Originally published at: What makes LifePlans different? – InvestEngine Insights
InvestEngine’s LifePlans make long-term, smart investing easier than ever before.
Our range of five globally diversified portfolios are built to cater for any investment goals, whether you’re putting money aside for a house deposit or investing for retirement.
But what makes LifePlans special? Here, we’ll explore the key differences that make InvestEngine’s LifePlans stand out.
We avoid home bias
When it comes to the construction of your portfolio, our experts at InvestEngine take a global view with no home bias.
Other portfolios hold significant weights in the UK, despite the UK only accounting for around 3% of global equity markets. These are large bets on the UK’s performance, and introduce the risk of underperformance should the UK not perform as well as the rest of the world.
Our LifePlans are globally diversified and built using modern portfolio theory. You won’t be overexposed to any geography, meaning your portfolio is built to withstand any specific shocks.
We’re not limited to a single fund provider
At InvestEngine we’re not limited to a single fund provider. Our portfolios are ‘open architecture’, meaning we’re not constrained by holding only one company’s funds.
As a result, we have hundreds of ETFs from a bunch of different providers in our range. This means we’re able to switch ETFs when other funds lower their costs or are otherwise improved. We’re also able to invest in any new ETFs which are released, regardless of who issued them.
This means we can build and maintain portfolios that are as cost-efficient and effective as possible, drawing from the best of each provider rather than having to rely on a single source.
Not just beta
Our portfolios don’t just rely on “beta” (also known as “market risk”). LifePlan funds include factor ETFs, which select stocks based on common attributes associated with higher returns.
These attributes have been found to drive returns which are differentiated from market returns. Put simply, this means we don’t tie the performance of our portfolios with the performance of global markets too tightly. As a result, they offer diversification benefits, and are designed to improve long-term, risk-adjusted returns.
By adopting a factor investing approach, we diversify portfolios not just by asset class, sector, geography, and currency, but also by risk factor. We pursue a systematic approach to exploit these so-called market anomalies efficiently and effectively.
This means InvestEngine’s portfolios are diversified across multiple unique sources of risk, with a higher potential for superior risk-adjusted returns and lower variation in terminal wealth outcomes versus a traditional beta-focused investing approach.
Less currency risk
We hedge a large portion of our equity foreign currency exposure back to pound sterling, meaning our portfolios aren’t subject to the same currency risk that unhedged global or US-focused funds are.
While a fully unhedged equity position increases a portfolio’s risk, a fully hedged position increases costs and the temptation to time currency markets.
Based on extensive research, our balanced currency hedging policy is designed to reduce volatility and drawdowns, while keeping costs low and increasing long-term risk-adjusted returns.
Bonds are for safety
While other platforms may try to time the bond market by buying higher-risk long-term bonds, we take a different approach. Our philosophy is that bonds are the “safe” allocation in investors’ portfolios, and are there to provide diversification when equity markets fall.
As a result, our portfolios only hold bonds with the highest credit quality – predominantly government bonds. We also favour short-duration bonds, as these bonds are affected the least by interest rate movements, and are less prone to large drawdowns – as happened with long-term bonds during the bond selloff of 2022.
This means we can rely on the bond ETFs we hold in portfolios to deliver robust diversification benefits when equity markets fall, improving long-term returns.
They’re on a better platform
The final thing that separates our LifePlans from other ready-made portfolios is InvestEngine itself. Compared to other platforms, InvestEngine is more user-friendly, more flexible, and more powerful.
We can offer easy regular investing with our Savings Plans, full transparency on your investments with Portfolio Look-through, and some of the lowest fees on the market. Our app makes investing a breeze, whether you’re investing £10,000 or £100.
We also have better customer service, and are more highly rated by our clients – just look at our TrustPilot reviews.
So, when it comes to choosing a place for your long-term investing, look no further than InvestEngine.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.