Moneyfarm describes itself as ‘simple, efficient and tailored to your profile - the Moneyfarm investment plan maximises your long-term returns whilst protecting your wealth’
Unlike some of its rivals, Moneyfarm is unequivocal – it delivers financial advice; it aims to make investing more accessible for first-time investors and remove the hassle from investing for more experienced investors.
Moneyfarm automatically invests your money into portfolios suitable to your own personal risk profile and financial goals; the questions asked during the signup process allows Moneyfarm to determine which investment portfolio is suitable to you by using its algorithms.
Moneyfarm’s portfolios, constructed of ETFs are continuously monitored and rebalanced on a discretionary basis; the assets within them scale according to the value of the investment – a portfolio of less than £50,000 will contain 7 funds whereas an investment greater than £50,000 will comprise 14 funds.
Its platform is well suited to individuals who want a low-cost, hassle-free investment; its simplicity makes it appealing to first-time investors, particularly those already comfortable with managing their finances online.
Your investment can be held in a tax-efficient ISA or a General Investment Account (GIA).
Moneyfarm has three basic risk based asset allocation models – high, medium and low, which underpins six different investment portfolios.
The ETFs that compose them are inherently diversified across asset types and geography; its portfolio optimisation is based on the efficient frontier concept within Modern Portfolio Theory.
Assets held are cash, short-term government bonds, developed markets government bonds, inflation linked bonds, investment grade credit, high yield credit and emerging markets government bonds, developed markets equities, emerging markets equities, commodities and real estate.
Their geographical spread is across the UK, Eurozone, US, Japan, emerging countries and other developed countries – Australia, Canada, New Zealand, Norway, Sweden and Switzerland.
The six model portfolios then serve up a combination of these assets and geographical locations according to a client’s set objectives and calculated attitude to risk; portfolios are Conservative, Cautious, Balanced, Experimental, Adventurous and Bold.
It is this inbuilt diversification that makes ETFs the ideal building blocks for Moneyfarm’s portfolios – just imagine replicating this spread of assets and geography by trying to create your own investment portfolio; then invest £1!
The Moneyfarmers monitor the volatility of the assets they hold to ensure that the risk within an individual portfolio remains as it was intended; more volatile, and thereby risky, assets are replaced when the portfolios are rebalanced every two months.
Unlike some automated advice platforms, Moneyfarm is not content to just simply track a market or an index, rather it makes affirmative investment decisions based upon its own research and by having the conviction to make investments that others may consider less attractive, it gives them the opportunity to outperform the market.
Because it has now been trading for over a year in the UK, Moneyfarm is allowed to publish its investment returns and, albeit in favourable market conditions, they have been impressive.
|Portfolio||Low risk portfolio||Medium risk portfolio||High risk portfolio|
|Actual Moneyfarm return - 1/1/2016 - 17/1/2017||17.44%||18.15%||17.82%|
|Projected Moneyfarm 5 year return (not guaranteed)||20.74%||27.94%||28.37%|
These results can be viewed in the context of a typical pension fund or other actively managed fund which returned 15.6% over the period; it also stacks up well against other popular passive investments such as Vanguard's Lifestrategy Funds or other multi manager fund - an impressive start.