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ii Model Portfolios: FAQs

Rebecca O'Keeffe, Head of Investments at ii answers your questions about our model portfolios

What are the objectives of each model portfolio?

Interactive investor’s overall objective is to create high-quality portfolios, designed to help you realise your ultimate financial goals. They are completely transparent, not just in terms of how they are constructed and managed, but also in terms of their cost. They comprise our highest conviction choices across the whole fund universe, with absolutely no conflict of interest. They are built upon a selection process that has proven itself over many years to deliver returns well in excess of their benchmarks.

ii Growth Portfolios

The objective of the ii Growth Portfolio (whether Active or Low-Cost) is to maximise investment returns over the long term, by investing primarily in growth assets e.g. equities. The risk-return profile of the ii Growth Portfolio is expected to be consistent with an asset allocation to global equities of between 80% and 100%.

ii Income Portfolios

The objective of the ii Income Portfolio (whether Active or Low-Cost) is to focus on income generation as well as investment returns over the long term, by investing primarily in income assets e.g. dividend-paying equities. The risk-return profile of the ii Income Portfolio is expected to be consistent with an asset allocation to global equities of between 80% and 100%.

  • The Active Portfolios are constructed using active (non-index) funds.
  • The Low-Cost Portfolios are constructed using passive (index) funds.

How did ii choose these Model Portfolios?

The ii Model Portfolios’ were chosen to include our highest conviction choices across the whole fund universe. Designed to meet the individual portfolio objectives, we then looked to see what different assets we needed to include in order to achieve an optimal asset allocation.
In terms of choosing the underlying constituents for our Model Portfolios, we looked first to the ‘Super 60’ list of our highest conviction investment choices. However, diversification is also essential to building a robust investment portfolio, therefore we also looked outside the Super 60 list where we needed to introduce other high-quality funds that complemented the main equity and bond allocations.

To see our methodology please click here.

How often will the Model Portfolios change?

We review the model portfolios regularly to ensure there are no dramatic changes, such as a fund manager change for any of the constituents etc. We also review the weightings of the portfolio every quarter, to ensure that the portfolios are in line with our asset allocation targets. Once a year we refresh the asset allocation of each portfolio and review all its constituents. If changes are required, these will be published on the website and in our quarterly investment review. 

Our ongoing management process is designed to keep portfolio turnover low and trading costs to a minimum, in keeping with our belief that fund investment should be for the long term.

We will also publish quarterly performance and risk reports for each Model Portfolio, including attribution of returns against the strategic benchmark.

Are they suitable for all investors?

Yes they are. If you are a ‘hands-off’ investor with limited time or financial knowledge, you might choose to simply replicate the ii Model Portfolio within your own investment account. For those with more confidence in their own investment expertise, the Model Portfolio can still be useful as a ‘reference portfolio’, helping you to follow the correct strategic asset allocation over time to achieve your ultimate goal, but allowing you to select your own preferred underlying investments.
 

How much does it cost to buy the ii Model Portfolios?

At the current time, each underlying constituent has to be bought and sold separately, but we are working to allow the portfolio to be bought as a single purchase and sale. 

Our customers make a quarterly payment of £22.50, and in return they receive £22.50 of trading credits. To buy and sell online is usually £10 a trade, which we reduce to £6 for your first 3 months. If you want to invest regularly, then it costs just £1. View full details of our charges here 

Why does interactive investor charge flat fees?

We believe that flat rate charges are simple, clear and fair. All fees erode the value of your portfolio, so it makes sense to try and pay as little as possible. The more you invest, the more our fixed fees make sense. 

Are there any incentives for interactive investor to promote these portfolios?

No. There are no commercial or other incentives for ii in relation to model portfolios or the ii quick start funds and ii Super 60. All funds, trusts, ETFs and portfolios are picked purely on quality and performance and free of commercial incentives.
As a flat fee provider, interactive investor is completely neutral on any type of investment our investors choose to make. We don’t make any additional money promoting funds instead of equities or any other asset class. 

What is a fund?

A fund is a pool of investors' money run by a fund manager who invests on behalf of the customer, invested into different assets and professionally managed by the fund manager and their research team. Each investor receives units, which represent a portion of the holdings of the fund.

What is a trust?

Investment trusts are listed companies that invest in the shares of other companies or fixed income securities, unquoted securities or property. 

As a listed company its shares are quoted on the London Stock Exchange and the share price is determined by demand and supply.

What is the difference between a fund and a trust?

Investment trusts are closed-ended companies. This means they have a fixed number of shares in issue, unlike Funds that are open-ended investment companies ('OEICs') or Unit Trusts. Investment Trusts are also listed companies and must have an independent board of directors that are obliged to answer to their shareholders.

What is an ETF?

Exchange-traded funds (ETFs) are collective funds that trade on a stock exchange. They are designed to track the movements of an index, commodity or basket of assets. They will do this by taking positions in the underlying securities that make up an index in the same weights that they appear in that index.

ETFs are offered on a vast range of indices and commodities and usually have a lower annual management fee than other types of collective investment fund. They are also bought and sold in the same way as normal shares, but because they are a basket of stocks like a fund, you do not pay stamp duty on the purchase of ETFs, as stamp duty has already been paid on the underlying investments held by the ETF. However, you will be subject to tax on any gains made from your investment in an ETF.

What is the difference between active funds and passive funds?

An actively-managed investment fund has an individual fund manager or a team of managers who make investment decisions for the fund. They seek to deliver a higher return than the relevant market index. 

Passive management of a fund intends to track the returns of an index, it doesn't have a fund management team making decisions. 

Passive funds typically cost less than actively managed funds. 

How can I invest in these portfolios?

Customers who already have an account with us can simply select the individual buy buttons and login to their account. Customers who do not have an account with us yet can apply for an account. Applications take just a few minutes.

What information do I need to open an account?

To open a Trading Account you must be 18 or over and either a UK, Channel Islands or Isle of Man resident. You will need the following information.

  • Your address details (last three years)
  • Your National Insurance number
  • Your debit card details

Can I invest in these portfolios in an ISA or SIPP?

Yes. All these underlying investments can be held in an ISA or a SIPP and being tax-efficient is hugely important over the long term. Once you have an account with us you don’t pay any more for an ISA. If you want to open a SIPP there is an additional charge of £100+VAT per annum. 

Can I set up a regular investment and buy these portfolios monthly?

As discussed above, each underlying constituent of the portfolios has to be bought separately at the moment, but we are hoping to launch a portfolio buy option shortly. 

In relation to buying each of the underlying investments, our account allows you to invest regularly for just £1 per investment. This allows you to build up your investment portfolio in a simple, low-cost way to achieve your investment goals. It also ensures that you can balance your returns over the longer term, removing the worry of investing a lump sum. For more details please see our regular investing page
 

Can I hold other investments in my account?

Yes. Once you have an account with us you can choose to invest across a wide range of investment options including funds, investment trusts, ETFs, equities, including both the UK and a wide range of international markets, and bonds. We also offer a range of tools and filters to try and make it easy for you to decide what investment options suit you. 

What factors should I consider when looking at the ii Model Portfolios?

The ii Model Portfolios are tools designed to help you to realise your long term financial goals. It is vital, therefore, to select the model which is best aligned to your personal financial goal. Careful consideration should also be given to the risk attributes of your chosen model, as described in its investment objectives.

Your next decision is whether to select the active or low-cost version of a given Model Portfolio, depending upon your preference for potential additional returns or for a simple, ‘passive’ solution with the lowest possible cost.

Which portfolio is right for me?

We don’t offer advice and any decision to invest is based on your own personal circumstances, including how long you intend to invest for and the amount of risk you are willing to take. Each portfolio and underlying constituent has a factsheet detailing its asset allocation and objective. 
 

How can I look at alternative investment options to invest in? 

We offer a fund search option that allows you to filter the range of available funds and search options that allow you to explore the whole range of available investments including shares, investment trusts and ETFs.

We also have the ii Super 60 selection where we have chosen a range of active and passive funds, investment trusts, and ETFs to make up the ii rated investments list. Our aim is to help you identify collective investments with consistent returns, and those which we believe are good choices in the prevailing market environment. For more information see the ii Super 60 list