The rise of the robo-advisor seems unstoppable, so it was only a matter of time before some bright spark combined it with crypto.
Initially launching in the US, the Makara app will offer investors curated baskets of cryptocurrencies design to reflect a variety of goals.
Described by the company as “crypto on autopilot”, the diversified baskets will cover the entire range of crypto, including DeFi and a specific basket aimed at hedging against inflation.
The fees are set at 1% of the value of your portfolio, which is on the high side compared to ‘standard’ stocks and shares robo-advisers currently operating in the UK.
Quick read: Makara is a robo-advisor offering access to baskets of cryptocurrency that reflect specific interests or crypto sectors. The AI automatically manages and rebalances your portfolio using sophisticated algorithms. You can starting investing from US $50.
Crypto investing for everyone
You can invest from just US $50, and no previous financial experience is needed to get started.
The platform is also focusing on education, offering step-by-step instructions and explainers to encourage those new to cryptoassets to dip their toes in the water.
Portfolios will automatically be rebalanced on behalf of users using Makara’s proprietary algorithms developed in conjunction with the Stix Leviathan investing platform.
Makara is registered with the US Securities and Exchange Commission – a first in the crypto robo-advisor (sometimes spelled robo advisor or roboadvisor) space.
What is a robo-advisor?
Robo-advisors have grown in popularity in the UK and around the world, especially with digital-savvy investors.
In the UK, companies such as Wealthsimple, Wealthify, Nutmeg, Moneybox and Moneyfarm, are some of the largest players operating in the space right now.
A robo-advisor is an investment platform that assesses your attitude to risk then matches you to a curated portfolio and investment strategy.
The app’s AI then manages trades and rebalancing activities on your behalf without you having to get involved.
They’re generally low-cost compared to traditional financial advisers (Makara being an exception) and require very little effort to set up, meaning there’s a low barrier to entry.
Once you’ve chosen your investment goals you can leave it to run on autopilot.
However, they don’t take a holistic view of your finances or take into account any specific circumstances that apply to you, which a human financial adviser would do.
Which robo-advisor should I choose?
There’s a plethora of robo-advisers to choose from in the UK, with often little to distinguish them from each other.
However, when you carry out your research you may find a platform offering a particular portfolio that matches your beliefs or interests that may sway the decision for you.
All the major platforms are backed by the Financial Services Compensation Scheme but ensure you do your due diligence before committing your cash.
What type of robo-advisor account will suit me?
Robo-advisers, like traditional savings institutions, offer several options to choose from depending on your individual circumstances.
- A General Investment Account (GIA) – your cash will be invested in stocks and shares, but any profit will need to be assessed for tax purposes. There is no tax benefit to a GIA and gains could be subject to Income Tax or Capital Gains Tax (CGT).
- An Investment ISA – you’ll be able to save up to £20,000 a year (2021/22) and any profits are tax-free and won’t impact your dividend allowance. Any gains you make from selling your investments are free from CGT.
- A Self Invested Personal Pension (SIPP) – this is a wrapper that holds your investments until you retire and attract generous tax benefits which vary depending on your personal circumstances.
When choosing an account you need to consider what’s going to suit your specific circumstances.
On most platforms you’ll have virtually instant access to your cash with either a GIA or Investment ISA.
However, whenever you invest in stocks and shares you should always be thinking longer term.
Financial advisers generally suggest funds invested in stocks should be left for a minimum of five years to allow for any bumps in the market to smooth out over time.
If you choose a pension you need to understand that the money is locked away until you’re at least 55 (this is likely to increase in the future) unless there are exceptional circumstances.
You won’t be able go into drawdown – ie access your funds – until this age, and there are several rules and tax implications that apply when you do.
At this point it’s probably a good time to seek advice from an expert!
*This article is for informational purposes only and does not constitute financial or investment advice.
Adam is the founder of The Crypto Adviser which offers experts guides and reviews on all things related to Bitcoin and cryptocurrency.
Adam is Diploma for Financial Advisers (DipFA) Level 4 qualified, a Member of the London Institute of Banking and Finance (MLIBF), and has worked for many years as a journalist and PR consultant, having studied with the National Council for the Training of Journalists (NCTJ).