Better investing on autopilot

autopilot-banner
 
Almost 6 million Australians own direct shares or Exchange Traded Funds (ETFs). As a result, one of the questions we often get is “How does Stockspot compare to managing my own investments?”.

Certainly the trend over the last 10 years has been towards more people investing themselves. The latest ASX Share Ownership Study highlighted that direct ownership of shares and ETFs has rocketed over the past decade while interest in managed funds and professional advice has fallen. This is understandable given the high costs and below-average results that many professional funds have delivered over that time. Also as information and tools have become more easily accessible online, a larger number of people are taking an interest in investing themselves.

So why use a service like Stockspot rather than manage your own portfolio? While it might not be right for everyone, there are a few ways most people can benefit from an automated investment service like ours rather than managing their own investments.

Saves time and the need to watch markets

Our service automates many of the jobs you would need to be doing yourself to effectively manage your own investments, including product selection, portfolio allocation, rebalancing and reinvestment.

  • We are constantly reviewing the ETF universe to ensure that your portfolio contains the right mix of the best low-cost products.

  • When you receive distributions or make additional contributions to your account we rebalance your investments back to their target mix so that you don’t need to spend time monitoring markets.

  • We periodically rebalance your portfolio back to your target investment mix when the investments move significantly from their target allocation so that your portfolio does not become more risky over time.

Studies have shown that investment selection, efficient portfolio allocation, automatic rebalancing and automated reinvesting can add over 2% p.a. in pre-tax performance each year1, so there is a real value in the automation of these processes. Not everyone has the time or desire to watch markets and keep track of investment products – so for that group, an automated service like ours can save a lot of time, cost and hassles.

Helps you avoid behavioural mistakes

While many people could in theory manage investment selection and rebalancing, in practice most people make common costly behavioural mistakes when given full control of their investment decision making. We have discussed some of the more common cognitive mistakes before, including trying to time the market, buying into expensive funds, not diversifying enough or panicking during market dips.

A US investment research firm that has been analysing individual investor behaviour for more than 20 years has consistently found the average investor loses approximately 4% per year from behavioural mistakes2. One of the benefits of using an automated service is that you are prevented from making these errors.

autopilot-average-returns
Source: DALBAR

We also offer automatic direct deposits from your own bank account into your investment account to make it convenient to commit to a disciplined savings strategy by gradually averaging-in to your investments. Automating regular investments without having to pay brokerage each time can really add up over a period of years.

compound-interest-chart-3
Assumes an initial amount of $2,000 at 9% return per year

Keeps up with your situation and goals

Most investment products are static so don’t consider your personal situation. The same can be said when you own a portfolio of shares or ETFs. This means that the onus is on you to work out when the strategy should be updated based on changes in your circumstances or goals. Many self-directed investors ignore these changes, which is why many people took on too much risk going into the Global Financial Crisis (GFC) and their investment strategy wasn’t consistent with their timeframe or risk appetite.

Our investment recommendations are personalised for each client and reviewed at least annually because we believe this leads to better outcomes and a much lower chance of bad surprises for clients. Whenever your personal circumstances changes, we review your financial situation to ensure that your investment strategy stays relevant. This means our clients can have peace of mind that their investment strategy is suitable for where they are in life, their goals, timeframe and personal risk profile.

 
For some people, managing their own investments can be a rewarding hobby. However the value of behavioural guidance and the benefits of automation make investment services like ours a great alternative for those less interested in being actively involved.
 

Low fee, hassle-free investing

Stockspot is Australia’s fastest growing automated investment service. We can help you build and manage a personalised portfolio tailored to your financial situation and your goals. With Stockspot, there’s no paperwork, no need to be an expert and no hassles.

See what we recommend for you

 
1 Arnott, Robert D., Andrew Berkin, and Jia Ye., 2000. “How Well Have Taxable Investors Been Served in the 1980s and 1990s?” Journal of Portfolio Management, No. 4, pp. 84-93
2 2014 DALBAR QAIB Highlights Futility of Investor Education

Image: Lwp Kommunikáció via Flickr

Related posts

 

Chris Brycki

Stockspot Founder and CEO

Leave a Reply

Your email address will not be published. Required fields are marked *