Should you use Trading 212’s ready-made pies or build your own?

Trading 212’s "Pie" feature allows investors to easily build their own portfolio of stocks, funds, bonds and commodities.

But it gives users a dilemma: should you build your own pie, or do you want one we made earlier?

If you’re new to investing, the ready-made pie might seem appealing – you can simply copy a portfolio from someone else. But is that really a good idea? Are these ready-made pies really suitable for all investors?

Let’s dive in and see how your options compare, and which pie you might favour depending on your investment goals.

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What are Trading 212 pies?

Pies are customisable mini-portfolios that automatically keep your investments in the proportions you choose. You set a target percentage for each stock or ETF, and every time you add money, it's spread according to these targets.

Each pie can hold up to 50 different investments, and because Trading 212 offers fractional shares, you can build one even with a small amount of money.

You can create your own pie from scratch or pick a ready-made option – both of which we'll explore below.

Model pies

The first option we're going to look at is Trading 212's 'Model pies'. These are pre-built pies created by fund providers with trillions in assets under management between them.

If you select this option, you'll be presented with a small selection of model pies. At the time of writing, there are six different options to choose from.

First, we'll look at the three most prominent pies in this section: Vanguard Global, BlackRock Core and WisdomTree Core.

Diversified asset model pies

The first thing to note is that all of our pies – at least, at their default "moderate" setting – take a pretty conservative approach to investment.

Vanguard global – the first pie on our list – is a straight 50/50 bond/equities split.

BlackRock Core is made up of roughly 50% equities (that’s stocks and shares), roughly 50% government bonds, with the small percentage left over going to commodities – which includes things like physical gold.

Similarly, WisdomTree Core has around half invested in equities, but this time, the remaining split is 32% bonds, 20% commodities.

All of these pies aim to be diverse and somewhat low risk.

They aim for diversification by spreading money across different asset classes, industries, and regions.

At Financial Interest, we typically focus on slightly higher risk, very long-term investing strategies – 20 years or more – because we're a long way away from retirement age.

We generally prefer to have investments as close to 100% in equities, or stocks and shares, as possible. This is because they have the potential to yield higher returns – albeit with greater levels of risk and volatility.

Bonds and commodities offer greater levels of security because they are less likely to experience extreme volatility in price movements, but this may not be as appealing for investors in the earlier stages of a long-term investment journey.

These asset classes are generally considered more suitable for those nearing retirement age, or those attempting to generate a safer return – away from the huge price volatility that the stock market can sometimes offer.

As a popular example of this, Vanguard's "Target Retirement" funds contain large weightings of bonds – usually starting around the 20% mark, and this allocation increases as high as 70% as you reach your target retirement year.

It includes bonds from the start because it wants the best possible chance of allowing you to retire – less chance of a total disaster – but the weighting is much higher towards equities in the beginning. It still has a 71% equity holding when 15+ years away from retirement.

If you’re in the situation where you'd prefer your investments to have less risk at the downside of potentially lower returns – though returns could still be larger in theory – then these three model pies could be good options for you.

Vanguard Global comes with a 0.11% Total Expense Ratio (TER) – also known as the 'Ongoing Charge' (OCF) – which is taken annually by the fund. BlackRock's comes in at 0.17%, and WisdomTree Core has a 0.29% TER, which is higher because of the larger weighting towards commodities – bonds are typically the cheapest option in a portfolio.

Vanguard's TER is pretty cheap. The other two are fairly reasonable – not a bargain, but not stomach churningly expensive.

And if you click through to the pies, you can also adjust the investment style to be more aggressive and take on more risk, or even be more conservative if you wanted to.

This option is listed in Trading 212 as ‘Pie variant’, which will change the investment weights.

With BlackRock core, if you want the most conservative pie possible, you’ll be putting around three-quarters of your investment into bonds, and only around 20% into equities.

On the other hand, you can select ‘Aggressive’ and have a 93% equity split.

There's flexibility for you to consider, but we won’t delve into every single pie option here – we’re focusing on the default options, which is the ‘Moderate’ pie variant in this case.

To see more model pies, scroll down a bit and you’ll see three more options – and this time, they invest 100% in equities (again, that’s a fancy word for stocks and shares).

Equity-focused model pies

These equity-focused model pies are called WisdomTree Tech, WisdomTree Environmental, and WisdomTree Multi-thematic.

We assume BlackRock and WisdomTree pay to have their pies featured within Trading 212, but this hasn't been verified.

These pies don’t offer the option to alter the investment style or risk level, so there's just one variant of each portfolio to consider.

The "WisdomTree Tech" pie will invest your money into multiple ETFs, all in different parts of the tech industry. This includes artificial intelligence, blockchain, biotech and more – it's basically a futuristic tech pie, the type you’d enjoy sinking your teeth into as the world burns around you.

There’s also the "WisdomTree Environmental" pie, which focuses on eco-friendly themes like renewable energy, recycling, and sustainable food.

Finally, there’s the "WisdomTree Multi-thematic" pie, which is mostly a blend of the other two pies that we just discussed.

These are all 'thematic' pies – they focus on investments with a certain theme – and we can summarise our thoughts on all three together.

These pies are more in line with our own investment style (yours may differ) because they focus 100% on stocks and shares, but they are not highly diversified.

While we’re comfortable taking on higher levels of risk due to our focus on long-term investing, we also seek diversification to reduce our risk as much as possible.

Overexposure to specific industries does not fall in line with the investment approach we take at Financial Interest.

Because we're not financial analysts or professional investors, we don't believe in 'stock picking'.

Our logic is simple: If many highly-paid traders fail to beat the market when picking stocks – and they do – why would we believe we could do it as casual investors that are simply looking to put money away for our future?

Investing in specific industries, or betting on certain "themes", is essentially stock picking.

We obviously recognise that AI and emerging technology will be more prevalent in the future, but does this mean the share price of companies in that sector will go up?

The fact that these industries are expected to grow in popularity and use cases – and everyone knows it – should already be factored into their current share prices.

That's one of the reasons why a company like NVIDIA has a P/E ratio* of 53.05 at the time of writing, whereas a non-AI company, for example Visa, has a much lower P/E ratio of 30.86.

P/E ratio, or price-to-earnings ratio, is the share price of a company divided by its earnings per share. The higher the P/E ratio, the less money the company makes relative to how expensive their share price is.

Future growth of an industry doesn't necessarily mean share prices will go up – but it could... we would have no idea either way, which is why we don't pick stocks.

So, are we saying we'd never invest in NVIDIA, or AI companies, or tech? Not at all. In fact, we do invest in these companies. We just do it in a different way with much less exposure.

If you want to make a bigger bet on the tech or environmental industries, these pies might be suitable.

However, a final consideration is the yearly fees (TER) the funds in these pies take, which are quite high.

WisdomTree Environmental, for example, takes a 0.45% annual fund fee – plus they'll take other small fees for covering things like their trading costs.

That's higher than many other funds on Trading 212, and the difference between a 0.45% annual fee and a 0.22% annual fee – from a fund we'll look at shortly – can be significant when compounding fees eat into your balance over time.

Another thing to be aware of is that both the Wisdom Tree multi-thematic pie and the Wisdom Tree core pie contain non-GBP listed funds, introducing a sneaky 0.15% FX fee.

But can you buy into similar funds to the ones we're discussing at a much lower price? Probably not.

Smaller, more niche funds will often require higher management fees to justify operating them.

While the initial model pies we looked at were too diverse for our strategy in terms of asset classes, the thematic model pies are not diverse enough in terms of industry or regional coverage.

What you’re looking for might be totally different depending on your age, risk tolerance, and more.

Community pies

If the first pies were too cold, and the second pies were too hot, will the final ready-made pies be just right?

An interesting feature that Trading 212 offers is their community pies, which allows users to copy the investments of other real users – and publish their own for others to copy. You'll find these on the "Social" tab, right next to the model pies option.

You can see how many real users are viewing and copying each pie, too.

By default, you'll see new pies that have drawn a lot of community interest. You can also switch to viewing the top pies – the ones that the most users have recreated.

The default setting means we're faced with some interesting portfolios when we scroll through the "Social" tab.

Potential for growth? Certainly. Possibility of flatlining? Definitely.

That's not to say that these pies won't be interesting to you. We just prefer to keep our eggs in more baskets.

Unsurprisingly, if you switch to ‘Top’ community pies instead of ‘New’ – and you find portfolios that tens of thousands of people are copying rather than 65 people – things start to look a little more promising.

The top pie, for example, focuses on big brand names that pay regular dividends like Microsoft, Apple and Johnson & Johnson.

This is clearly popular – 186,000 people have copied this pie at the time of writing.

Sadly, again, it might not be a good fit for those seeking broader diversification.

Focusing exclusively on companies that pay dividends means we'd miss out on all of the companies that choose to reinvest their profits instead – something that can also potentially help share prices, in theory.

The '(Almost) Daily Dividends' pie only includes 50 different companies, so it’s not particularly diverse. This is the maximum number of different 'slices' a pie can have on Trading 212.

A slice could be an ETF rather than a share in one company, but many of these top community pies focus on individual shares.

This pie also invests exactly 2% into every company – it doesn’t scale based on company size.

For long-term equity investors who are looking for diversification, a portfolio would likely include exposure to more than 50 companies.

The investments could also scale based on the size of the company – the bigger the company, the bigger the position. This is how large funds typically structure their portfolios, at least.

Another thing to consider is FX fees. When you're based in the UK and buying shares priced in USD, you're going to incur currency conversion costs.

These costs aren't massive, but if you're investing on a regular basis and you're losing 0.15% in FX fees every time you do, this compounds to a large amount over time.

This doesn't apply if you purchase ETFs priced in GBP, and taxes are different too, although shares don't have an annual ongoing charge (TER) to deal with.

Overall, community pies don't seem quite right for what we're looking for.

That said, we did give the Daily Dividend pie a go over on our YouTube channel, because we're nothing if not good sports.

Build your own pies

Based on everything above, we prefer using the ‘Create your own’ pie option instead.

And truth be told, the only reason we use a pie at all is because it allows us to set up regular, ongoing investments.

At this time, within our pie, we have just a single, solitary ETF.

Please note: this is not a recommendation. There are many similar funds, and thousands of other funds that allow you to invest in different things – from subtle differences to totally incomparable.

We invest into a globally-diverse fund – VWRP – that invests in 3,655 stocks as of the date of writing, and has an ongoing charge (TER) of 0.19%.

It invests into businesses of various sizes, spread out across the entire globe.

The majority of the portfolio's exposure is in North America, with businesses in the S&P 500 getting a relatively large amount of exposure, but it's still much more diverse than simply investing into an S&P 500 fund.

It ticks all of the boxes that we're looking for: it's 100% equity focused, but is extremely diverse in terms of industry, region and business size coverage.

Any dividends that are earned are automatically reinvested because this is an accumulation fund, though there is also a version of the fund that pays dividends directly to you (VWRL).

After all, in the (paraphrased) words of Vanguard founder Jack Bogle: "why look for the needle when you can buy the whole haystack?"

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What's best for you?

From everything discussed here, we hope you can see how important it is to decide exactly what you want from your own investments rather than blindly copying what other people are doing. That includes copying our strategy – we are "other people".

We are not financial advisers.

While we might not be fans of many ready-made pies on Trading 212, there might be one that looks perfect for you.

If you need any assistance or specific advice – especially if you've got a lot of money on the line – seek help from a qualified financial adviser.

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