Both Nutmeg and Vanguard have popped up frequently on our investment platform reviews, and it makes sense to pitch both platforms against each other. Particularly with Vanguard’s LifeStrategy funds, which offer a similar investment approach to Nutmeg’s fixed allocation portfolios. Both are very popular options for UK investors looking for a low fee option, who don’t have the time or the knowledge to go down the DIY investing route.
Nutmeg offers fixed allocation portfolios as well as fully managed portfolios, socially responsible portfolios and the latest addition – ‘smart alpha’ portfolio’s powered by J.P. Morgan Asset Management. All offer a passive investment style from the outset but the fixed allocation offering comes with the lowest fees.
Vanguard LifeStrategy funds have a similar approach to Nutmeg fixed allocation portfolios in that both are setup to essentially run themselves with only occasional management required from the investment teams. Where Nutmeg has 5 set risk levels, Vanguard LifeStrategy funds have 5 blends split between equity vs bond percentage. With the LifeStrategy 20% Equity being lowest risk and LifeStrategy 100% Equity being the highest risk fund. Similarities aside, in the battle of Nutmeg vs Vanguard LifeStrategy, which comes out on top? Let’s find out.
Nutmeg Fixed Allocation vs Vanguard LifeStrategy: Quick Overview
- Both Nutmeg and Vanguard LifeStrategy provide a passive investment approach
- Nutmeg has slightly higher fees than Vanguard LifeStrategy
- Nutmeg has a 6 month no fee offer (details below)
- Nutmeg builds you a portfolio based on a risk questionnaire
- Both perform very well against competing services
- Both offer ISAs and pensions
What is Nutmeg?
Nutmeg is a well established UK investment platform that I’ve sung the praises of before. That’s not to say it’s to everyone’s tastes, but it’s quickly become one of the leading names in the UK wealth management space.
It’s been around since 2011, and in the last decade, it’s brought passive investing to the masses with very competitive fees. It offers a plethora of portfolio options as previously mentioned, although the focus here is on the fixed allocation offering. It also offers ISAs, Junior ISAs, Lifetime ISAs and pensions, and has ventured into the financial advice space in recent years. All over, it’s built itself as one of the go-to platforms for quick, low fee, painless investing.
Altogether, it’s a very appealing model. No pressure then, Vanguard!
What is Vanguard LifeStrategy?
Vanguard as an investment platform is very far-reaching, but for the purpose of this comparison, I’m focusing purely on the LifeStrategy side of things. As a potential rival to the Nutmeg fixed allocation standard, it’s a very appealing way to put all of your eggs in some potentially lucrative baskets.
Vanguard LifeStrategy provides a choice of five different funds, each of them split different ways depending on your attitude to risk and or expected time horizon. For long-term investing, you can choose a 100% equity fund, or if nearing / in retirement you can go as conservative as 20% equity, 80% bond. With three other blends available in between.
Vanguard LifeStrategy is designed to help you work out a passive investment plan based on your attitude to financial risk. Just as you’d set risk parameters with Nutmeg when you first sign up, you get to choose one of five portfolios, completely managed, based on how you’d like to save. It’s an altogether very different way of investing money, while at the same time providing a similar attitude.
What investment styles do they offer?
Both Vanguard LifeStrategy and Nutmeg offer ‘save and forget’ models of investing in slightly different ways. As mentioned, Nutmeg travels the robo-advisor route, and therefore puts money away based on machine learning and your own minimal input, whereas Vanguard LifeStrategy offers you a choice of five tailored packages. Both, too, allow you to safely invest in a diversity of ETFs and index funds.
Nutmeg’s main investment styles are split into four. There’s fully managed portfolios, socially responsible portfolios, fixed allocations, and smart alpha portfolios – the latter of which have only popped up in the past year.
As mentioned, Vanguard LifeStrategy’s five-package line-up lets you split things based on equity and bond. There are 20% equity, 40% equity, 60% equity, 80% equity and 100% equity options. The higher the equity, the more likely you are going to want to invest for the long-term.
What accounts do they offer?
Nutmeg offers a variety of different account products. You’re able to take advantage of lifetime ISAs, pensions, junior ISAs, general investment accounts and of course stocks and shares ISAs.
Once you’ve decided whether or not Nutmeg offers the best take on passive investment for you, it’s time to whittle down which of these accounts is likely to get your money to where it needs to be. Thankfully, Nutmeg is more than helpful when it comes to guiding you along the way.
Vanguard, meanwhile, offers four mainline financial products for you to choose from, alongside the LifeStrategy fund system. You can set up a pension, general investment account, stocks and shares ISA and junior ISA with Vanguard. There’s a little bit less to choose from here, but only in the sense that there’s no lifetime ISA option.
If this is an avenue you really have your heart set on, then it’s absolutely worth considering Nutmeg. Beyond that, I do feel you should give Vanguard LifeStrategy a closer look.
What is the minimum investment amount?
Both Nutmeg and Vanguard LifeStrategy keep things relatively cheap and straightforward in terms of minimum investments. The absolute lowest buy-in here is £100, meaning that providing you have three figures to spare, you can get started with either option. Of course, fees will vary, and I’m certainly going to consider which option is cheaper or better value for money a little further down.
However, there’s no need to worry about having much money to hand if you want to start with either option. Do keep in mind that you’ll need at least £500 for most of Nutmeg’s products, however, as it’s only the lifetime ISA that allows an initial investment of just £100.
With Vanguard LifeStrategy funds the minimum one off investment is £500, however you can also get started by committing to a regular monthly direct debit of at least £100.
Which has the best track record?
To keep things simple here I’m going to compare the performance of both platforms highest risk level options. For Nutmeg that’s the Fixed Allocation Risk Level 5 and for Vanguard that’s the LifeStrategy 100% Equity Fund.
Nutmeg Fixed Allocation Track Record
Looking at the full range of historical data available the Nutmeg Fixed Allocation Risk Level 5 has returned an impressive +53.6% between Feb 17 – Oct 21. Over the last 12 months the return is +34.6%. It’s important to note that these are regarded as simulated returns calculated using Nutmeg trading data from client accounts. You can find more information on how figures are calculated by checking out the fixed allocation past performance section on the Nutmeg site.
Vanguard LifeStrategy Track Record
In comparison the Vanguard LifeStrategy 100% Fund has returned +55.3% over the same period (Feb 17 – Oct 21). Putting Vanguard +1.7% ahead of Nutmeg for that timeframe. However over the last 12 months the LifeStrategy 100% Fund has only returned 30.74%, that’s -3.86% worse than the Nutmeg performance over the last 12 months.
Therefore, there’s not actually that much to choose from in terms of performance between the two. Nutmeg certainly compares favourably over the last 12 months. However, Vanguard’s LifeStrategy 100% Equity Fund has seen ever so slightly better performance over the analysed longer timeframe.
With regard to user feedback and ease of use, both platforms offer an excellent user experience. Nutmeg have both web based and app platforms, however Vanguard only offer a web platform currently. So if you would prefer app access on your phone then that may be something to consider.
Beyond this, it’s worth noting that LifeStrategy won’t hold your hand as much as Nutmeg. Vanguard expects you to know your risk attitude before you get started and you select one of the LifeStrategy funds accordingly. Whereas Nutmeg builds a profile around your answers to various questions and prompts, resulting in a suggested risk level. With that in mind, Nutmeg may still be the better choice for complete novices, even if it means having to go through an initial risk assessment.
Which is the cheapest?
Costs tend to be where many people compare Vanguard LifeStrategy and Nutmeg the most, and while on the face of it Nutmeg is the slightly pricier option, it’s worth taking a look at the fees you can expect across the board before getting started.
Vanguard prides itself on being refreshingly affordable, and I certainly couldn’t argue with that. All the LifeStrategy funds have an ongoing charge (OCF) of just 0.22%. You will also have to pay the annual account fee which is 0.15% and capped at £375 per year for accounts over £250,000. There is also fund transaction costs to consider – estimated at a maximum of 0.06%. For illustration purposes assuming you had £20,000 invested in the Vanguard LifeStrategy 100% Fund you would pay just £86 in annual fees (£44 for the 0.22% OCF, £30 for the 0.15% platform fee and £12 for the 0.06% transaction costs).
Nutmeg Fixed Allocation portfolios in comparison come with a 0.45% fee on up to £100k, then just 0.25% beyond that amount. There’s also average fund costs of 0.19% and market spread costs of 0.07% on average. Using the same £20,000 investment example you would be looking at annual fees of £128 (£90 for the 0.45% management fee, £38 for the 0.19% fund costs).
Therefore, on a £20,000 investment you would be £42 better off in terms of fees with Vanguard LifeStrategy. However it’s worth remembering that cheapest doesn’t always mean best – take for example the last 12 months performance compared above – you would be over £700 better off with Nutmeg taking into account performance and fees. What’s more, you can take advantage of 6 months of zero fees with Nutmeg if you sign up using the link below.
Nutmeg 6 Months No Fees
If you want to take advantage of 6 months of no portfolio management fees with Nutmeg you can sign up via the link below. You must fund your account with the minimum amount and the promotional fee rate will be applied within 30 days. Note that when signing up you will still see fees presented during the on-boarding process. This will then be updated within 30 days of your funds first being invested and traded.
The long and short of it is that both platforms offer very competitive fees and some of the lowest available in terms of UK investment platforms. So if fees are a major consideration for you (as I think they should be) then you wont go far wrong with either Nutmeg or Vanguard.
Nutmeg vs Vanguard LifeStrategy: Conclusion
Both Nutmeg and Vanguard have a lot going for them. Vanguard LifeStrategy tends to make things easier on you if you have a vague idea of what you want from your money long-term. However, it does also make assumptions that you know about risk and everything that comes with it.
That said, many people will prefer Nutmeg for the simple fact that you get a broader selection of parameters and tweaks. Nutmeg’s wide range of products help to make it an appealing platform for newbies who want to keep their options open. Beyond that, it’s also a service you can edit and adjust along the way. There isn’t that much in the way of tweaking involved with the LifeStrategy picks (short of moving your money to one of the other fund options).
Both perform fairly similarly in the sense that they outstrip much of the competition in terms of performance and offer very competitive fees.
So – between Nutmeg and Vanguard LifeStrategy – which is the best passive investment service? Despite the higher fees on average, I do still have to thrown my weight behind Nutmeg. Its diversity in options, its risk assessment and its constant innovation are hard to ignore. That said, LifeStrategy still has plenty going for it, and is also an excellent choice for those looking for an invest it and forget it approach.