Investors with low-risk portfolios are more likely to be suffering large losses in 2022, according to data from provider Boring Money.
Ready-made portfolios are popular with novice and DIY investors because they combine different diversified investments into one fund. They are usually split into different risk categories and are managed by the provider, but investors can conveniently keep track of their investments on the platform.
However, ready-made portfolio investors have had a tough time this year. All ready-made investment portfolios have recorded negative returns since the beginning of 2022. But it’s those playing it safe who have suffered the biggest losses.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Low-risk portfolios underperform high-risk ones
Eight portfolios or funds in the bottom ten by performance this year have been low or medium risk ones.
Eight of the top ten worst performing funds in 2022 market themselves as being low or medium risk.
The average low-risk portfolio has returned -12.7% year-to-date, while the average high-risk portfolio has seen an average return of -11.7%.
“There are many factors behind these performance numbers,” says Holly Mackae, CEO of Boring Money. “From the expected underperformance of ethical options which exclude fossil fuels, the upheaval in bond markets and especially UK bonds, and also the approach taken to hedging in light of a strong US dollar."
Boring Money’s data evaluated the performance of 33 leading ready-made investment portfolios from ten of the industry’s main providers, including AJ Bell, Hargreaves Lansdown, Vanguard, Moneybag and Nutmeg.
Out of the top 10 best-performing ones, only three were low-risk while five were high-risk. Moneybox topped the chart with its “Cautious” investment option (low-risk) returning -3.42% year-to-date.
AJ Bell’s “Adventurous” offering,(high-risk), wasn’t far behind, returning -3.52% year-to-date. The platform’s medium-risk Balanced option returned -4.92% making it the third-best performer on the list.
Other high-risk strategies on the list included HSBC’s Adventurous fund with a return of -9.13%; Vanguard LifeStrategy’s 100% Equity Fund returned -9.62%; Moneybox’s Adventurous fund 9.94% and Natwest Invest’s fund 5 - High Risk returned -10.39%.
Which were the worst-performing low-risk portfolios?
Wealthify’s ethical, high-risk adventurous offering was the worst performer, returning -21.40% year-to-date.
Santander DA’s multi-index Fund 1 and Fund 2, with low and medium risk levels respectively, returned -20.84% and -18.37%.
All the other funds on the list managed medium or low-risk portfolios. Wealthify’s high-risk Adventurous fund was the best of the worst, with a return of -14.51%.
“Although NINE months is not long enough to support any conclusions about a provider’s performance credentials, it is long enough to call into question again the description and positioning of ‘ready-made’ portfolios to novice investors,” says Mackae. “It’s hugely difficult to get the right balance between simplicity, but also arming people with the right expectations around the journey they can expect.”
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
-
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The top funds to invest in - November 2023
Tips Investors are focused on income strategies and FTSE heavyweights. We look at what investors have been adding to their portfolios in the last month
-
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
