How to get a cheap investment portfolio tailored to you

A new breed of investment companies are aiming to take the hassle out of picking investments to put in your stocks and shares ISA and, crucially, create a portfolio that reflects your appetite for risk.

The idea is that, rather than paying a wealth manager to assess your risks, the likes of Nutmeg, Wealthify and MoneyFarm tailor a portfolio of investments for your needs and then manage your portfolio for you, you simply use a computer programme instead.

You sign up to an investment portfolio based on your risk profile then computers manage the portfolio for you.

But how do the companies compare?

What they invest in

Wealthify invests in a range of assets including shares, cash, corporate bonds, Government bonds, and commodities.

It keeps costs down by mainly focussing on passive investments, such as Exchange-Traded Funds (ETFs) and tracker funds that don't incur additional fund manager costs.

MoneyFarm invests in bonds, equities, commodities and currencies just as a traditional wealth manager would.

But, like Wealthify, it does so via ETFs in order to keep costs down. This means investments track market indices.

The good news is you're not paying a premium for a fund manager. The bad news is your investments won't ever outperform the market.

Nutmeg also invests via ETFs in equities, corporate and Government bonds and cash.

Minimum investment

Earlier this year, Nutmeg cut its minimum investment from £1,000 to £500.

When the reduction was announced, Nick Hungerford, CEO of Nutmeg, said: "We are crushing these barriers to entry and are dedicated to making to quality investing available to everyone.

There is no reason why somebody with £500 shouldn't get the same quality of service – a professional investment team, diversified, regularly rebalanced portfolio – as a millionaire."

Note that if your portfolio is smaller than £5,000 you have to make a monthly contribution of at least £100.

Wealthify has a minimum investment of £250, while MoneyFarm has no minimum investment.

Fees

MoneyFarm charges no management fees on portfolios worth less than £10,000 or more than £1 million but you will pay an average of 0.25% a year in fund costs.

Portfolios worth £10,001 to £100,000 are charged 0.6% a year, while investments worth £100,001 to £1 million pay 0.4% a year.

Wealthify charges 0.7% a year on portfolios worth £250-£14,999, 0.6% for £15,000 to £99,999 and 0.5% for £100,000 and above.

You'll also pay a average of 0.28% in fund charges each year.

You can cut your Wealthify fee by persuading friends to invest with the platform. Get one person to join your 'circle' and you'll get a 5% discount on your fees. The discount gradually increases up to 20% if you manage to get 50 people to sign up.

Nutmeg charges between 0.3% and 0.95% depending on the size of your portfolio.

You'll pay 0.95% for £500-£24,999 portfolios, 0.75% if you invest between £25,000 and £99,999, 0.5% for £100,000-£499,999 and 0.3% if you invest over £500,000. On top of that, you'll pay an average of 0.19% in underlying fund costs.

Additional fees

Nutmeg charges no fees for setup, deposits, standard withdrawals or trading. But if you need to withdraw your money in a hurry you'll pay £10.

Wealthify and MoneyFarm do not levy any additional charges.

ISAs

All three providers accept ISA investments. Meaning you can enjoy tax-free returns on your investments.

Protection

All three companies are regulated by the Financial Conduct Authority and are covered by the Financial Services Compensation Scheme.

This means the first £50,000 of your investments are protected if the investment company goes bust.

Compare stocks and shares ISAs at loveMONEY.com