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How to Start Robo Investing UK for Beginners

Vincent Nyoike
Vincent Nyoike Investment

Robo investing is one of the best passive income ideas in the UK. It is also a great way to prepare for retirement. Robo investing is an automated investment where a software algorithm uses AI and data to match you with the best investment. UK robo investing has become one of the best ways to generate a passive income. However, just like any other investment, there are risks. You can either make a profit or a loss.

In this article, we are to show you how robo investing UK works and provide you with a list of the best robo advisors in the UK.

What is Robo Investing?

Robo investing is the use of a software algorithm to automate your investments. You don’t invest manually, instead, you use software that asks you questions and then matches you with the best investments based on your answers. You can think of it as an autopilot kind of investment.

What are Robo Advisors?

A robo advisor is an online service or software that helps you automate your investment. It is not a real person. It is a software algorithm that asks you questions and then provides you with suitable investments. The software also manages your investment portfolio for you.

How Does Robo Investing Work?

Robo advisors first gather information from an investor. They use algorithms to understand an investor’s goals and risks they are willing to take. They do so by asking you questions. Based on the answers you provide, robo advisors then provide you with investments.

Robo advisors use financial transactions like investment, bank, and credit card transactions to understand investors' financial behavior. They then use AI and data to predict how you can behave in a particular situation. They then come up with patterns that help them provide you with the best investments.

Some of the questions that the software asks you include:

  • How much is your income?
  • What is your financial plan for investing?
  • What risk factors can you take?

Features of Robo Advisors UK

The following are the features of robo advisors:

  • Auto investing. Robo advisors automate your investments based on the answers you provide to their questions.
  • Auto balancing. Robo advisors automatically adjust your investments to suit your needs based on the market drift.
  • Personal financial planning. Robo advisors help you plan your finances well by offering you financial advice.

Who is Best Suited for Robo Investing?

Robo investing is best suited for investors with limited investment capital and have time constraints. Besides, if you are looking forward to investing in the long term and you are comfortable using technology, you can consider robo investing. Also, if you are a novice and don’t have much experience investing, robo investing is a good deal for you.

Best Robo Advisors UK

The following are some of the best robo advisors you can consider using in the UK.

1. Nutmeg Robo Investing

Nutmeg is the largest and cheapest robo advisor UK. Nutmeg allows investors to choose between a Fully Managed Plan or Fixed Allocation Plan. One of its advantages is that it has an interface that you can use to track your investments. You also get to enjoy tax-free returns on contributions up to £20,000 every year. You need a minimum initial investment of £500. Nutmeg is the best robo advisor UK.

2. Moneyfarm Robo Investing

Moneyfarm is a popular robo advisor in the UK. It is one of the best robo advisors UK for beginners. You can easily diversify your portfolio and quickly access your money. It gives you access to a human investment advisor. It offers top-performing stocks and shares and has a tiered fee system. The minimum ISA deposit is £500. You will incur a 0.20% investment cost per year.

3. Moneybox Robo Investing

Moneybox is also an excellent robo advisor for beginners in the UK. They encourage investors to save by offering 0.6% AER on their 95-Day Notice Savings Account. Investors can invest as low as £1. You will incur a 0.21% investment cost per year. For those with non-pension accounts, you need to be aware that there is a £1 monthly subscription fee.

4. Vanguard Robo Investing

Vanguard is one of the cheapest robo advisors UK that can help you create a personalized retirement portfolio. Vanguard introduced a new service known as Vanguard digital advisor that requires investors to have a minimum investment of £3,000. You will incur a 0.15% investment cost per year.

5. Wealthify Robo Investing

Wealthify is a robo advisor that helps you choose risk levels. It invests in a wide range of ETFs that are low-cost. You can invest in stocks and shares ISA, investment ISA, Junior ISA, or an ethical investment. You will incur a 0.16% investment cost per year. It is ideal for new investors since you can invest as low as £1.

6. Fidelity Robo Investing

Fidelity robo advisor lets you open an investment account without a minimum balance. You can easily convert a brokerage account or retirement account and easily monitor your investment. Fidelity has a tiered fee system. It does not charge advisory fees for investment below £10,000. It doesn’t charge management fees as well. 

Which is the Best Robo-adviser in the UK? 

Nutmeg is the best robo advisor UK. It is the largest and cheapest robo advisor in the UK. In 2017, Nutmeg lowered its fees so that most across the board so that every investor gets the best fee rate

How to Choose a Robo Advisor UK

Before you can start Robo investing in the UK, you need to make some considerations. These considerations include:

1. Fees and charges. Some of the fees to look out for include management fees, funds costs, FX costs, and transaction costs.

2. Track record. You need to look at how well a portfolio has been performing compared to other portfolios.

3. Security of the robo advisor. Before investing, ensure that the robo advisor is regulated by the FCA and is financially secure. Reputable firms ensure that your assets are protected by the Financial Services Compensation Scheme for up to £85,000.

Is Robo Investing Safe?

Before investing, you must check if the robo advisor UK is regulated by the Financial Conduct Authority (FCA). If they are, it means they report their financial activities to the regulator. Besides, regulated robo advisors ensure that investors’ money is protected by the Financial Services Compensation Scheme (FSCS) for up to £85,000.

Related: How to invest in stocks for beginners UK.

Pros and Cons of Robo Investing

There are merits and demerits of UK robo investing. They include

Pros of Robo Investing UK

  • You can diversify your portfolio and spread your investments across multiple industries
  • Automated rebalancing based on the market drift
  • Low fees compared to human investment advisors
  • Robo advisors are more accessible by low net worth investors
  • Eliminates emotional investment decisions

Cons of Robo Investing UK

  • There is limited human interaction
  • There is no one to manage your emotions
  • There is limited flexibility and personalization

Summary of UK Robo Investing

Robo investing, just like any other investment has its merits and demerits. There are risks involved and you can either make a profit or a loss. Ensure that the robo advisor you choose is regulated by the FCA. Then go for a low-cost robo advisor with a good track record and an easy-to-use interface like Nutmeg and Moneyfarm. 

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