The managed portfolio at a glance
The managed portfolio comes from the provider. You choose a risk level, and the provider invests your money in a mix of funds to match it. The details come from the provider's published terms.
What is the managed portfolio?
The managed portfolio is a managed portfolio. Instead of choosing individual shares or funds yourself, you answer questions about your goals and tolerance for loss, and the provider puts your money into a mix of funds that matches the risk level agreed. It then looks after that mix for you.
It sits between a savings account and picking your own investments. You give up some control and pay an annual fee. In return you don't have to research funds, decide when to rebalance or remember to reinvest dividends.
It isn't a savings account. There's no fixed interest rate, the value changes every working day, and you aren't promised your money back. Over long periods, a spread of investments has historically tended to beat cash, but not in every period and not without some bad years along the way.
How is the portfolio built?
The portfolio is a mix of funds, weighted according to the risk level you agree with the provider. Lower-risk mixes hold more bonds and cash, which usually move less. Higher-risk mixes hold more shares, which can grow faster but can also fall harder. The provider chooses the specific funds.
Spreading your money
A single fund can hold hundreds or thousands of companies and bonds across different countries. Spreading money this way means one company going bust has little effect on the whole. It doesn't protect you when most markets fall together, as they did in early 2020.
Rebalancing
When shares rise faster than bonds, the mix drifts towards more risk than you signed up for. Rebalancing means selling some of what's grown and buying more of what hasn't, to get back to the agreed mix.
How much does the managed portfolio cost?
The managed portfolio's fees are set by the provider and listed in its published charges. Log Test charges you nothing. Fees come out whether the portfolio rises or falls, so in a flat or falling year they deepen your loss. Our fees page turns the percentages into a ten-year example in money.
Percentages look small until you turn them into money. See the $10,000 worked example for how a fee adds up over ten years, including the growth you miss out on because that money is no longer invested.
| Cost | Amount |
|---|---|
| Fee charged by Log Test | None. The provider pays us for introductions. |
Who is the managed portfolio for?
The managed portfolio suits people who have an emergency fund already, can leave the money invested for five years or more, and would rather pay a fee than manage investments themselves. It's a poor fit if you need the money soon, carry expensive debt, or want full control over each investment.
A reasonable fit if you
- Have three to six months of spending in easy-access savings.
- Can leave this money alone for at least five years.
- Don't want to research funds or decide when to buy and sell.
- Have looked at the annual fee in money terms and are comfortable with it.
Probably not for you if you
- Have credit card, overdraft or payday loan debt.
- Need the money for something specific in the next two or three years.
- Want to choose your own shares or funds. A DIY platform may cost less.
- Would lose sleep over a fall of 20% or more.
How does it compare with a savings account or picking your own funds?
Compared with a savings account, the managed portfolio has higher potential growth but no fixed return and a real chance of loss. Compared with picking your own funds on a DIY platform, it costs more in fees but takes the choosing, rebalancing and record-keeping off your hands. Which matters more depends on you.
| Savings account | The managed portfolio | DIY fund platform | |
|---|---|---|---|
| Can the value fall? | No, apart from inflation eating into it | Yes | Yes |
| Who chooses the investments? | Not applicable | The provider | You |
| Typical yearly cost | None, you earn interest | Set by the provider; see its published charges | Platform fee plus fund costs, depending on the platform |
| Effort needed from you | Very little | Little | More: research, rebalancing, records |
| Protection if the firm fails | Often a deposit guarantee up to a limit, depending on the country | Depends on how the provider holds client assets and on the rules that apply to it: ask the provider | Depends on the platform and the rules that apply to it |
Where a compensation scheme exists, it never covers falls in market value. Our trust page explains what to ask the provider.
What are the risks of the managed portfolio?
The biggest risk with the managed portfolio is that markets fall and your portfolio falls with them, so you get back less than you put in. Fees reduce returns every year regardless. Other risks include needing the money during a downturn, currency swings, and the chance, however unlikely, that the provider fails.
- Market falls: in a bad year, a portfolio weighted towards shares can lose a large part of its value. Recovery can take years.
- Timing: if you have to sell during a slump, you turn a paper loss into a real one.
- Fees: they're charged in good years and bad, so they add to losses as well as trimming gains.
- Currency: overseas investments can lose value in your own currency when exchange rates move, even if the investments themselves hold steady.
- Inflation: lower-risk mixes holding mostly cash and bonds may not keep up with rising prices.
- Provider failure: if the provider failed, what you got back would depend on how it holds clients' investments and on any compensation arrangements that apply to it. Ask the provider about both before you invest. Neither would cover market falls.
Past performance doesn't predict future returns. Read the full risk disclosure and the provider's own key documents before you invest.