If you’re like me and want to invest with little to no money, Raiz is here to answer your prayers. The Australian born micro investing platform converts your savings into shares, bonds and cash in markets both locally and internationally to give you a higher average return than regular stock market trading. The idea behind Raiz is truly revolutionary, this is without a doubt the technology of the future, but is Raiz right for you? Find out below.
What is micro investing?
Micro investing is a new type of investing that has only become popular in the past few years. It is basically the practice of giving your money to a company, who will then invest it across many different exchange traded funds (ETF’s). ETF is just a fancy way of saying companies, bonds, foreign cash, basically anything you can invest in. So if I give Raiz $10, I would then own between $0.05 and $0.25 in many different ETF’s, all bundled into a portfolio. To simplify it all though, all you will ever see is the portfolio value.
So how does micro investing make money? Surely the fees involved with trading would be ridiculously high? Well, yes they are, but the power behind micro investing is in economies of scale. Without putting you to sleep with an explanation, economies of scale means the more money you have or the higher quantity of something you want to buy, the lower the price per unit will be. For example, McDonalds would buy beef for their patties per kg far cheaper than a takeaway shop. Apply the same here and you can see how Raiz can purchase shares cheaper than an investor going on their own.
Who can create a Raiz account?
Any Australian resident over the age of 18 is welcome to create an account. If you’re under 18 or want to set up an account for your kids, Raiz kids is an excellent alternative to get your kids savings up and running. There is no extra fee for Raiz kids and the savings will be invested the same as your normal Raiz account, so as they grow up, so will their savings.
Raiz will also soon be available to residents of Malaysia! This is the first country outside of Australia to get it.
What does Raiz invest in?
Short answer, heaps of things. When you invest your money into them, your money will actually be spread over many different ETF’s. The team behind the decisions try and keep an ethical approach to their investing and will only invest in things they believe to be big in the future. After all, if the world is shifting towards something like after pay options, that’s going to create some very rich shareholders. Each portfolio invests in different things, which is all dependent on how aggressive the trading strategy is of the portfolio you choose.
There are currently 6 portfolio’s with a 7th on the way. These consist of the 5 main portfolios:
- Conservative – The ‘safe’ option, heavily invests in Australian government and corporate bonds instead of companies. This will perform the best in a market crash and fluctuate the least.
- Moderately Conservative – Still a fairly safe option, also heavily invests in the government, but more so in corporate bonds, also invests 22% in Australian companies.
- Moderate – Starting to become a little more volatile, invests 32% in Australian companies and still a significant amount in government and corporate bonds. Low foreign investment may leave you stranded if Australia’s market crashes.
- Moderately Aggressive – Almost half of your investment will be in Australian stock, government bonds only make up 3% while corporate bonds still make up 22%.
- Aggressive – The riskiest option. More than half your investment will go straight into the Australian stock exchange, 24% into Asian markets and the rest predominantly going to Europe.
As well as Emerald, the socially and environmentally responsible, which invests in only heavily studied ETF’s that are doing the right thing for the world, while still making profit.
On the way, expected to launch in February, is a portfolio that invests in Bitcoin and potentially other cryptocurrencies, as Raiz believes that while volatile, crypto is the direction the world is headed.
So which Raiz portfolio is right for me? Well for the main 5 that depends on two things, how riskier you’re feeling and how much time you intend to let the money sit there. The more conservative portfolios will make you less money than the aggressive ones in the long run. However, the conservative portfolios will remain fairly steady during market uncertainty and crashes. Therefore, if you have a fixed date you need the money by in the not too distant future, conservative is the way to go. Alternatively, if the moneys going to sit there for a while, or you simply don’t mind the risk, then go aggressive.
Is Raiz safe?
Raiz is absolutely safe. I have personally been using Raiz for almost 2 years now and have never had any issues with my banking details or personal details in any given way. Instead of taking my word for it though, lets get a little technical for a second.
They take safety very seriously at companies like this, I mean they’re essentially like a small bank, so this calls for serious safety. This means that all your information isn’t stored on your phone or at their headquarters; instead it is stored on a remote server which has bank level encryption. So you’re not only safe from cyber-attacks, but also if your phone gets stolen. On top of this, all your money is automatically ensured in case something bad were to happen.
How Much Money Will I Make?
The big question. Well, unfortunately I can’t give you all the magical number that you want to see here. How much money you make will depend on how much you invest and how well the market performs. Rather annoyingly, nobody can truly predict how well the market will perform in the next week, month or year, however we can try and look at previous performance from Raiz as a guide.
Here we hit a new roadblock though. You see Raiz doesn’t openly discuss the unit price of their portfolios (unit price is basically 1 share of the portfolio) or their performance anymore, meaning we can’t get any real solid details. They did share these details for the 2018-2019 financial year though and all portfolios grew (good start) ranging from conservative at 6.88% all the way to emerald at 10.92%. While still impressive, I bet these numbers weren’t as high as you were hoping. Good news is, that was a bad year of trading. Even though they’ve not publicly released the details, I can tell you from last calendar year (2019), my own Raiz account set to aggressive grew around 20%. As the company continues to grow, even with poor market performance, it is expected that the returns will only get higher.
You will also occasionally get paid out dividends. These dividends are scheduled, which you can find on their website and can take up to 90 days to finally reach your account. Each portfolio will have different dates and a different amount of times a year they receive dividends. Mostly, these dividends will only be a small fraction of your investment, but you will occasionally get one for a few dollars.
Without a doubt, the biggest thing that stops young people investing is fees. You simply can’t afford to be investing a relatively small amount of money, if your money is being eaten up by transaction and merchant fees. So you can see why it’s so attractive when micro investing companies don’t charge any fees at all for as many deposits and withdrawals as you like.
They do however charge a $1.25 monthly fee for all customers. This is to help cover the expenses of staff and company expenditure behind the scenes, without having to take out of our investment. You may have noticed that their biggest competitor, Spaceship Voyager, doesn’t have any fees at all (under $5,000). Well that’s simply because Spaceship just take a cut of the profits to pay what they need. So really, it works out about the same for you.
Lets breakdown that fee for a second though. $1.25 a month = $15 a year. So to make it worthwhile having your money in there at all, we need to make at least $15 growth for it to be worth it at all. Now, to play on the side of caution, we will say that the portfolio will only grow by 8% this coming year. That means that you will have to invest at least $187.50 to break even. But really were splitting hairs here. Any savings is an excellent start to build off. If you’re that concerned about the fee, you can make it obsolete by referring 3 of your friends in the year, which will make you $5 each as soon as they deposit $5.
Depositing and Withdrawing
As I said earlier, there is no limit to how many times you can make any deposits of withdrawals. The process is actually really simple, once you’ve set up your bank details within the app, all you have to do is head to the invest tab, then select either deposit or withdraw. From here, there is no minimum amount you can either deposit or withdraw and the transaction for both is normally complete within 5 business days.
There’s also 2 more options on how to invest, recurring investments and round ups. Recurring investments are pretty straight forward, you select an amount to get invested automatically with a daily, weekly, fortnightly or monthly frequency.
Round ups are a little different though. This is one of my favourite features of Raiz. How they work is the round up all your purchases on your card to the nearest dollar and invest the remaining amount into your account. So if you buy a $3.30 coffee, you will be charged the $3.30 from the store then an additional $0.70 will be invested into Raiz. As one of the first companies to do this, I personally saw how easy it was to quickly rack up a fair bit of money.
The app also offers a feature which will change how you shop. Raiz Rewards gives you a certain percentage back of your online purchase and invests it straight into your account. With more than a hundred different stores and some offering over 10%, it is an excellent way to save on your everyday online purchasing.
The stores aren’t no names either. They include:
Just to name a few.
One of them is a little different though. If you scroll to find PureProfile, instead of purchasing anything, you can complete surveys to earn cash back straight into your account. They actually pay decently high for your time and you will often have at least 2 surveys waiting for you. The money from this and any other store is usually credited to your account within 30 days of the purchase or survey completion.
Carbon Offset Program
I won’t go into too much detail about this because it is about to change according to a recent letter from the Raiz management. The Carbon Offset Program monitors what you spend with your linked card through having round ups enabled. It will then give a rough estimate of how much Carbon Dioxide you are putting into the atmosphere. Then after 3 months, it will have an accurate enough idea of your footprint and will deduct a certain amount of money from your account to make you Carbon neutral! Pretty smart hey. The cost is always fairly low and completely optional.
The future of Raiz
I recently wrote an article about the upcoming year for Raiz which you can read here, but to give a brief overview, there are a few changes they are making in the right direction:
- Bitcoin portfolio – As mentioned earlier, they plan on releasing a Bitcoin based portfolio in the very near future. Whether or not this will perform well is a complete mystery, but it will certainly be interesting to watch it play out.
- Raiz Bundll credit card – They also plan on releasing a new credit card as a joint project with a company called Bundll. Not too much has been released about this yet, but it is assumed at the moment that there would be some form of benefit to your account, whether that is incorporating the rewards feature for physical purchases at participating stores instead of just online, I’m not sure, but I certainly hope so.
- Malaysia expansion – At some point this year they hope to venture into the Malaysian market. This will be the first country outside Oz to be able to use the app. While it is still going through government and planning phases, expansion is very promising for the health of yours and my accounts.
Are there better micro investing companies out there?
Last year, we saw huge growth in the Spaceship Universe portfolio from Spaceship Voyager, over 30%. This was an unprecedented result which nobody expected in such a tumultuous year for trading. With no fees as well, it is safe to say that last year, Spaceship was the better of the two. This coming year though, I’m not as sure of that. With the new features Raiz has bought to the table and the extra features that already exist like rewards and round ups, Raiz does look a lot more appealing.
I love this app. Ever since finding it, I have put as much of my savings as I can in there and watched it slowly grow higher and higher. Being aware of what you can receive as cash back from online stores is also really easy and has saved me a decent chunk of cash a few times. I firmly believe that micro investing your money is the safest and highest paying method of investing in the future and Raiz fits all the criteria that we’re looking for.
I can’t recommend this app highly enough. If you want to start earning money off your savings, get a Raiz here account today.