The UK’s historic vote to leave the EU caused turmoil in global financial markets –did the new wave of online investment services weather the storm?
Last Friday saw the first real test for UK online investment services (or robo-investors) with the surprise Brexit vote resulting in the biggest drop in Sterling in 31 years and UK markets seeing their worst performance since Black Wednesday in 1992.
So how did we fare?
The short answer for Wealthify is, we did pretty good. Performance for the week was encouraging across all our customer Plans, with a majority seeing positive growth by close of trading on Friday.
Our modest gains were achieved despite a tide of negative performances across UK stock and currency markets, with leading UK, US and European indices all closing negatively on Friday and shares in some FTSE 100-listed companies plummeting by as much as 45%* on the Brexit announcement.
Market events on Friday clearly highlight the risks faced by do-it-yourself investors self-selecting and managing their portfolios.
At Wealthify, we were able to limit the impact of the Brexit market shock through careful positioning of customers’ Plans ahead of the Referendum vote. Our investment team correctly anticipated that the Pound would struggle significantly and took measures to ensure we retained substantial exposure to foreign currency markets.
Most DIY investors however just don’t have the luxury of such insight, or the ability to act quickly and effectively to protect their capital. Online investment services (or robo-investors) meanwhile have access to swathes of market analysis and the expertise to adjust investments accordingly. So, while events like those seen on Friday are relatively rare, they will typically hit the pocket of the amateur investor harder, forcing them either to keep their money tied up for longer in the hope of a market bounce-back or panic, sell and take the hit.
So, robo-investing arguably passed its first real test, but does it represent value for money?
The costs of robo-investing are amongst the lowest you will pay for any investment management service. And events like Brexit show the true value of having professionals looking after your money. In the example of a £1000 investment plan, Wealthify’s 0.7% annual fee would amount to £7 a year – for that, you get 12 months’ worth of 24/7 expert investment management with all costs included. Food for thought for would-be stock pickers everywhere.
Looking ahead, market uncertainty across the UK and EU is set to continue for some time. At Wealthify, we’ll continue to position Plans optimally to ride out the storm and take full advantage of the right opportunities to further protect and grow our customers’ Plans. DIY investors, perhaps feeling bruised and hoping to limit any further losses, may do well to take another look at what robo-investing can do for them.
Please remember that the value of your investments can go down as well as up and you can get back less than invested.
*Source: Bloomberg 24.06.16.