Lightyear launches ready-made plans

Lightyear, the popular, low-cost investment app, is growing at the speed of light, and has expanded their offering yet again, with the launch of ready-made plans (hot off the release of their top rate Cash ISA and Stocks and Shares ISA last year).

For some people (actually, a lot of people) investing is a tad daunting, and opening an investing app with charts, stocks (companies) and numbers everywhere isn’t the best introduction to investing. And that’s where Lightyear’s¹ ready-made plans come in.

Ready-made plans are there to help you navigate the universe of investment by offering just 3 investment options (called plans). They are based on 3 different risk levels to suit your level of tolerance for ups and downs in the market, and your plans for your money (such as planning to grow over time).

Let’s just explain that word ‘risk’ a bit more. Don’t let the word put you off, think of it as the official term for how much you are prepared for your money to potentially go down in the short term in exchange for higher potential returns in the long term (typically 5 years or more).

If you don't want the value of your money to fall at all in the short term, cash savings may suit you better, although the interest you earn may not keep up with inflation over time, meaning your money's spending power could reduce. For longer-term savings, investing is generally worth considering alongside cash. Investing puts your money at risk of both increasing and decreasing in value, but historically it has tended to outperform cash over longer time horizons. Which is right for you depends on your goals, time horizon, and how comfortable you are with risk.

If you are prepared for the value of your money to go up or down a bit in the short term (we're talking in months or a couple of years), over the long term your money has the chance to grow more than it does as cash savings. A low risk option would typically see lower ups and downs.

With a medium level risk investment, you might be happy with your money going down a bit more in order to help your money grow more over time. With the higher risk level, this could be even more. 

The thing to really understand here is that these regular ups and downs are a part of investing and the reason why your money can increase more than saving cash.

In order for your money to grow over the long term, it typically needs to be invested in stocks and shares (often called equities) and these fluctuate in value daily, therefore increasing or decreasing the value of your investment, but over time, sensible investment plans tend to increase as businesses and economies grow. For instance, owning a bit of the global stock market (investing in a wide range of large companies throughout the world) is a very popular way to invest (Lightyear has a ready-made plan for this called All-World Wonder).

You might find that your investment increases year after year, but then there’s a dip, you can never predict the ups and downs, and it’s to be expected, but the money you’ve made before a dip, and what you’ll continue to earn after, might be significantly more than just keeping cash savings and earning interest.

With Lightyear, they’ve made it easy to take advantage of a typical investment strategy, without having to research investment options, as there are 100s to choose from, and 1,000s of individual stocks. If you’re not confident investing, it can be intimidating.

Behind each plan is an investment fund selected by Lightyear, but they are not recommendations and you should consider whether the plan suits your circumstances.

These investment funds are managed by two of the biggest investment companies in the world, BlackRock and Vanguard.

Technically speaking, the plans contain a mix of equities and bonds (or just equities), which is typical of an investment strategy. Equities are stocks and shares, and represent ownership of businesses (you own part of the company), which are traded on stock exchanges (such as the London Stock Exchange).

Bonds are effectively loans to governments and large corporations in exchange for interest payments. Bonds are generally considered lower risk than equities, though they carry their own risks and have historically offered lower returns over the long term. The higher the proportion of equities, the higher the potential return, but also the larger the potential ups and downs in value.

The higher proportion of equities, the higher the potential return is, but the higher potential for ups and downs.

Lightyear’s ready-made plans

The 3 ready-made plans on offer with Lightyear are:

1. Moderate Mix (lower risk)
2. Growth Group (medium risk)
3. All-World wonder (higher risk)

Moderate Mix

This is a mix of equities (stocks and shares) and bonds (loans to governments and large corporations). This is a mix of around 40% equities and 60% bonds.

You might opt for this if you have a medium-term goal in mind, like a large purchase a few years away. The trade-off is lower potential upside in exchange for typically smaller swings in value, although this type of investment can still fall in value and isn't guaranteed to grow.

Growth Group

This has a higher ratio of equities to bonds, with around 80% equities and 20% bonds.

This has a higher proportion of stocks and shares than ‘Moderate Mix’, and tries to achieve higher returns for those willing to have more ups and downs in the short-term. This could be an investment pot you are planning to withdraw in the medium-to-longer term, and are happy to ride out any down periods.

All-World Wonder

This only contains equities, and contains 1,000s of large and medium sized businesses from a wide range of countries around the world. This means it’s 100% equities (stocks). The goal is to track the FTSE All-World index, which is a popular measurement in investing to represent the global economy.

Put simply, it’s a great option to invest in the global stock market with just one investment.

This is the highest risk option of the 3, and has the potential for the biggest returns over time. You might opt for this if you have no plans to withdraw the money in the coming years, or are happy with a larger dip in your balance in the near future for the potential to make more over the long term (maximise returns).

For example, if you're on the younger side, you may be comfortable taking on more risk in exchange for higher potential returns over the long term. This type of allocation is common in pensions for those under 40, as a longer time horizon can give more room to recover from market falls. That said, markets can fall sharply and recovery isn't guaranteed.

How do the plans work?

To invest within a ready-made plan, all you need to do is set up your Lightyear account if you haven’t already done so. Head over to the Lightyear website¹ to get started. 

You can then pick your plan from the 3 options, and invest as much or as little as you want to. You could also set up a regular investment top-up into your plan, called auto-invest on Lightyear.

That’s it. You don’t need to make any other investments if you don’t want to. The experts behind the scenes, who are the investment managers of the fund behind each plan, will make changes to the investments within the fund on an ongoing basis. This is so the fund is always on track to achieve its goal and the appropriate risk level.

How much does it all cost?

The great thing about Lightyear is that, for personal accounts, there’s no fees to buy or sell investments (it’s commission-free) and there’s no account fees either. The only fees you might pay is a currency conversion fee if you were to buy investments in a different currency to your own. For instance, buying US shares from the UK with your GBP (Pounds) balance. And even then, the fee is just 0.10% for personal accounts which is the one of the very lowest out there.

The ready-made plans in the UK are all in Pounds (GBP), so you wouldn’t pay this fee.

There are management fees within each fund, which is typical of every fund, and this is a fee to the investment manager (so BlackRock or Vanguard) rather than Lightyear. This fee depends on which plan you are selecting, but is great value for money and low cost in our view.

Who are ready-made plans for?

Ready-made plans are a great option for all types of investors, but they’re especially great for those new to investing, as it takes away any complicated decision making, reducing the options of 1,000s of potential investments to just 3, and of those 3 by selecting by how much risk you’d like to take.

But it’s not just for beginners. They’re also popular with experienced investors who prefer an automated approach to investing, where they can simply add money and not worry too much about it (with the experts managing the fund in the background).

There’s no rules that say you have to know the ins-and-out of your investments, pick the stocks yourself, or be constantly reviewing your portfolio. With ready-made plans, you can get yourself set up, and often forget about it until you need it in the future. Lightyear’s auto-invest feature is great for this too, to contribute monthly.

Let’s recap

Ready-made plans are a great addition to Lightyear. They make investing easier, which is very much needed! Although the Lightyear app is easy to use, if you’re brand new to investing, seeing lots of investment options can make you feel like you should know what's going on, and unfortunately due to the nature of investing (and not being taught much about finance in schools), picking the right option isn’t always obvious. By the way, some investment platforms are far more complicated than Lightyear (we think they’re one of the very best).

For the pro’s, all the investment options are great, but for newbies, having only 3 ready-made plan options is ideal. There should be one plan that suits you, based on your risk tolerance and your future plans, such as when you’d probably want to withdraw the money. For instance, if you’re planning to save and invest for a long time, you might consider the 100% equities ready-made plan.

The other two plans are lower risk, with around 40% equities and 60% bonds, and medium-high risk with around 80% equities and 20% bonds. The higher the percentage of equities, the more the potential for higher returns over time (make more money) but also potential losses.

The funds behind the investment plans are managed by two of the biggest companies in investing, BlackRock and Vanguard.

As Lightyear itself is super low cost, investing in these ready-made options is actually completely free of Lightyear fees (when investing in GBP-denominated plans). How great is that? All you’ll pay is the investment manager fee, which is also low cost, and included within the fund itself (so you don’t pay the fee directly).

Overall, these plans are a great addition to Lightyear. Even if you’re an experienced investor, they’re a great way to set and forget about your investments, and benefit from Lightyear’s low fees and great investment app. To get started, or learn more, visit the Lightyear website¹.

Investing gives your money the chance to grow and outperform cash over the long-term, but investment values can also go down, so you may get back less than you put in. This is not investment advice. Past performance does not guarantee future performance.