Five ways to take the hassle out of investing

Over the past few decades DIY investing has become increasingly accessible and relevant to a wide range of people. It is likely to become more so, as interest rates gradually decline and cash savings lose their competitiveness compared with stock market exposure.

But many of us simply haven’t got the time, personal interest or know-how to manage our own portfolios. Instead, the preference is to hand the decision-making over to a professional with deep knowledge and resources to do the job properly.

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For those who can’t afford, or don’t want to pay, a financial adviser to oversee their investments, the good news is that there are various routes you can take as a self-guided investor to ensure a well-balanced and sustainable portfolio.

Below, we take a look at five options, and where possible indicate the kind of investor they might suit best.

Bear in mind throughout that – all else being equal – the younger you are, the more you’re best off focusing on stock market investments. That’s because over a very long time frame, equities tend to significantly outperform other asset types, despite their higher short-term volatility.

A low-cost tracker based multi-asset fund

These fund ranges include Vanguard LifeStrategy and BlackRock MyMap among others. They offer a choice of different risk profiles, each one shaped by a fixed specific allocation of stocks, bonds and (in some cases such as the BlackRock range) alternative investments. Basically, the more stock market exposure, the higher risk the fund.

The fund portfolios use index trackers and exchange-traded funds (ETFs), which aim to mirror the performance of a particular stock market or bond market.

Yearly costs are low, due to the approach of owning the market rather than attempting to beat it. Most of BlackRock’s MyMap funds cost 0.17% a year, for example, while Vanguard’s LifeStrategy funds are 0.22%.

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However, says Ben Yearsley, director of Fairview Investing, says that they won’t protect you when both bond and stock markets are in freefall, as happened in 2022 when interest rates rose.

He says: “I’d look to blend a couple of different multi-asset funds, to ensure there is a bit of protective style diversity.

“Most are growth-focused, as that’s what the MSCI World index (which they track) is, so how about adding something from the Vanguard Sustainable Life range, which is slightly more value-focused?”

Yearsley stresses that younger investors should consider a range that offers a 100% equity multi-asset option.

Other options include Legal & General Investment Management’s Multi-Index funds and abrdn’s MyFolio Index range.

A one-stop shop fund or investment trust

The most obvious candidates here are large, actively managed global investment trusts such as F&C Investment Trust Ord (LSE:FCIT), as well as certain multi-asset investment trusts. There are also multi-asset funds with a similar mandate, such as the Royal London Sustainable range.

In each case the manager is actively stock-picking, rather than using a market tracker.

They are significantly different from each other, so you really need to have a careful look at each before you make a decision. But all set out their stall as a single, competitively priced, long-term holding that investors can buy and tuck away with confidence.

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Yearley notes: “With any one-stop show you are passing on responsibility for your portfolio to someone else to make market timing and asset allocation calls. In this case, don’t look at your investments for the next five years! Give the manager time to do his or her job.”

For anyone looking for a cautious one-stop multi-asset approach, Yearsley suggests the capital preservation-focused Personal Assets Ord (LSE:PNL) investment trust, or Troy Trojan, the open-ended equivalent.

Younger investors comfortable with a global equity focus could look at either F&C’s 400-stock portfolio run by Paul Niven or Alliance Witan Ord (LSE:ALW)’s “best ideas” multi-manager approach.

interactive investor’s Managed ISA

This option aims to keep things very simple, using index funds and ETFs to create two low-cost multi-asset portfolio ranges that will suit different tolerances of risk.

Investors need to decide first whether they would rather keep fees to a minimum using funds with charges ranging from 0.13% to 0.2% (the Index option) or pay up to 0.29% for exposure to ESG (environmental, social and governance) funds (the Sustainable option), and second which of five levels of risk they are prepared to accept.

Based on that information they’ll be automatically allocated to a portfolio, in which a range of funds have been selected. These are “actively managed” to the extent that the portfolio managers review each one at least annually and if necessary swap the funds used for others that they think could do a better job for that level of risk.

For beginner investors feeling anxious about the jargon or the need for at least a modicum of investment knowledge, these portfolios provide a particularly user-friendly way into the markets.

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A DIY core and satellite strategy

If you have a decent lump sum, you could build your own portfolio. A core and satellite approach involves putting the bulk of your money into core funds, which might be a global tracker or a solid actively managed alternative, and then allocating much smaller sums to a handful of more specialist or interesting funds with different focuses.

These could encompass a broad gamut of investment opportunities, from single-country or single-region funds to technology, listed infrastructure, healthcare or small-company offerings.

However, arguably this approach won’t suit beginner investors building a pot from monthly savings only, as you do need to be able to buy several funds.

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Nor will it work for anyone hoping to leave fund selection and monitoring to the professionals. Additionally, some specialist funds and investment trusts that are potential satellite holdings tend to be relatively expensive, so it is not going to be a low-cost plan.

Following Warren Buffett’s advice to his wife

In the event that investment guru Warren Buffett dies before his wife, his will does not advise her to invest her inheritance into Berkshire Hathaway Inc Class B (NYSE:BRK.B), the investment company he has run so successfully.

Instead, it recommends that she put 90% of it into an index fund following the US S&P 500 index, and the other 10% into US bonds.

However, this may not be an ideal solution for younger investors, who would potentially do better with less bond exposure.

A further consideration is that Buffett’s approach puts heavy reliance on the strength of the American economy, and especially on the handful of US technology stocks currently driving it.

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Global index funds or ETFs have a high weighting to the US, of around 70%. However, such funds spread risk, and opportunity, much more broadly than a US index fund or ETF.

However, it’s arguably simpler for ordinary investors to go back to the list above and chuck their cash straight into one of the multi-asset index fund ranges, or the ii Managed ISA.

In the end, your choice will be determined to a large extent by how you feel about index funds and ETFs that simply follow a market, as opposed to actively managed funds of selected stocks that the fund manager hopes will outperform it.

But even when you’ve come down on one side of the fence or the other, remember that your options still differ from each other and it’s important to understand what you’re investing in before you commit your cash.