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What is MicroInvesting?
Micro Investing put simply is a term used to describe investing small amounts of money. Micro Investing is often targeted towards those who are new to investing and may not feel comfortable investing large amounts of money into things they don’t fully understand.
In recent years, micro investing has become a bit of a trend. There are now a handful of trendy micro investing apps that boast to be beginner friendly apps that allow users to make small investments. Raiz, Spaceship Voyager and ComSec Pocket are some of the more popular micro investing apps out there at the moment.
But what is the benefit of micro investing? Why wouldn’t you just use a normal broker like CommSec or Pearler? Well, it is undeniable that there are definitely some key benefits to micro investing, especially for those who are new to investing.
Investment platforms like CommSec, despite the fact that overall it is a very good platform, is not really designed for someone who is new investing. It is this complexity combined with steep brokerage costs, that often acts as a barrier to entry for new investors.
With Micro investing however, you can dip your toes into the world of investing. You can begin learning about investing and how it works at your own pace and with as little money as you’d like. To top things off, most micro investing platforms, Raiz included, have very simplistic and easy to understand interfaces that simplify investing and make it easy for anyone to get started.
Before we get into our review of Raiz, please note that I am not a financial advisor, and this is not intended to be used as financial or investment advice.
What is Raiz Invest?
Now that you understand what micro investing is – we can move onto reviewing Raiz as an Investment platform. What is Raiz? You guessed it! It is one of the biggest micro investing apps in Australia. With Raiz, you can invest small amounts into their ready made portfolios easily.
The entire platform is very beginner friendly and can be accessed through their webpage or smartphone app. Raiz make it extremely easy for you to get started with investing. You can invest in three main ways.
- Round-Ups (We will talk about this later on)
- Recurring Investments
- Lump Sump Investments
The idea that you can set up a few things and essentially put your investments on auto pilot is something that a lot of people love. With Raiz, you don’t need to be extensively researching stocks and managing your portfolio. You can simply select a ready made portfolio, turn on round-ups, set up a recurring investment, and you are all set!
Whilst this isn’t suited to everybody, there definitely is a large group of people that enjoy being able to invest without having to really think too much about investing! Micro investing through Raiz is essentially a way of simplifying what can be quite a complicated topic to many.
Raiz Invest Features
Round-Ups | Raiz’s round-ups feature, when enabled, round up your purchases to the nearest dollar, and invests the difference for you. Confused? Don’t worry it is a very simple feature but can be a little bit tricky to explain. Imagine you go and buy a coffee and it costs $4.50 – Raiz will round this up to $5 and invest the $0.50 for you. The idea behind this feature is that you are investing tiny amounts everyday purely from making your daily purchases. Over time these tiny amounts will hopefully grow into larger amounts. Round-ups can easily be turned off if you don’t want to use this feature.
Smart Portfolios | Raiz has 6 diversified, ready-made portfolios that you can choose from. These portfolios were created with help from Dr Harry Markowitz who won a Nobel prize and is the creator of the modern portfolio theory. The portfolio’s that Raiz has to offer are conservative, moderately conservative, moderate, moderately aggressive, aggressive and emerald. The portfolio’s aim to meet the needs of all investors with varying levels of risk tolerance.
One Time & Recurring Investments | If you don’t want to use the round-ups feature, there are other ways to invest with Raiz. Firstly, you can set up recurring investments. Select the amount you would like to invest and how often. For example, you may chose to invest $20 a week. Once a week, Raiz will deposit $20 from your bank and invest it. This is perfect for the set and forget mentality and gives you the ability to put your investing on auto-pilot. Alternatively, you can do one-off lump sum investments whenever you like.
$0 Brokerage | One of the biggest barriers to entry to investing is the brokerage costs charged by the big Australian brokers. Think of it like this, your son turns 18 and really wants to make his first investment into the stock market, but he only has $200. Even the most competitive Australian stock brokers would charge a $10 fee when you make a purchase. Usually this would be considered quite reasonable, however because the boy only has a small amount, this $10 fee actually means that he is instantly losing 5% of his investment, not to mention he will also be charged another $10 when he sells. The problem here is that the Australian stock market returns on average roughly 8%, you can do the math! Raiz do not charge any brokerage fees when buying or selling on their platform. This makes investing so much more accessible for those that want to get started investing, but only have small amounts.
High End Security | Raiz has a ton of security features that are designed to keep your information safe. These include but are not limited to: SSL encryption, account alerts, bank-level security and account safeguards. To top things off, your money is insured against fraudulent and criminal activity.
My Finances | This feature allows you to analyse your income and expenses. You can link your bank accounts to Raiz which allows the app to give you some extremely useful information such as your spending habits, transaction categorisation and cash flow. These features can be a great way to help you get an understanding of how much more you could potentially be investing if you cut down expenses in key areas.
Raiz Super | Raiz Super, as the name suggests is Raiz’s very own super fund. Raiz Super works just like any other superannuation fund. The attractive thing to many about Raiz Super is the ability to have your investments as well as your superannuation fund with the same organisation.
Raiz Kids | Do you have children or grandchildren that you would like to save for? Raiz Kids makes it easy to save and invest small amounts for kids who are under the age of 18. Raiz Kids is not a seperate account, it is essentially a subsection of your current account. You can select how much of your total account balance you would like to go towards your kids when they turn 18. As soon as they turn 18, they can open their own Raiz account and have the money transferred to them or you can manually withdraw the amount and give it to them.
Raiz Rewards | Raiz Rewards is essentially like a cash back system (check out our review of the ShopBack cash back system). Except rather than receiving cash, you will get money added to your Raiz investment account. Raiz have partnered with hundreds of companies whereby if you purchase from them, a small amount of that purchase amount will actually go back to you and be invested into your Raiz account. For example, at the time of writing if you made a $100 purchase with Adidas, $5.60 would be invested into your account.
What are the Fees?
Uh huh! Possibly the bit you have been waiting for, the fees! When making any investment decision, it is extremely important that you pay close attention to the fees. They are often tucked away and are pretty easily overlooked. What may look like tiny differences in investment fees, may actually have quite significant impacts on your long term investing returns.
So, what are Raiz’s fees? Firstly, lets look at a few areas that Raiz does not charge any fees for. You will not be charged anything to create an account, close an account, deposit funds or withdraw funds with Raiz.
Account Fees | For all portfolios excluding the saphire portfolio, Raiz charge $0 per annum for accounts with balances under $15,000 and 0.275% of your account balance for accounts with balances equal to or greater than $15,000.
Maintenance Fees | For all portfolios excluding the saphire portfolio, Raiz charge $42 per annum for accounts with balances of less than $15,000 and $0 per annum for accounts with balances over $15,000.
Underlying Issuer Fees | For those brand new to investing, this one may be slightly confusing, but I will do my best to explain. Raiz’s ready made portfolios are built with ETF’s (exchange traded funds). Each of the ETF providers charges their own fee. So when you are using one of Raiz’s portfolio’s, you are indirectly investing in ETF’s, which have their own underlying fees attached to them. As each portfolio has a variety of ETF’s it is impossible to give one single figure for how much this fee is, but Raiz have stated that the underlying issuer fees range from 0.04% to 0.59%. If you would like to know more about ETF’s, you should check out my post on them here.
Please note that these were the fees at the time of writing and are subject to change. The best place to check Raiz’s fees is in their product disclosure statement where they are legally required to clearly state all fees involved in using their investment platform.
How is Raiz different | Personalised portfolios, no minimum deposit amounts, fractional investing, extremely beginner friendly.
What is the sign-up process | You can sign up on Raiz’s site or app. All you need is an email address, a few bits of personal information and a funding account.
Is there any risks involved with investing with Raiz? | It would be completely irresponsible to say that there is no risk. There is risks with any type of investment. Your investments are subject to market fluctuations which could both increase and decrease the value of your investments.
Can you change your portfolio? | You can change your portfolio with Raiz without being charged.
Will my portfolio earn dividends? | Yes you will. Each ETF within your portfolio will pay dividends.
Can I withdraw whenever I want | Yes. You can withdraw from Raiz at any time, however, the money will take approximately 5 days until it will hit your account.
Why does Raiz need my TFN? | Raiz require this for tax purposes at the end of the year.
As with any investing platforms there a ton of questions that get asked. If you dint’t find what you were looking for here, the best place to check these out is directly on Raiz’s FAQs page.
Alternatives to Raiz
If you are looking for an alternative to Raiz, there are a couple of options that you have. The two most prominent are CommSec Pocket and Spaceship Voyager. Both micro-investing platforms are targeted towards those who are new to investing.
Just like Raiz, both platforms have sleek interfaces that are easy to understand and use.
With Commsec Pocket, you have the option to invest in 7 different ETF’s. Each of these ETF’s has its own theme which makes it easy for those new to investing to understand exactly what they’re investing in. These are Aussie Top 200 (IOZ), Aussie Dividends (SYI), Global 100 (IOO), Emerging Markets (IEM), Health Wise (IXJ), Sustainability Leaders (ETHI) and Tech Savvy (NDQ).
In terms of fees, CommSec Pocket does not charge any account fees, however, you will be charged brokerage when you buy or sell. For all trades under $1000, you’ll pay $2. For trades over $1000 you will pay 0.20% of the trade value.
On the other hand, with Spaceship you have the option to invest in three ready made well diversified portfolios. The three options are the origin, universe and earth portfolio. With Spaceshipo you aren’t charged a fee when you buy or sell, however, similar to Raiz you will be charged account management fees on all accounts over $5,000. These range from 0.05% – 0.10% depending on the portfolio.
Should You Micro Invest with Raiz
Overall, Raiz as a micro investment platform does a pretty good job at making investing easy and accessible. With all of its positives it definitely does have a few drawbacks. Whether or not Raiz is the right platform for you really depends on a lot of different personal variables that only you know.
Here is a summary of Raiz’s strengths and weaknesses as an investment platform. If you decide to create a Raiz account, if you use our link Raiz will add $10 to your Raiz account once it is approved.
- Beginner friendly
- No fees when buying and selling
- Quick and easy sign up process
- Raiz rewards
- Fractional investing
- Ready made portfolios
- Fees can erode small balances
- Can’t invest in direct stocks