- 13th Aug 2015
Online investing – are you getting your money’s worth?
There are countless companies offering ‘online investing’ services these days but while you may think they all offer the same level of service, look closely and you will likely find they are vastly different. Yes, they may be similar in terms of cost and usability, but more than likely, they are not comparable in terms of the service they actually offer.
So, it’s important to read the small print and understand exactly what you are getting and paying for. Yes, there will be traits that all online investment firms have, yet others that only a handful have. When deciding where to invest it’s important to delve a little further to ensure you’re getting the exact service you need and expect.
From picking individual stocks yourself to having an advised and managed portfolio – online investing encompasses a wide scope of services. There can sometimes be an overlap in the services offered by different providers – and when this is coupled with often ambiguous language – it can be surprisingly hard to know what you’re actually signing up and paying for.
All on your own
This is the most widespread online investing model. And the most basic. (Albeit, the knowledge and time you need to dedicate to this service is not so basic – in fact it’s very involved!) You’re provided with a platform to hold your investments and left to do the rest. While great for someone who wants to spend their time managing their portfolio – and has the expertise to do so – it can leave a lot of people feeling a little helpless. Essentially, the onus and responsibility is firmly placed with you, the investor.
Managed for you
One step up. You decide on the level of risk you think you should be taking with your money and you can have the said investment portfolio managed for you. The stock picking and on going upkeep is taken off your hands but you still hold responsibility for deciding the appropriate level of risk you should be taking, checking the investment is entirely suitable for your personal circumstances and that you can afford to take that level of risk.
Advised and managed for you
The final step up, and the highest level of service available from an online investment firm. Through a series of questions related to your tolerance and capacity for risk taking – and an analysis of your personal financial situation – an appropriate level of investment risk is determined and your money is invested accordingly. In the same fashion as the previous service described, the initial set up and on going management of your investments is done for you. The big difference is that with this type of service you receive regulated financial advice on your investment. This means your intended investment is assessed for suitability and affordability and checked to be the right choice for you. Responsibility moves away from you and to the provider.
Compare the market
It would be fair to assume the cost, as you move across the three service levels, would be incremental. This isn’t always the case, however. Comparing service levels and costs is an important first step when decided how to invest your money. Don’t always assume the relationship between cost and level of service is a positive one.
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