What’s the appeal of online investing?
Are you cautious or risk hungry?
Since its launch in 2016, thousands of customers have used the NatWest Invest service to take the hassle out of investing.
“From launch in 2016 until the end of July this year, the fund that takes least risk has returned the annual equivalent of 5.5%, while the highest risk fund has returned on average 13% per year.”
- Nick Johnson, Wealth & Investment Management, Coutts
Please note that the performance figures quoted are net of fund charges and costs, and are based on latest data up to 31 August 2019.
Taking away the difficulty
According to Nick Johnson, from the Wealth & Investment Management team at Coutts - which manages the funds for NatWest’s online investing service - a key part of the appeal of ‘NatWest Invest’ is that investors do not have the challenge of working out how to spread their money among shares and bonds, in order to manage risk.
“For DIY investors creating their own portfolios, it’s incredibly hard and time-consuming to get it right,” he explains. “Making sure you’ve got the right amount invested in different asset classes and geographies is actually a very difficult thing to do. And it’s crucial not to get this process, known as asset allocation, wrong because the academic research shows that over time it’s this part in particular that drives the vast majority of returns. Much more so than, for example, picking out individual company shares.”
Having a fund managed by experts also means that, as some assets grow and others perform less well, it can be monitored and rebalanced to ensure it stays at the risk level the investor is comfortable with, says Johnson.
He adds that around 60% of NatWest Invest customers put money into their funds on a regular basis. “That’s an efficient thing to do and it gets you into the habit of investing: in our experience, most people have their monthly contributions come out on the day they get paid, so they don’t really even have to budget for it.”
As Johnson explains, investing always comes with a risk of loss, but markets have by-and-large performed well since the bank launched its online investment platform.
“Last year, however – and especially the back end – was a very challenging time,” he says. “But since the start of 2019 those market dips have largely recovered. If we look at year-to-date performance of our online funds, the lowest risk one has returned 8.6%, while the highest risk fund has returned 15%. In our view, this shows the benefits not being overly distracted by short-term market conditions, such as those at the end of 2018.”
He expands on this point by reflecting on those investors who felt compelled to cash in their investments in the bumpy tail end last year, as a means of protecting themselves: “Up until that point, although the funds were down for the year, their annualised returns since inception were still positive. If an investor decided to sell at this time, rather than sitting tight, they will have crystallised their short-term losses and then also missed out on the subsequent recovery period.”
Looking at the overall performance of the five funds, Johnson says he is pleased, especially with the low-risk fund. “From launch in 2016 until the end of August this year, the fund that takes least risk has returned the annual equivalent of 5.5%, while the high-risk fund has returned on average 13% per year,” he says. “It’s particularly rewarding to see how well the low-risk fund has done. Investors in this fund may be people who are investing for the first time, and/or who are naturally cautious, so I hope they are really encouraged to see the level of return that we’ve achieved, without having to take too much risk.”
On the same annualised basis, Johnson adds, the low to medium-risk fund has returned 7.4%; the medium-risk fund 8.8%; and the medium to high-risk fund 10.7%.
After an encouraging start for the online service, Nick and his team are hoping more people will start using Natwest Invest as part of their wider financial planning.
Please remember investments can fall as well as rise, you may not get back the full amount you invest. Past fund performance is not an indication of future returns and should not be relied on as such. Eligibility criteria, fees and charges apply.
Past performance history of NatWest Invest's five funds
Personal Portfolio Funds
Year to date
Since inception (annualised)
It’s important that you make sure you can afford to invest for the long term, before you invest. As long as you’re aware of the potential highs and lows of markets, any time can be a good time to invest.
Rather than trying to start at the perfect moment in terms of market movements, it’s better to consider when investing might serve your wider financial planning needs. Have patience with your investments and give them time to bear fruit.
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