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4 ways to micro-invest for Australians

 

4 ways to micro-invest

Micro-investing is all the rage right now. With the advent of smart phones, it was just a matter of time before developers with a keen sense tuned towards finance came up with apps and ideas to allow more people to invest with smaller dollar amounts. The share market can be quite daunting and overwhelming so micro-investing boast a much friendlier entry.

As Australians, we don’t have quite as many micro-investing options as our friends in the States. But we definitely do have a fair few, so here’s a quick list on how you can join in on the micro-investing trend that’s rolling in onto our shores right now.

Disclaimer: These are not personal recommendations as to what you should do with your finances. This is just a general list as to what is available out there. I have included my personal opinions and thoughts, but do your own research and take your own calculated risk according to your risk appetite.


Acorns - micro-invest

I have mentioned Acorns on this blog before. It is an app that had its start in the states and was launched on our shores in Feb 2016. The company has said that the uptake on Acorns have been swift and wide, because hey, an automated investing service? What’s not to like? The way Acorns obtains money from you is two fold. You can either do regular contributions to Acorns or you can link your bank account to Acorns to allow it to do automatic round-ups on your spending. So say you spent $4.50 on a takeaway coffee, Acorns will round up that spending to $5 and squirrel away $0.50 to invest. Just be aware that this ‘squirrelling’ is mostly virtual (within the app) till it hits a minimum of $5 before Acorns takes the money from your account. And while this does not bother me in the slightest, it doesn’t seem to work for other people so it’s really up to your personal preference. Acorns is free to download, but that’s where the free ends. For balances under $5000, Acorns charges $1.25 per month as maintenance fee; for balances above $5000, 0.275% is charged instead.

So what does Acorns do with your money? Acorns uses Exchange Traded Funds (ETFs) as their vehicle of choice to build investment portfolios. Depending on your risk appetite, you can opt to go for an aggressive portfolio that is highly volatile or a conservative portfolio that consist mostly of cash and bonds. It kinda reminds me of the super fund that I am with where I have no choice in the matter as to where my money is being invested into beyond picking a portfolio type. In that manner, it can seem very appealing to some people who have no interest in doing the research or investing the time to get to know the stock market better.

There are many pros and cons to Acorns. I am currently running a 12 month experiment on Acorns that you can keep up to date with here. If you’d like to sign up for Acorns, please use my referral link here.


 

Ratesetter - micro-invest

 

Ratesetter is a P2P lending platform that facilitates loans of all kinds and sizes ($2000 – $35,000). They were first founded in 2009 in United Kingdom and launched on our shores in 2014. General members of the public can invest money to lend (and not just wholesale or sophisticated investors as rivals SocietyOne does) from as little as $10. For those who are risk averse, Ratesetter boast of a provision fund that can be drawn upon in the event of a default. The interest returns that are advertised are between 3.5% – 9% depending on the life of the loan.

I have been using Ratesetter for 2 months now and have been testing the waters with a small $100 investment. (I have come to the conclusion that lending any money in the 1 month or 1 year  market is not worth it and have decided that I will only be lending money in the 5 year loan market.) The fees are 10% of any gross interest and a fee equal to any interest generated on cash held in the holding account. The process is smooth and very simple, you don’t even need to decide who gets your money. Just pick the loan duration you want, the interest you want (you can set an interest rate you want to achieve or go with market rate) and away you go. You can even set it to reinvest when the money is repaid, with the options of being capital only or with the interest you have earned. As far as set and forget goes, Ratesetter is ranking pretty high in my books right now. There are no current referral bonus but it’s still worth checking them out!

 


Brickx - micro-invest

Brickx is a real estate crowdfunding platform with an interesting premise. Brickx obtains properties in blue-chip suburbs and divides the property into 10,000 virtual bricks. Investors are then able to purchase these bricks at the purchase cost of the property (the formula being purchase price of property divided by 10,000). After settlement date, brick prices are then determined by supply and demand of the members. So if a property is going gangbusters and more people want to buy bricks from that property to cash in on the net rental yield, then the prices of the virtual bricks goes up.

love this concept. It’s the sharemarket but on a smaller scale and in real estate property form. Brickx are still fairly new so they don’t have many properties on their portfolio right now (just 12 properties that are mostly in NSW) but I am watching with much interest and have invested a little bit just to see how this platform will grow. If you are keen to join, my referral link is: here.

Just be aware that there are always fees. To quote them:

“BRICKX charges a 1.75% transaction fee when you buy or sell your Bricks.

In addition, as part of an individual property’s expenses, a 6%+GST property management fee is deducted from the Gross Rental Income of each BRICKX Trust (before making distributions to Brick Holders, if any), and $75 per property per month fee (equating to $0.0075 per Brick per month) to cover annual audit and valuation services”

So do your own calculations and research before hopping in. Tho at this point, just like the name says with micro-investing, I am doing exactly that. Investing in micro amounts and seeing if that will actually get me anywhere.


Firststep

Firststep is much like Acorns. At least, at first glance it looks like Acorns. Seeing as it actually hasn’t launched, it’s hard to tell exactly how it will stack up against the popular app. I had a poke and a prod around their website and came up with one difference. They are Australian owned and developed. So that’s a big tick.

I was intrigued enough to send them a message to ask point blank: just what it is that makes them different? Why should Acorns users be wooed across to their app when it seems as though they are doing essentially the same thing – allowing regular deposits and sweeping up loose change to build an ETF-based portfolio. To their credit (given I am a really small nobody), they came back with some serious answers and even offered time for me to interrogate them by phone. Now that, that got my attention.

Short answer: they believe their point of difference will be the ability for users to input their key interests and pick a portfolio based on that. So users will be given the chance to pick a US-centric portfolio, or one with an Asian focus, or perhaps a Tech focus etc. I like the sound of that! They are also keenly focused on user education and have aims to scaffold learning so that more people will become aware of how investing works and how they can build their own financial freedom.

The proposed fee structure on their website however, I have issues with. And I did point out my issues to them as well, because if we thought Acorns was high in fees (when your balance is low, obviously when your balance is higher the % swallowed by fees become less of a concern) then it feels like Firststep is even higher. But we will see. Nothing is set till launch, right?

Launch is set for August 2017 (soon!!) so you can be sure that I will be sinking my teeth into this app as soon as I can.


Do you know of other ways we can micro-invest in Australia? Or perhaps you dabble in some micro-investing yourself (and not just the big boys)? Share your stories, opinions and views please as I’d love to know what your take on micro-investing is!

7 thoughts on “4 ways to micro-invest for Australians”

  1. I’ll be interested to see how your Brickx experiment goes. My own investigations tell me that the fees are straight up ridiculous, and the people I’ve spoken too have said the same.

    I’d love to be wrong for the sake of all the people jumping on the bandwagon, but I don’t think I am

    1. I agree with you! Their fees are quite crazy. But I fell in love with the concept and jumped a bit quicker with my heart than my head, tho not with a huge amount because luckily some sense prevailed. And the way I view micro-investing is that, it needs to be viable with small amounts of money. If it is not, or if the fees chew it all up then people should just ignore micro-investing and save up for bigger and better things which is why I only ever experiment with small amounts on these platforms.

  2. Thanks for contacting FirstStep. I looked at them and simply thought “another (more expensive) Acorns”. Focused portfolios might be interesting, depending on how diversified they are. I also like the sound of education, especially with an Aussie point of view. Will it be enough to entice me away from Acorns? Well, it doesn’t have to be an either/or situation, but in the interests of keeping our portfolio simple, I’ll also wait and see.

  3. Thank you for sharing! I don’t live in Australia but I think Acorns is available here. There are various services/platforms like this and I think it’s tremendously helpful for the general population in helping them save money. Because it’s money that you don’t notice. The little change that’s left over here and there that do add up.

    1. Yes, so instead of that little bit of money going to a coffee here or a lolly there, saving it up via Acorns or similar apps would definitely make a huge difference over the long run. Thank you for your comment – stoked that you made it over here!

  4. Great post! I hadn’t heard of a couple of these before so good to see what else is out there. I look forward to reading how your experiments turn out.

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