investing

Better investing on autopilot

Why use a service like Stockspot rather than actively manage your own portfolio?

Almost 7 million Australians invested in direct shares or other securities such as Exchange Traded Funds (ETFs) in 2018, up from 6 million in 2015.

If you are one of these investors, or are considering starting investing, you should ask “How does Stockspot compare to managing my own investments online with, say, CommSec or NabTrade?”

  1. Build a diversified portfolio instantly
  2. Saves time and risk
  3. Helps you avoid mistakes
  4. Avoids costs like brokerage fees
  5. Keeps up with your situation and goals

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 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.

So why use a service like Stockspot rather than actively manage your own portfolio?

There are many ways people can benefit from a low-cost, fully automated investment service like ours, rather than 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).

Get your personalised portfolio recommendation

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 universe 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, so there is a real value in getting these right.

By automating these activities online, we can keep the costs of these processes lower than a traditional fund manager or indeed the time it would take to manage them yourself.

Not everyone has the time or desire to watch markets and keep track of investment products – so if you’re one of those people, an automated service like ours can save a lot of time, cost and hassles.

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 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 analysing individual investor behaviour for more than 20 years compared this to just matching the index (via say 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.

 

autopilot-average-returns
Source: DALBAR

Avoids costs like brokerage fees

We also offer 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.

 

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 – that is to say, they don’t change as your personal situation changes over time. 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 time-frame or risk appetite.

Our 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, time-frame and personal risk profile.

For some people, managing your own investments can be a rewarding hobby. However the value of behavioral 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.

Find out which Stockspot portfolio we recommend for you.

This article was originally posted in July 2015 and has been re-published with updated information in March 2019.


Founder and CEO

Chris has been vocal in calling out the industry 'Fat Cats' and is known for telling it as it is. He sits on two Advisory Committees for the industry regulator ASIC, and was previously a fund manager at UBS. He holds a Bachelor of Commerce (Accounting/Finance Co-op Scholarship) from UNSW.

Grow your wealth effortlessly

Get your free personalised portfolio recommendation

Get started
cloud
Join thousands of Australian already investing with Stockspot