The 2020 ASX Investor 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 managed 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.
Whether you’re already invested in the share market, or you’re getting started, we outline how Stockspot compares to managing your own investments.
Build a diversified portfolio instantly
We often talk about the benefits of having a diversified portfolio rather than only investing in a handful of local or global shares. Holding a diversified portfolio of a mix of global shares gives you access to better return opportunities than just holding Australian shares.
Stockspot portfolios include the S&P Global 100 Exchange Traded Fund (IOO) which tracks the top 100 stocks in the world, as well as an Emerging Markets ETF (which invests in developing, high growth economies).
Building your own diversified investment portfolio takes a lot of time and effort to research the best shares (or ETFs) across different regions and across different asset classes.
With Stockspot, we build a personalised, diversified portfolio for you instantly – and you don’t need hundreds of thousands to start, only $2,000!
Having a mix of assets such as gold and bonds also gives you even more diversification, and help you when global or local stock markets fall (as gold and bond typically rise when this happens).
Saves time and risk
Our service automates many of the jobs you would be doing yourself to effectively manage your own investments, including choosing the best products, portfolio allocation across different assets, rebalancing your portfolio and reinvestments.
- We constantly review the ETF landscape to ensure your portfolio has the right mix of the best low-cost ETFs so you don’t have to spend days or weeks researching the local and global markets.
- When you receive distributions or make additional contributions to your portfolio, 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.
In its Adviser’s Alpha whitepaper, Vanguard showed that selecting the best low-cost products, maintaining a suitable investment mix for your situation, automatic rebalancing, automated reinvesting and behavioral coaching can add over 3% p.a. in better performance every year.
By automating these activities, we can keep the costs of these processes lower than a traditional fund manager and compress the time it would take to manage them yourself.
Helps you avoid mistakes
While you could in theory manage investment selection and rebalancing, in practice most of us make common costly behavioural mistakes when we have to make lots of investment decisions.
We’ve 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 analysing individual investor behaviour for more than 20 years compared this to just matching the index (eg. an Exchange Traded Fund), consistently found the average investor loses approximately 4% per year from these common behavioural mistakes.
One of the benefits of using an automated service is that you won’t be making these common errors – you let the algorithms do all the hard work for you.
Avoid costs like brokerage fees
Stockspot offers automatic direct deposits from your own bank account into your investment account to make it convenient to commit to a disciplined investment strategy by gradually adding your savings on a regular basis (‘averaging-in’ or ‘dollar-cost averaging’).
Automating regular investments – without having to pay brokerage each time like you would with say your CommSec or NabTrade account – can make a difference to your portfolio over a period of years, as otherwise those fees constantly eat into your potential returns.
Changes with your situation and goals
Most investment products are static –i.e, they don’t change as your personal situation changes over time.
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 time-frame or risk appetite.
Stockspot’srecommendations 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 change, 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, time-frame and personal risk profile.
For some people, managing your own investments can be a rewarding hobby. However the value of behavioural guidance and the benefits of automation – including lower costs and less time needed – make investment services like ours a great alternative if you don’t have the time or don’t want the hassle of constantly managing your investment portfolio.
