and adding to those that have declined. It reduces risk, and has also been proven to increase returns.
In addition, we will also rebalance your portfolio if your investment strategy or tolerance for risk changes.
One of the first decisions you need to make as an investor is whether to follow an ‘active’ or ‘passive’ investment strategy.
Active investing means picking individual stocks – either by paying to use an investment manager or doing it yourself through a broker. An investment manager, for instance, will make judgement calls based on their personal view of the market or the prospects of an individual stock.
This translates into buying and selling stocks on a regular basis – and trying to time the market to identify the best times to be in the market and when to get out.
The trouble with active investing is finding an investment manager who will consistently beat the market; not to mention the high fees they charge for their services.
Passive investing, meanwhile, is rapidly gaining in popularity –and is set to overtake active investing, according to a recent Moody's report.
In a nutshell, it is the complete opposite of active investing, with passive investors believing that individual stock picking and market timing are something of a fool’s errand. Accepted research over many decades backs this view up.
Instead, passive investors rely on a long-term strategy of buying and holding a portfolio of securities – very often in a range of asset classes – that track broader market indices. This enables them to reap the benefits of market gains and at a fraction of the cost of an active investment manager.
ETFs have facilitated this rise in passive investing; offering a cheap and easy way to invest in multiple asset classes.
All of your investments are in highly liquid securities that are listed on the world’s major stock exchanges with transparent daily official pricing. At the end of each trading day, InvestEngine will price your portfolio's securities using the closing stock exchange prices which is standard practice for the investment industry.
The performance of your investment account is calculated using a money-weighted calculation on each business day. This gives you an accurate measure of the performance because it considers individual cash flows – these cash flows could be money movements from dividends, account top-ups or withdrawals - if you add or withdraw money from your investment account this affects the performance of your investments.
As a passive investor, we try to be the market and mimic broad indices like the FTSE 100.
Our low-cost portfolios of index-tracking ETFs are specifically designed to match the performance of markets, giving you more certainty over the long term. Where we try to slightly improve on the market is through our expert diversification and rebalancing techniques.
We also don’t charge high fees like many active investment managers in trying to beat the market, although few rarely do. Many studies have repeatedly shown that while active managers can enjoy short-run success, very few actually outperform the market on a consistent basis when their fees are taken into account. Why pay more for less?
An algorithm is just a fancy-sounding word that means a step-by-step way of solving a problem by computer code.
Algorithms can be designed to be very simple in nature or extremely complex.
They are also ubiquitous; not only are they used by computer scientists, but they power everything today from dating apps to mortgage approvals. They are also now a staple of the investment world as they process reams of data in milliseconds – something which would take a human many hours.
The sophisticated algorithms we use have all been carefully crafted by our award-winning investment team. Their main function is to select the best investments for you based on your personal circumstances.
And with an algorithm, you get the same sort of investment planning at a fraction of the fee of a traditional investment manager.
Yes, you can. With InvestEngine, you can invest via a one-off payment (via Direct Debit or bank transfer) or set a Direct Debit for regular/monthly payments.
With regular payments, you increase your saving discipline and you can build up your wealth over time. Any payments to your account will be invested in your chosen portfolio and we will always monitor your portfolio to ensure it continues matching your financial situation and investment goals.
Like all market investments, your capital is at risk. The value of your portfolio with InvestEngine could go down as well as up and you may get back less than you invest.
Although historic data suggests that while it is hard to predict short-term market movements, over the long term your investment is likely to increase.
As with all investing, you do have certain investment risks that you will need to consider.
Past performance is not an indicator of future performance and the value of your investments may go down as well as up.
There is, however, little risk associated with using InvestEngine itself. Your investments are held with our ‘custodian bank’ Crest, a separate nominee company, adding an additional layer of security.
If you want to find out more about your risks, please read our risk disclosure statement.
As ETFs always collect the full dividend of all constituent stocks, these dividends are then added to your account.
The ETFs we invest in are either ‘distributing’ funds, which pay out dividend income on a periodic basis, perhaps quarterly or annually, or an ‘accumulating’ fund, which will automatically reinvest any dividend income received back into the fund.
The distinction is negligible as both distributing and accumulating funds amount to the same thing - you receive the dividend payment.
Where appropriate, any distributing fund dividends added to your portfolio will be reinvested by InvestEngine to ensure risk levels are maintained.
The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. Learn more about the risks
InvestEngine (UK) Limited does not provide investment advice, or give recommendations. If you are unsure of the risk or of the suitability of an investment, you should seek advice from an independent financial adviser.
InvestEngine® is a trading name and registered trade mark of InvestEngine Limited. InvestEngine (UK) Limited is Authorised and Regulated by the Financial Conduct Authority. The Firm Reference Number is 801128. InvestEngine (UK) Limited is incorporated in the UK with company number 10438231 and has its registered office at Lawford House, Albert Place, London, United Kingdom.