I’ve never been a fully committed Monzo customer; my account balance rarely exceeds £300, and I primarily use it for everyday spending, such as eating out or when I pop in to Sainsbury’s to buy a few bits. However, Monzo grabbed my attention when they announced their new service: Monzo Investments.
This feature lets you invest through either a Stocks and Shares ISA or a General Investment Account, with a low entry point of just £1. You can also activate the round-up tool, which automatically invests your spare change from everyday purchases.
Indie Tip
Profits made through a General Investment Account are subject to tax. Gains within a Stocks & Shares ISA are tax-free.
What makes Monzo Investments appealing is its native integration within the Monzo app. There’s no need to deal with third-party platforms or fill out long forms – everything is managed in one place, making it simple and accessible.
Monzo Investments is powered by BlackRock, the world’s largest asset management firm. When you invest through Monzo, your money goes into BlackRock^ funds. Known for managing trillions in assets and offering a wide range of ETFs through its iShares brand, BlackRock is a major player in global finance. I’ll summarise one of these funds below, but for those who want to dig deeper, the Monzo app provides detailed information on each option.
Monzo has recently made changes to their fund options and now have a selection of 14 funds you can invest in, which offer different sectors and themes.
Through Monzo, you have the option to invest through three distinct investment strategies: Careful, Balanced, and Adventurous. Your choice depends on your risk tolerance. The Careful option, for instance, invests only about 20% in stocks, with the remainder in more stable bonds. The Balanced option ramps up to 66% in shares, while the Adventurous option goes all-in with 100% stock investment.
This tiered structure makes Monzo Investments an excellent gateway for those who want to dip their toes into investing without having to handle the intricacies of financial markets themselves.
The Investment Funds
Before diving into the main fund you’re investing in, it’s worth quickly explaining what an ETF is. An Exchange-Traded Fund (ETF) is a type of investment fund that holds a mix of assets, such as stocks, bonds, or both, and is traded on stock exchanges, much like individual shares.
The key advantage of an ETF is diversification. Instead of putting all your money into one company, your investment is spread across multiple sectors. If one area performs poorly, gains in another can help offset the losses. This built-in balance makes ETFs a cost-effective and lower-risk way to invest.
When investing through Monzo Investments, your money is distributed into several funds, which include UK, European, US and Japanese stocks, as well as UK Gilts and other bonds. The main fund is the iShares MSCI USA ESG Enhanced UCITS ETF^ (where 17.86% of your capital is invested), which aims to invest in companies with strong ethical, environmental, and social characteristics.
Stocks in this fund include well-known tech giants such as Apple, Microsoft, NVIDIA, Amazon, Google (Alphabet), Meta (formerly Facebook), and Tesla. This selection offers exposure to some of the world’s leading technology and innovation-driven companies.
This ESG (Environmental, Social, and Governance) approach means the fund does not invest in tobacco companies, weapons manufacturers, or businesses involved in unconventional oil and gas extraction. Instead, it focuses on companies that demonstrate responsible business practices and sustainability efforts. However, be aware that not all funds adhere to ESG principles, so if ethical investing is a must, then Monzo Investments may not be suitable.
Other funds in the adventurous option include:
- iShares MSCI USA ESG Screened UCITS ETF
- iShares Equity ESG Index Fund (UK)
- iShares US Equity MSCI USA SRI UCITS ETF
- iShares MSCI EM ESG Enhanced UCITS ETF
- iShares Japan Equity ESG Enhanced UCUTS ETF
- iShares UK Equity ESG Index Fund (UK)
- iShares Continental European Equity Index Fund (UK)
What about Dividends?
iShares fund investments do pay dividends, though the yield and distribution frequency vary depending on the specific ETF.
For example, the iShares MSCI USA ESG Screened UCITS ETF has a current dividend yield of 0.95%, and it has historically paid out small dividends on an annual basis. Similarly, the iShares MSCI EM ESG Enhanced UCITS ETF and others may also pay dividends, although the amounts and yields differ across regions and indices.
It’s important to note that when investing through Monzo, any dividends received are automatically reinvested. This means that instead of receiving cash payouts, the dividends are used to purchase additional shares in the funds, potentially boosting your long-term returns through compound growth.
Fees and Costs
Monzo Investments has a competitive fee structure, with standard customers paying an annual total of 0.59% of their investment value. This includes a 0.14% fund fee and a 0.45% platform fee. While these fees may seem small, they can impact your overall returns over time. For example, if you invest £1,000, you’ll pay about 48p a month in fees, which can add up and affect your net gains. It’s important to factor these fees into your investment decision.
Monzo Perks or Max customers benefit from a reduced fee structure, with the same 0.14% fund fee but a lower 0.35% platform fee, resulting in a total fee of 0.49%. This means that with £1,000 invested, Perks or Max customers would pay about 40p a month, assuming no growth or withdrawals.
It’s also worth noting that fees accrue daily and are charged monthly, covering both Monzo’s service and the underlying fund costs. This straightforward and transparent pricing model is particularly attractive for Perks or Max customers.
The Takeaway
Monzo Investments is a great option for beginners because it’s easy to use, has a low entry point, and offers a straightforward way to start investing without needing deep financial knowledge. The round-up feature and access to managed funds also make it simple to get started with minimal effort.
Frequently Asked Questions
Still have questions about Monzo Investments? Here are some quick answers to the most common ones.
Can I withdraw my money at any time?
Yes, you can withdraw your money at any time. It can take up to 7 days to process a withdrawal, so it’s always best to initiate the withdrawal in advance if you might need the money unexpectedly.
Stocks & Shares ISA vs General Investment Account
A Stocks & Shares ISA and a General Investment Account both allow you to invest in various securities, but the key difference is tax treatment. The ISA offers tax-free growth and income within your annual allowance, while investments in a General Investment Account are subject to normal tax rules on capital gains and dividends.
Can you tell me more about what a Stocks & Share ISA is?
You can check out our short guide on what a Stocks & Shares ISA is here.
Is my money safe?
Yes, Monzo is regulated by the Financial Conduct Authority (FCA). Your deposits are protected up to £85,000 by the Financial Services Compensation Scheme (FSCS).
What is the best option for me?
This decision depends on your personal risk tolerance. Remember that markets fluctuate regularly, and you’ll see your investment value rise and fall over time. It’s important to consider your financial goals and comfort with risk when choosing an investment strategy.
