What each option is
A managed portfolio service builds and looks after a set of investments for you. You state your goals, how much risk you can accept and how long you plan to invest. The service then chooses what to hold and rebalances it over time. Some services use people, others use automated rules, but in both cases the investment decisions sit with the provider.
An online broker is an account that lets you buy and sell investments yourself. You decide which funds, shares or other assets to hold, when to buy, when to sell and how to spread your money. The broker places your orders and holds your assets. Nothing changes in your portfolio unless you act.
Handing over decisions or keeping them
The deciding difference is who makes the investment decisions. With a managed portfolio, the provider decides what you hold and when it changes. An online broker leaves those calls with you, and you bear the results of them.
Everything else follows from that split. Control, effort, flexibility and the kind of mistakes you are likely to make all depend on who is steering. Start with that question before comparing anything else.
Control, effort and flexibility
A managed portfolio asks very little of you once it is set up. You review your goals and update your details when your situation changes. The day-to-day work of selecting and rebalancing sits with the provider. People who would rather not think about markets at all tend to find that a good fit.
An online broker gives you the most control over what you hold, how much you hold and when you move. You can choose specialist investments, set your own mix and act on news you find important. Control of this kind also means more work. You research each holding, track performance and rebalance on your own schedule.
Flexibility works in a similar way. A managed service usually works within a defined strategy, so changing direction can mean changing the service itself or revisiting your goals. An online broker lets you change direction at any time, but the judgement on whether the change makes sense is yours.
Where a managed portfolio fits
A managed portfolio suits you when you want investing to run in the background. It is a good match for people who lack the time or the appetite to follow markets closely. Many investors also find it easier to stay with a plan during a sharp fall, because the provider's rules guide changes rather than mood.
- You want a set strategy and do not want to pick investments yourself.
- You would rather review your goals once a year than watch prices each day.
- You accept a standard approach in return for less work and fewer decisions.
- You are investing over a long period and want rebalancing without effort.
Pricing structures vary by provider. Check the provider's own documents before you decide.
Where an online broker fits
An online broker suits you when you enjoy researching investments and want to choose them yourself. It also suits investors who hold specialist assets or want a mix that a standard service would not offer. Because you control every decision, you also keep responsibility for each outcome.
- You want to pick the funds or shares you hold.
- You are willing to read about markets and review your holdings on a regular basis.
- You need to buy or sell at a moment that suits your own plan.
- You want a single account that holds several kinds of investment.
Before opening an account, read how to judge safety and check what investor protection covers in your country. Client money rules and compensation vary, so verify them with the provider and your local authority.
Which to pick
Choose a managed portfolio if you want investing handled for you and you accept a more standard approach. An online broker suits you if you want to make the decisions and have the time to do them well.
By reader type, the choice tends to look like this.
- Busy investors who want a hands-off approach will usually find a managed portfolio easier to live with.
- New investors who want to learn gradually may prefer a managed portfolio first, then an online broker once they understand markets better.
- Engaged investors who enjoy research and want full control will prefer an online broker.
- Anyone who finds frequent decisions stressful should lean towards a managed portfolio, unless they already hold a plan they trust.
Whichever route you take, compare providers on the points that matter to you. You can compare investing services side by side before deciding.