Raiz (formerly Acorns Australia) is an App that can be said to replace the spare change jar of old.
Back some years ago whenever I would get some spare change weighing down my purse, I would put it in a jar.
By the end of the year, I had always accumulated a decent amount to deposit in the bank.
I never missed the spare change going into the jar and was always pleasantly surprised at how quickly it added up.
However, as we move more and more to a cashless society, the Raiz App has given us an option to squirrel away our spare change.
Except this time the change is invested virtually in a diversified portfolio.
How does Raiz work?
Launched in Australia in February 2016 Acorns Australia (now Raiz) followed in the footsteps of the launch in the US. It is an App that you download and link with your current bank account and credit or debit cards you might like to link up. (In 2018 the App changed its name to Raiz to operate in the Australian market. Which makes my pictures that accompany this post a little strange these days).
Raiz then automatically rounds up your transaction and invests the “change”. For example, if you buy a coffee on your card for $4.60 then Acorns places the extra 40 cents into a diversified portfolio.
So what is a diversified portfolio?
Raiz have five portfolio options for you to choose from ranging from conservative through to aggressive.
They have managed fund portfolios which invest in a variety of investments via Exchange traded funds (EFTs). Not dissimilar to how your Superannuation fund works.
An EFT is like a combination of managed funds and shares. It is basically a diversified portfolio designed to track and measure the stock market. If you hear on the news the S&P/ASX200 is up today, that is referring to this kind of diversified portfolio.
If you have read my About section or a few other blogs you will know that wealth creation for me has always focused on property investing. But I have been doing a lot of research on shares lately and EFTs have really appealed to me.
For me, EFTs take out the higher risk of speculating on individual shares and instead just track the market. Given Warren Buffett (multi-billionaire investor) has said if he dies to invest 90% of his money in this kind of account I think they must be a fairly decent long term option.
Of course there is always some risk that the market will go down, but I have taken the approach of leaving the money in there for the long term so will just leave it there to do its thing
Different ways to contribute to Raiz
There are three different ways you can add funds to your account.
Rounding from everyday purchases – this is what I mentioned above, where your purchase is rounded up to the nearest dollar and the “change’’ is invested.
A recurring payment – just like you might have a set amount go to savings each pay day you can set this up with Acorns. I have $50 each pay going to the account and I hardly miss it.
One time investment – if you receive a lump sum payment, such as a tax return, you might like to invest some of it into your Acorns account.
What about the fees?
Unlike some investing accounts where understanding the fees is like needing to learn another language, Raiz keep it nice and simple to understand.
If the balance of your account is less than $5,000 then you pay $1.25 per month. This amount comes out of your linked bank account.
If you balance is over $5000 then the fee is 0.275% of your account balance per year. So if you have say $10,000 in your account that is $27.50 a year. Reasonable in my view.
In the time I have had Acorns I have found it really easy to use and have made some returns. I like that if I needed to I could withdraw the money at anytime without penalties.
A great benefit is that there is no minimum balance required. Some managed funds elsewhere you need a minimum amount of $5000 or more.
Whilst I am comfortable with the fees involved if you think you are only going to invest a really small amount each month the $1.25 fee will soon start eating into any returns. So that is something just to bear in mind.
Because I am adding money to the account over and above the rounds up, for me this fee is negligible. I see it as a cost effective way to access a diversified portfolio.
Have you tried Acorns or any other investing App?