High risk investment

Question

I have a spare £500 I do not mind losing too much. But, I do not just want to throw it away.

I have found high risk investments like this one from JP Morgan Chase, and over the past few years all has gone well (look at that high level of interest). I know it should not be an indicator of the future.

I like the investment as it's a one off £500, when Android applications such as Nutmeg expect an initial investment of £500 and further investments of £100 per month!

The minimum investment is £500 for each fund you create, which allows us to create a diversified mixture of investments. For portfolios below £5,000, we also ask for minimum monthly contributions of £100, and the Nutmeg pension has a minimum investment of £5,000.

https://www.nutmeg.com/why-nutmeg

I have some economics knowledge (A-Level Economics) so I have come up with a theory.

• If the UK stays in European Union the uncertainty will end causing markets to improve.

• If the UK leaves European Union, as 2/3rd of the FTSE100 said it would be beneficial to leave I believe that will also improve markets.

So aside from other factors I think the investment is due to work out.

Admittedly I am new to everything. I am looking for advice, as I most likely have missed something or made a mistake above. Please post nicely.

Any links where I could further research into this would be highly welcomed.

Answer 1

I would say that the UK Equity Core Fund does not look especially risky. It invests in a large number of companies in your home country (I'm guessing you are UK based). Since it is equity some ups and downs are expected but if you don't need this money for a long time (especially if you are saving for retirement) this is not a big deal.

The fees for the UK Equity Core Fund are not too high, but not great either. From their holdings they seem to invest so broadly that their results would be likely very similar to their index and a cheaper index fund may get the same results for less.

Nutmeg for the most part uses the index ETFs, closely related to the index funds I was discussing above. Also, Nutmeg gives you what I think is the advantage of having UK and non-UK investments which makes it so you won't be effected (as much) by the Brexit. I personally think the UK leaving will have a negative effect on UK equity but, as you mention, it is not clear. Finally, putting away a little bit automatically each month is a really great idea for most working people though you have to decide if $100 is too much for you right now.

However, the added fees from Nutmeg are so high for someone putting in $500 (on top of the ETF fees!) it is hard to justify their service. If you think you can buy a good UK (and maybe an ex-UK fund) and add a small amount regularly (every month or three months) investing on your own, you can save a large amount of money in the long run and get most of the benefits of a Nutmeg type service.