Whoever believed micro-investing would be a thing? Arguably, it has always been there but without the label.
When I look back throughout my life and the relationship I had with money, at a time when money could be seen, touched and even jingled in the pocket, I threw my loose change into a jar.
I often referred to this as my holiday fund. Whatever I was able to accumulate over a year would be put towards a flight that would take me overseas to explore new places and experience new cultures.
Back then, I did not see this as an investment, however, such experiences have enabled me to grow on a personal level and develop a different perspective to the world we live in.
Nowadays, with cash being almost invisible, it is possible to metaphorically throw your loose change in a jar.
What Is Raiz Invest?
With technology becoming more and more influential in our day to day lives, we now have investment apps such as Raiz Invest (previously known as Acorns).
The Raiz Invest (ASX: RZI) app has been around since 2016 and has grown in popularity during this time. Raiz enables its customers to invest small and large amounts of money using its micro-investment platform.
The Raiz philosophy is to encourage Australians to start early and invest often to reach their financial goals.
How Does Raiz Invest Work?
A key feature on the Raiz Invest platform allows customers to proactively invest through “round-ups”. Let’s say you’re buying a morning coffee that costs $3.50, Raiz will round this to $4.00. The round-up of 50 cents will be put into your Raiz account and once the round-ups amount to more than $5, the funds will be invested into a diversified portfolio.
Raiz currently has six portfolios to choose from, these are Conservative, Moderately Conservative, Moderate, Moderately Aggressive, Aggressive and Emerald. The portfolios have been designed to accommodate the customer’s appetite to risk, with the exception of the Emerald portfolio which has been designed for those who are interested in socially responsible investments that potentially generate moderately high returns.
Each portfolio is constructed using a combination of Australian ETFs that range from cash, bonds, Australian shares and international shares, creating a diversified approach to investing alongside a focus towards risk minimisation.
How Is This Acorn Growing?
Raiz is still a very young business, with some serious potential for growth.
The company recently announced that as of 31 July 2019, it had 199,433 active customers growing 20.2% from the 12 months prior. In the same period, the total funds under management have grown by 67.9% to $373.39 million. From June to July 2019 alone, Raiz added 5,000 customers.
How Does Raiz Make Money?
It is free to download the Raiz Invest app and to sign up as a customer.
Raiz makes its money through account fees by charging $2.50 per month on balances under $10,000 and 0.275% per year (charged monthly) for accounts with a balance of $10,000 and over. These monthly charges increased by 50% on 1 August 2019 which could be considered expensive depending on the account balance. To put it into perspective, let us say you had a $10 balance and paid the fee of $2.50 this would equate to 25%. On the flip side, and over time with the commitment to growing your balance, this ratio will reduce drastically. As a further example, let’s take the fee on a balance of $5,000 (still being $2.50), this would equate to 0.05%.
Raiz Invest added Raiz Invest Super in July 2018 to their platform further engaging millennials to develop their financial confidence and literacy. This currently has ~$50m in funds under management. It is worth noting funds under management is split between their retail and superannuation services meaning customers have the option to sign up to either Raiz Invest or Raiz Invest Super or both.
A further feature of the Raiz Invest app is their loyalty program which again is likely to appeal to millennials who are well accustomed to shopping online. Raiz Invest has partnered with well-known brands, who will invest a dollar amount or percentage of the purchase price back into your Raiz Invest account. The list of partners continues to grow and offers some nice incentives especially knowing that this will be paid into your account potentially compounding over time.
Raiz Invest is currently looking at growing its business in Southeast Asia via Indonesia and Malaysia. Their corporate strategy is to create a positive social outcome by improving financial literacy among their neighbours.
Should you add Raiz Invest to your portfolio?
I discovered Raiz Invest back in 2017 and was intrigued by its offering and I still use it today. I like the fact that my so-called loose change gets put to work daily and I also feel it’s a great tool for those who are interested in investing but not too sure where to start.
Whether I add Raiz Invest to my share portfolio remains to be seen, however, I am interested in the journey of this business and would encourage those who are keen to invest to take a look at what micro-investing can offer.
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Disclosure: At the time of writing Robert Rooth does not hold any shares in Raiz Invest but is an active user of the Raiz Invest app.
