Beginners Guide to Micro-investing. Times have changed. Now, it doesn’t take millions and an expensive financial advisor to start thinking about securing your future or life after retirement. Nor do you have to go through any lengthy process. Previously, you had to accumulate a large amount of money and then contact a financial advisor to provide advice and manage your assets.
Today, it takes little to no knowledge of Robo-investing or micro-investing platforms like Raiz or Unhedged. You can start your journey immediately with a small balance of around $100.
Capabilities of Robo-Advisors:
In the beginning, Robo-advisors would only prepare portfolios for investors. Since then, they’ve improved multi-fold and now they’re capable of everything you would expect from a traditional financial advisor. They build your portfolio based on your given information including your risk tolerance and future plans etc. Then your assets are invested based on your portfolio.
Best places to start your journey:
In Australia, there are multiple micro-investing apps where you can begin your investing journey. People find micro-investing easy and interesting because it doesn’t require hundreds or thousands of dollars. You can even start with some spare change.
Raiz: A go-to micro-investing app in Australia:
It’s one of the most popular micro-investing apps in Australia for beginners. Raiz doesn’t have any minimum balance requirement or commissions. Thus, attracting a lot of new users.
You can set up your account and start transferring funds. The feature that stands out is its roundup option. When you link the app to your spending account and buy something, it invests the change by rounding up your purchase to the nearest dollar. For example, if you buy a packet of chips for $1.60, it’ll take the chips up to $2 and invest the 40 cents into ETFs (Exchange Traded Funds).
It also has a reward feature that gives bonuses whenever you buy through the app.
With the new Custom portfolio, Raiz allows you to choose from its eight different portfolio options. It goes from Conservative (low risk) to Aggressive (high risk) portfolio.
Further, it has Emerald and Sapphire portfolio options. Emerald is a socially responsible portfolio and companies in this category don’t hurt the environment. While the only options that invest some of your money in crypto-currencies are the Sapphire portfolio and the custom portfolio (you can choose where you want to invest).
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Fee structure and more:
Raiz doesn’t have minimum balance requirements and you can set up your account with $0. It doesn’t charge any fee if your balance is $0. There are no brokerage or transaction fees. However, it has a monthly fee of $3.50 if you’ve less than $15,000 in your account. While 0.275%, if your balance is above $15,000.
For a custom portfolio, the monthly fee is $4.50 if your balance is or below $20,000 and 0.275% above $20,000.
Spaceship Voyager is another well-known Australian micro-investing app. Which doesn’t have any minimum account balance or other requirements. Basically, you can set up your account and then deposit money to it anytime you like.
Unlike Raiz, it doesn’t have the roundup option thus no need to link your bank account to the app. Essentially, leaving your bank account secure (in case of a hack).
Spaceship voyager has only two portfolio options; the universe portfolio and the origin portfolio. If you choose universe portfolio, your money will be invested in “world-changing” companies like Microsoft, Disney, and Facebook, etc.
While, the money of origin portfolios is invested mostly in large-cap stocks like Bank of China, Beach energy, and Berkshire Hathaway, etc.
Fee Structure and more:
No minimum account balance or initial deposit is required. Management fees are based on the balance in your account. In addition, if your account balance is under $5,000, it’ll be managed completely free.
When your account balance reaches $5,000, there’s a management fee of 0.05% per annum or 0.1% p.a. depending on your portfolio. If you’ve chosen Origin portfolio, then the fee will be 0.05% per annum otherwise it’ll be 0.1% p.a.
Unhedged is a new entrant into the micro-investing space which requires just $100 to get started. They typically invest in US stocks and bonds using algorithms which aims to outperform the broad based market. They explain why algorithms can be better investors. Their fees are priced favourably for smaller and larger investors alike.
Fee Structure and more:
Balances of $5000 and under incur only a performance fee that is priced at 20% above what the benchmarks return. (eg. If the market goes up 10% and the algorithms go up 15% you pay 20% on that 5%). This is particularly quite inexpensive compared to some apps that charge fixed monthly fees.
For balances over $5000 they have a 0.49% fee on only the amounts over $5000 + the performance fee. This is quite competitive for actively managed funds.