What is a managed portfolio?
A managed portfolio is an investment service where a firm decides what to buy and sell on your behalf, within a risk level you've agreed. You own the underlying investments, usually held in your name through a nominee. The firm makes the day-to-day decisions and charges an annual fee for doing so.
The technical name is discretionary management: you give the firm discretion to make investment decisions without asking you each time. That's the key difference from a normal investment account, where nothing happens unless you place the trade.
You'll see a few different versions. Some firms run a handful of model portfolios, each pitched at a different risk level, and put everyone at that level into the same mix. Others build a bespoke portfolio for each client, which is more common with larger sums and higher fees. Online services, sometimes called robo-advisers, usually run model portfolios and use software to place trades and rebalance.
It's also different from buying a single multi-asset fund. With a fund, you own units in one pooled product. In a managed portfolio, you usually hold several funds or ETFs directly in your account, and you can see each one on your statement.
How does a managed portfolio work, step by step?
Most managed portfolios follow the same five steps: an assessment of your goals and risk, a match to a portfolio, investment of your money, ongoing monitoring and rebalancing, and regular reporting. You can usually add money, take money out or change your risk level later, though selling can take a few days.
The provider's own process may differ in the details. How it works covers the exact steps for the managed portfolio, from the first call to opening an account.
You answer a suitability assessment
Because the firm is making decisions for you, it should check the service suits you before you invest, and in many countries the rules require it. Expect questions about your income, savings, debts, goals, how long you can leave the money, your investing experience and how you'd react to a fall in value. Answer accurately. The checks protect you; they aren't there to slow you down.
You're matched to a risk level
Your answers place you on a scale, often numbered (say 1 to 5 or 1 to 10) or labelled from cautious to adventurous. Each level maps to a portfolio with a set mix of shares, bonds and cash. Our risk tolerance guide explains how that scale works.
Your money is invested
After you deposit, the manager buys the investments in your portfolio's target mix. In many countries, investment firms must keep client investments separate from their own money, which matters if a firm ever fails. Ask any provider how and where your investments are held.
The manager monitors and rebalances
Markets move, so your mix drifts. If shares rise faster than bonds, you end up holding more shares than planned and taking more risk than you agreed. Rebalancing trims what has grown and tops up what has lagged. Some firms rebalance on a schedule, others when the mix drifts past a set limit.
You get regular reports
You'll get statements showing what you hold, how it has performed and what you've paid. How often depends on the provider and on local rules: some countries require a statement at least every three months and an alert if the portfolio falls sharply between statements. Ask the provider how often it reports and whether it warns you about large falls.
What does a managed portfolio invest in?
Most managed portfolios hold a mix of shares, bonds and cash, usually through low-cost funds such as ETFs. The split between them, called asset allocation, sets how much the portfolio is likely to rise and fall. Cautious portfolios hold more bonds and cash. Adventurous ones hold mostly shares.
Shares give you the most growth potential over long periods and the sharpest falls along the way. Bonds usually move less and pay regular interest, though they can drop when interest rates rise, as many did in 2022. Cash is stable in value but tends to lose ground to inflation over time.
The table below shows the kind of split you might see at different risk levels. It's an illustration of a common pattern, not the mix used by any particular provider.
| Risk level | Shares | Bonds | Cash | What to expect |
|---|---|---|---|---|
| Cautious | 20–40% | 50–70% | 5–10% | Smaller swings, lower expected growth |
| Balanced | 50–70% | 25–45% | 0–5% | Noticeable falls in bad years, moderate growth |
| Adventurous | 80–100% | 0–20% | 0–5% | Large falls possible, highest expected growth |
Illustrative only. Check the provider's published factsheet for the actual holdings of any portfolio you're offered.
How much does a managed portfolio cost?
You usually pay two layers of cost: the provider's annual management or platform fee, and the ongoing charges of the funds inside the portfolio. Some also have trading costs. Add them together to get your real yearly cost, then multiply by your balance to see it in cash.
Take an illustrative example. You invest $10,000, the annual fee is 0.75% and the funds inside charge 0.20%. Your total is 0.95% a year, which is $95 in the first year. If your portfolio grows, the fee grows with it, because it's a percentage of whatever you hold.
That doesn't sound like much, but fees compound over time just as returns do. Over 20 or 30 years, a difference of half a percentage point a year can add up to thousands in money terms. Our fees guide shows this with a worked table, and the the managed portfolio fees page lists what that product charges.
- Management or platform fee: the firm's charge for running the service, usually a percentage of your balance.
- Fund ongoing charges: the cost of the ETFs or funds you hold, taken inside each fund.
- Transaction costs: the cost of buying and selling, including spreads. Often small but not zero.
- Other fees: check for exit, transfer or minimum fees, and for any charge to switch portfolios.
What are the downsides and risks of a managed portfolio?
The main risk is that your investments fall in value and you get back less than you put in. A manager can't prevent that. You also pay fees in bad years as well as good ones, and you give up control over individual investment decisions. Past performance doesn't predict future returns.
If an investment firm fails, client investments are normally meant to be held separately from its own money and returned to clients. Some countries also run investor compensation schemes that may cover part of a shortfall if that goes wrong, up to a set limit.
Whether any scheme applies depends on the firm and where it's based, so ask the provider and check with the financial regulator in your country. No such scheme covers normal investment losses. Read the full risk disclosure before you decide.
- Market falls: a balanced or adventurous portfolio can drop 20% or more in a bad year. The manager will rebalance, not sell everything to cash.
- Fees reduce returns: a managed service costs more than buying a single index fund yourself. You're paying for the work and the discipline.
- Less control: you can't usually swap out one fund you dislike or exclude a particular company, unless the provider offers that option.
- Manager decisions: if the manager makes active calls, such as tilting towards one region, those calls can be wrong.
- Access: selling can take a few working days, so this isn't a place for money you might need at short notice.
Managed portfolio or do it yourself: which is better?
Neither is better for everyone. Paying a manager suits people who want a professionally chosen mix and don't want to rebalance it themselves. Doing it yourself is usually cheaper and gives you full control, but only works if you'll make the decisions and stick to them when markets fall.
Be realistic about the second column. Plenty of people set up a simple DIY portfolio, then sell in a panic when it falls or never get round to rebalancing. If that sounds like you, the extra fee for a managed service may be worth it. If you enjoy the research and have a plan you'll follow, it may not.
| Managed portfolio | Do it yourself | |
|---|---|---|
| Who picks the investments | The manager | You |
| Rebalancing | Done for you | You have to remember and do it |
| Typical cost | Platform or management fee plus fund costs | Platform fee plus fund costs, often lower overall |
| Suitability check | Usually carried out before you invest | Usually not, beyond basic questions |
| Control | Limited to choosing a risk level | Full |
| Biggest risk | Paying for a service you don't need | Making emotional decisions in a downturn |
Is the managed portfolio a managed portfolio, and is it right for you?
The managed portfolio is a managed investment product from the provider that invests in a mix of funds. It works much as described above. It can make sense if you want a done-for-you portfolio and can leave money invested for five years or more. It isn't a fit for short-term savings or anyone who can't accept losses.
Before you get in touch, check three things: the fees, the risk disclosure, and our trust page, which explains who provides the product and how to check the provider yourself. If you'd rather manage investments yourself, or you have debts or no emergency savings yet, the managed portfolio probably isn't for you right now. Our checklist before you invest covers that.