In April 2016 I invested some money with the Nutmeg investment platform. It turned out to be one of my better investments, so today I thought I’d say a bit more about it.
What Is Nutmeg?
Nutmeg is a low-cost online investment platform. It is aimed at people who want to invest in stocks and shares to take advantage of the potentially better returns, but don’t want the hassle of researching every investment themselves.
With Nutmeg you simply choose the type of account you want and say how much risk you are comfortable with and how long you want to invest your money for. You can deposit a lump sum and/or set up monthly payments. Nutmeg then invests your money in a range of Exchange Traded Funds (ETFs).
For those who don’t know, ETFs are a package of shares from a particular section of the stock market. For example, an ‘Asia Pacific ETF’ is a collection of shares from the Asia-Pacific region. ETFs are different to most investment funds in that they don’t usually have a manager running them. Instead, most ETFs are run by computers that regularly balance their portfolios automatically. This helps keep costs low, while still producing respectable returns in most cases. You can learn more about ETFs here if you wish.
Nutmeg currently has four different types of investment product on offer. They are as follows:
ISA (individual Savings Account) – These accounts have to be funded from your after-tax income, but they grow tax-free and withdrawals are also free of tax. Everyone has a maximum annual ISA allowance, which is currently a generous £20,000.
SIPP (Self Invested Personal Pension) – A SIPP has the big attraction that you get tax relief on your contributions, so the government effectively tops up every contribution you make. On the downside, you can’t withdraw money from a SIPP until you are at least 55, and only a quarter of the money you withdraw is tax-free, with the balance counting towards your total taxable income.
Lifetime ISA – A Lifetime ISA, sometimes called a LISA for short, is a new tax-efficient saving vehicle launched this year. You can use a LISA for one of two specific purposes – buying your first home or saving for retirement. You have to be under 40 to open a Lifetime ISA. The government will then top up any contributions you make with an extra 25%.
General Account – This is for when you have used up all your other tax-free savings allowances. You can use this for whatever you like, but there are no tax benefits or top-ups.
My Own Experience
I invested £6,188 in a Nutmeg ISA in April 2016. If you’re wondering why it was such an odd sum, I put in £6,000 from my savings. The other £188 came from another small ISA account I thought I might as well transfer at the same time.
Since then, despite the challenging economic environment, my investment has grown by £1,832 to £8,020. That’s a 22.85% increase in a year and eight months. Needless to say, I wish I had put in a bit more money now! Here’s a chart showing how my investment has grown.
As you will see, I accepted a high risk level with this account, which may partly explain the performance achieved.
As you will also note, Nutmeg charge a fee of 0.75% a year on investments of up to £100,000, and 0.35% on investments beyond that. That’s competitive compared with traditional mutual funds, although you can find cheaper investment opportunities and platforms if you look around. You may or may not get such good overall results, of course.
A reader asked if Nutmeg reveal what ETFs your money is invested in. The answer is that they do. In case you are interested, here is a screen capture from the website showing how my money is currently invested…
I am obviously a fan of Nutmeg and intend to use their service again in future. Of course, I am not a qualified financial adviser and everyone should do their own research (and/or take professional advice) before deciding to invest with Nutmeg. Based on my own experiences, though, I am happy to recommend them. They provide a simple, easy to understand investment platform, the customer service is excellent, and certainly in my case the results to date have exceeded my expectations.
If you are considering investing with Nutmeg, you might like to know that until January 5 2018, they are running a special promotion where if you join and invest at least £500 and commit to investing a further £100 a month, you will get £50 worth of John Lewis vouchers as a bonus. Alternatively, you can make a single investment of £5000 or more to qualify for the vouchers.
If you are interested in taking advantage of this offer, please contact me using my blog contact form and let me know your full name and email address. I will then arrange for Nutmeg to email you with full details. Obviously there is no obligation to proceed further if you decide against.
Disclosure: As stated above, I am a Nutmeg account holder myself. If you decide to take advantage of the promotion above, I will also receive a £50 John Lewis voucher as recompense for introducing you. This will not have any effect on the terms you are offered or the performance of your investment.
If you have any comments or questions about this post or Nutmeg in general, please do leave them below.