If you know that you want to put some of your cash into a Stocks & Shares ISA, you still might be unsure which provider to choose. It can be a bit of a minefield as there’s a lot of choice out there.
This article compares the performance of Stocks & Shares ISAs from a number of popular robo-advisers to help you make the right decision, looking especially at returns over the last three years for which we provide an easy-to-read summary table at the bottom of this article. However, we do also look at performance over longer time frames, where a product has a sufficient track record to allow us to do so, throughout this article.
1 minute summary - Which is the best performing stocks and shares ISA?
- The ISA allowance for the current tax year (2022/23) is £20,000
- There are different types depending on how involved you want to be
- You can choose between a true DIY ISA, a part-managed ISA or a fully-managed ISA where the investment management is done on your behalf
- This article focuses on fully-managed ISAs so that we can compare performance
- We've compared the performance of Nutmeg, Moneyfarm*, Wealthify* and Vanguard for 2021, 2020 and 2019
- We also explain why those looking at Vanguard may be better choosing Interactive Investor* if they have more than £80,000 to invest
What is a Stocks & Shares ISA?
First a quick reminder of what a Stocks & Shares ISA does. It’s a type of savings vehicle that allows you to invest in funds or stocks while protecting any investment returns you make within a tax wrapper meaning you don’t pay capital gains tax or income tax on any profits earned. The ISA allowance for the current tax year (starting on 6 April 2022) is £20,000.
There are different types depending on how involved you want to be in investment selection, and these will each come with different charges. You can choose a true DIY ISA, a part-managed ISA or a fully-managed one where the investment management is done for you, but you will pay a higher management fee for this. This article focuses on fully-managed ISAs so that we can compare performance. For more information on the different types of ISA available, read our article “Where should you invest you ISA allowance?”
You can transfer money held in other types of ISA (a Cash ISA, for example) into a Stocks & Shares ISA and it won’t count towards your annual ISA allowance if you paid into the existing ISA during a previous tax year. You can find more details on this in our article “ISA transfers explained“.
For a more general discussion on whether a Stocks & Shares ISA is worth holding, we summarise in our article “Are stocks and Shares ISA's worth it?”
Which is the best performing Stocks & Shares ISA?
For the purpose of this article, we are looking at fully-managed ISAs from five of the most popular UK robo-advisers. We will compare the performance of the model portfolios on offer to try to find the best performing Stocks & Shares ISAs on the market currently (but note past performance is not a guide to future returns).
Wealthify operates in a similar way to most other robo-advice services, using an automated process to construct portfolios that match clients’ risk tolerance, and it also uses cheap mutual funds and ETFs to keep costs down. Its investment team continuously monitors and rebalances client portfolios to keep them in line with risk tolerance. It had quite a cautious approach in the past, with a lower weighting to equities than you might expect for its medium risk offering, but more recently it has brought its asset allocation more closely into line with other robo-advisers. It has five ‘original' Stocks & Shares ISA portfolios as well as five ‘ethical' Stocks & Shares ISA portfolios. Its ‘Confident' portfolio sits in the middle of this risk-graded range. Wealthify’s 2021 performance for this portfolio was approximately 6.70% after fees and the equivalent ethical portfolio returned 7.63% in 2021. Its Ambitious portfolio returned approximately 9.72% in 2021 and its equivalent SRI portfolio returned 11.18%.
Wealthify charges a management fee 0.60% (the above performance figures are after the fee has been deducted). It also has a refer a friend scheme in which you can earn £50 for every friend you refer and you can read more in our article “Wealthify review – Is it the right investment choice for you?“.
Nutmeg offers a range of 10 risk-graded model portfolios to choose from, depending on how much risk you are willing to take. Nutmeg establishes your risk tolerance by asking you a series of questions and then recommends a portfolio it thinks will suit you, from ‘cautious’ to ‘aggressive’. The portfolios contain low-cost exchange-traded funds (ETFs) diversified across assets, countries and sectors and Nutmeg regularly reviews asset allocation on its fully managed products to keep them in line with your goals and risk profile.
Let’s say you went for portfolio number six, in the middle of the pack, offering ‘moderate growth without extreme volatility’. If you had invested in 2021, you would have a profit of 9.90%, which is similar to the return you would have experienced with the equivalent portfolio with its competitors Moneyfarm and Wealthify. Nutmeg also has a range of Socially Responsible Investment (SRI) portfolios, often referred to as ‘ethical' or ‘sustainable' investment portfolios and the equivalent ethical portfolio returned 10.70% in 2021.
Nutmeg’s investment performance figures are based on an account size of £25,000, and are calculated after fees, using data from actual trades rather than averages.
Nutmeg calculates the performance of its competitors using averages, after fees, from a range of discretionary investment managers including Coutts, UBS and Rathbones (rather than the other robo-advisers we refer to in this article).
Over a longer timescale, the portfolio has delivered 32.3% over five years and 74.0% since Nutmeg launched in 2012, outperforming its competitors' average return of 27.3% over five years and 63.3% since 2012. On an annualised basis, Nutmeg has outperformed its rivals, delivering 6.2%, compared to 5.4% a year since launch.
Looking across Nutmeg’s whole range, comparative performance is better at the higher end, so it could be a good option for those looking to invest in higher risk portfolios. Its riskiest offering, portfolio number ten, made 19.6% in 2021 compared to 13.3% from the competition and has also outperformed since 2012, up 139.4% versus 111.8%, or 9.9% versus 8.5% annualised.
In terms of fees, you pay between 0.35% and 0.75% for the fully managed and socially responsible portfolios, depending on the amount you have to invest, and between 0.25% and 0.45% for Nutmeg's fixed allocation portfolios.
There are also fees charged by the underlying funds in robo portfolios (that goes for all of the propositions mentioned in this article and not just Nutmeg), usually of around 0.2%.
Money to the Masses readers can also take our advantage of our exclusive offer where Nutmeg will waive all management fees for the first 12 months. For more details read our independent “Nutmeg review” which also explains more about their overall offering, including investment performance.
Moneyfarm is the closest comparable alternative to Nutmeg, which is the most well-known of the UK robo-advisers. Moneyfarm uses a questionnaire to assess your investing experience, risk tolerance and investment goals, and then recommends a portfolio tailored to you, which is classed as regulated financial advice (Nutmeg recently began offering financial advice as a standalone service for which you pay £575 plus VAT). Moneyfarm constructs a portfolio of ETFs based on its own investment research, and uses volatility targeting when doing your asset allocation, It rebalances portfolios about every three months. As it is giving advice, every year Moneyfarm has to review your portfolio to make sure it is still suitable.
If you had invested £25,000 in Moneyfarm's medium risk portfolio with Risk Level 6 (out of 7), you would have made a return of 71.6% between January 2016 (when Moneyfarm launched in the UK) and 31st December 2021 (the date of the latest available performance data). In 2021, the same portfolio would have returned 13.70%, which is the same return as Nutmeg's equivalent portfolio, as we demonstrate in our performance comparison table later in this article. Moneyfarm charges a management fee of between 0.35% and 0.75% depending on the size of your investment, and it says a £25,000 pot would set you back about £140-£170 a year in fees. However, Money to the Masses readers can take advantage of an exclusive Moneyfarm offer where your portfolio could be managed for FREE FOR THE FIRST YEAR*.
Read our detailed independent Moneyfarm Review.
Vanguard is one of the largest players in the investment fund space, offering both active and passive funds, although it made its name offering low-cost index tracker funds. Of interest to us here are its LifeStrategy funds, available through its Vanguard Investor platform. LifeStrategy funds are ready-made portfolios of Vanguard index tracker funds, and they tend to have a US equity focus. They come in five different mixes of stocks and bonds, labelled according to their equity allocations.
Let’s look at Vanguard annual returns. The LifeStrategy 60% Equity fund sits in the middle of the range, aiming for long-term returns with controlled risk. In 2021 it made 9.90%, while the slightly lower risk LifeStrategy 40% Equity fund made 5.73%. Both portfolios are in the top quartile over one, three and five years compared to peers in the Investment Association Mixed Investment 40-85% Shares sector, according to FE data, so Vanguard fund performance tends to be strong in the medium to long term.
In terms of fees, the total charge including platform fee on a £20,000 ISA investment would be 0.37% if you bought LifeStrategy through Vanguard’s own platform, Vanguard Investor. It is worth mentioning that if you have more than £80,000 to invest, one of the cheapest ways to buy Vanguard funds is via the Interactive Investor* platform, not directly through Vanguard Investor. For more on this tip and for detailed information about Vanguard and its product range and pricing read our full independent “Vanguard Investor UK review“.
2021 was a strong year for investors with the FTSE 100 rallying 14.3%, a complete reversal of the 14.3% fall experienced in 2020. In the table below we provide a summary of the relative performance of selected portfolios from Nutmeg, Moneyfarm, Wealthify and Vanguard over the last three years (2019, 2020 and 2021). We have not included the performance of the ethical portfolios provided by Moneyfarm as these only came to market in 2021.
The performance figures for 2021, 2020 and 2019 should be viewed in the wider context of the longer-term performance figures mentioned above and on each provider's website. All performance figures are after fees have been deducted.
Robo advisors performance comparison table 2021, 2020 and 2019
|Provider's portfolio||% return in 2021 (after fees deducted)||% return in 2020 (after fees deducted)||% return in 2019 (after fees deducted)||3 year Annualised return||Portfolio's exposure to equities %||
Platform fees per annum based on a £20,000 investment (Does not include fund costs)
|Nutmeg SRI (Portfolio 7)||13.70%||9.20%||17.20%||11.85%||72.80%||£150|
|Moneyfarm risk (level 6)*||13.70%||6.10%||16.50%||11.61%||74.00%||£136|
|Nutmeg (Portfolio 7)||12.60%||6.30%||15.00%||11.94%||72.85%||£150|
|Wealthify SRI (Ambitious Portfolio)*||11.18%||13.43%||14.04%||13.00%||65.60%||£120|
|Moneyfarm risk (level 5)*||11.00%||4.50%||14.40%||9.03%||62.00%||£136|
|Nutmeg SRI (Portfolio 6)||10.70%||9.30%||15.10%||12.12%||62.24%||£150|
|Vanguard LifeStrategy 60% Equity||9.93%||7.84%||15.24%||10.92%||60.00%||£30|
|Nutmeg (Portfolio 6)||9.90%||6.10%||12.70%||10.06%||62.86%||£150|
|Wealthify (Ambitious Portfolio)*||9.72%||5.06%||14.33%||8.85%||71.45%||£120|
|Wealthify SRI (Confident Portfolio)*||7.63%||9.04%||11.73%||10.51%||49.20%||£120|
|Wealthify (Confident Portfolio)*||6.70%||4.87%||11.89%||8.47%||54.19%||£120|
You can see that there is not much to choose between the Nutmeg SRI portfolio number 7 and Moneyfarm portfolio level 6 in terms of performance, both returning 13.70% in 2021. It is worth noting that while Wealthify has trailed slightly in terms of 2021 performance, both its regular and SRI portfolios turned in strong performances in 2020.
Bear in mind that investing comes with risk and markets can move quickly, as has played out in recent months, so there is no guarantee that the top performers in 2021 will remain so in years to come. Plus, the risk level of the portfolio you choose will depend on how much focus there is on protecting your capital from losses rather than making as much as possible in rising markets.
While you may be looking for the best-performing Stocks & Shares ISA, there are other factors that you should consider when selecting a product. This might include factors such as price, asset mix, minimum investment, quality of customer service, investment and product choice, and the options to view and manage your portfolio – whether through an app or a user-friendly website. Check out our article “The best stocks and shares ISA (& the cheapest fund platform)“.
If a link has an * beside it this means that it is an affiliated link. If you go via the link Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. But as you can clearly see this has in no way influenced the above editorial. The following links can be used if you do not wish to help Money to the Masses or take advantage of the exclusive Money to the Masses offers – Moneyfarm, Wealthify and Interactive Investor.