Raiz Review Australia – Is Raiz The Best Micro-Investing Platform? (2021)

Raiz Review Australia

Today I’m going to discuss Raiz, Australia’s first and most popular micro-investing app. I’ll be going over what separates it from its competitors for better and worst, to help you answer the question: Is Raiz a good investment?

Raiz Review Australia – What Is Raiz?

Raiz is a micro-investing product that is tailored for beginner investors. Similar to other micro-investing platforms, it removes traditional barriers to investing such as requiring a high starting capital and the complexity of deciding between thousands of assets. It achieves this by allowing users to invest as little as $5.00 at a time into a range of simple, yet tailored investment portfolios.

Available as both a mobile and web-based app, this product is designed to introduce Australians into the world of investing. When you sign up for the app, you are given a Raiz Investment Account. You can make regular contributions to increase the value of your Raiz Investment Account and you can withdraw part or all of your investment at any time.

Money contributed to your Raiz Investment Account is then invested into a portfolio that you select when you sign up. These portfolios consist of different exchange traded funds (ETFs), which cover a range of different financial assets. Such assets include cash, bonds, Australian equities, global equities and even Bitcoin, should you choose the Sapphire Portfolio. As such, these simple yet diversified portfolios should be sufficient for a range of modern investors.

For more information on how Raiz works and operates, please refer to their Product Disclosure Statement

For more information on ETFs, I recommend reading this guide: ETFs Explained

Raiz Review Australia – Is It Safe?

According to the Raiz Website:

Raiz Invest Limited (Raiz) is an ASX listed financial services company (ABN 74 615 510 177) and Raiz and its subsidiaries are regulated and overseen by the ASIC. All assets in the Raiz Invest Fund are held in custody not by Raiz but by Perpetual Corporate Trust Limited (Perpetual Corporate Trust). Perpetual Corporate Trust is a respected and leading provider of custody services.

As such, Raiz is bound by the rules and regulations that govern other Australian Securities Exchange (ASX) listed companies. They are also overseen by the Australian Securities & Investment Commission (ASIC) which is an external, independent government body. Additionally, in the event that Raiz ceased to exist, Perpetual Corporate Trust will still hold assets associated with investments on Raiz, ensuring that the user’s money is returned.

If you would like to learn more about Raiz’s security protocol, please refer to their website:

Raiz – Security

Raiz Review Australia – Fees

Similar to other micro-investment apps, Raiz comes with fees for its services. In the case of Raiz, they charge monthly maintenance fees. For Standard Portfolios, Raiz charges $3.50 per month for balances under $15,000. These fees are increased for Custom Portfolios to $4.50 per month for balances under $20,000. For balances above $15,000 on Standard Portfolios and $20,000 on Custom Portfolios, Raiz charges 0.275% per year. This fee is charged monthly and computed daily.

These fees are relatively high, especially when compared to its closest micro-investment competitor, Spaceship Voyager. Spaceship Voyager charges $0 for balances under $5,000 and 0.05 – 0.1% per annum for balances over $5,000 depending on your portfolio suggestion. However, Raiz offers a wider range of portfolio options, which may make the fees worth it in the eyes of some investors. For this reason, it’s important to weigh up the pros and cons of both apps to see if the higher fees in Raiz are worth it.

For more information on Raiz Fees, please refer to the Raiz Product Disclose Statement

For more information on Spaceship Voyager and how the two micro-investment apps compare, I have written these two reviews:

Spaceship Voyager Review
Spaceship vs Raiz

Raiz Review Australia – How to Invest

Round Up

This feature works by linking your bank account to your Raiz account. By following the default round-up feature offered by Raiz, the app will automatically round up all of your purchases to the nearest dollar. For example, if you purchase a coffee for $3.90. Raiz will automatically make the purchase cost $4 and they will invest the $0.10 for you. You can also alter this feature in-app to round up to the nearest $5, $10, $20 or $40 if you want to increase the amount that you automatically invest.

This method can be useful for people who struggle with setting aside money to invest or people who want an automated way of investing while making their everyday purchases. However, for people who have issues with budgeting or people who tend to splurge, this can be a very financially draining method and should be pursued with caution.

One-Time Investments

As the name suggests, this feature enables you to make a one-time investment in your Raiz account. This feature can be useful for people who want to invest a large sum of money and those who wish to invest infrequently. As such, users who have recently come across a sizeable sum of money may prefer this approach. However, if you intend on investing more frequently, particularly with lower sums, then the automated feature will probably be better suited.

Recurring Investments

Recurring investment is a feature that allows users to invest a pre-determined amount of cash daily, weekly, fortnightly or monthly. This is a great way of dollar-cost averaging (DCA), as users can spread out their purchasing pattern to reflect ups and downs in the market, averaging profits and losses.

Users can set up Recurring Investments to align with their pay cycles, ensuring that they have the funds to DCA on a regular basis. For example, if you get paid every fortnight on a Thursday, you could set up an investment that occurs every second Thursday. This way, you will instantly be investing with available funds without having to think about it. This takes the guesswork and stress out of investing on different days where you may not have the money to invest.

Raiz Review Australia – Investment Options

Currently, Raiz offers seven different investment options to suit a range of risk-tolerances and ethical considerations. While I am not offering financial advice, I have done my best to simplify the different investment portfolios to highlight their main holdings and their major appeal.

Raiz Review Australia - Investment Options

Conservative

This profile consists primarily of cash and government bonds. These are two of the lowest profiting investment options within Australia, yet they offer the most stability. Subsequently, they have a low risk and a low reward level. This option would be best suited for older residents who want to get slightly higher returns than a savings account while encountering minimal risk.

Moderately Conservative

See Above

Moderate

This option has a more even split of bonds and Australian large-cap stocks. While large-cap stocks are traditionally considered safer than micro-stocks, they still have a higher degree of risk when compared to Government bonds as these large companies may still become insolvent. However, their large net-worth combined with an established track record of profitability put them among the most reliable stock-related investments. For these reasons, this portfolio offers moderate risk with moderate returns. This option may be more suited for people nearing retirement age who have a slightly higher risk tolerance than those offered in the conservative portfolios.

Moderately Aggressive

See above, this option has a higher weighting of Australian large-cap stocks, so there’s a slightly higher risk margin and predicted return. However, the difference is relatively small.

Aggressive

This portfolio is primarily large-cap focussed, with exposure to Australian, Asian, European and American large caps stocks. Due to this portfolio focussing mainly on stocks, it carries significantly more risk and higher potential returns. This option is best suited for people who are willing to hold their portfolio for at least 5+ years, as while these stocks can dip during recessions, they traditionally will provide the highest returns over a long time horizon. This is my personal favourite portfolio due to it containing the highest predicted return rating, however, it should only be pursued by people willing to accept the elevated risk level.

Emerald

Is Raiz a Good Investment?

This portfolio is interesting and perhaps the main attraction for Raiz over other investment apps such as Spaceship Voyager. This option utilises Global Socially Responsible Large Cabs (ETHI) and Australian Socially Responsible Large Caps (RARI). These companies have been recognised as industry leaders in climate sustainability. To meet these criteria, companies must either have high carbon efficiency or be involved in actively trying to reduce carbon emissions. For ethical investors or people who believe in the future of these companies, this is a viable option.

Sapphire

This portfolio is a bit perplexing, as it offers moderately safe investments such as government bonds and Australian large caps with the extremely volatile and high-risk cryptocurrency Bitcoin. The different holdings dichotomise each other and I would dare say that people interested in large caps/government bonds would find Bitcoin too risky and that investors of Bitcoin would find the yield on the prior two options to be too low. However, if you would like very small exposure to Bitcoin, this is an option.

Custom

The Custom Portfolio allows you to choose the portfolio weights of up to 14 ETFs and Bitcoin and create your own asset allocation. You choose the Portfolio best suited to your own goals and financial circumstances. This is the most expensive portfolio to run. However, it offers the most flexibility in terms of being able to choose your investments and their allocations.

Raiz Review Australia – Investment Options Summary

Portfolio TypeMain Holding/sRisk LevelPredicted Returns
ConservativeGovernment Bonds
Cash
LowLow
Moderately ConservativeCorporate Bonds
Government Bonds
LowLow
ModerateAustralian Large Cap
Government Bonds
ModerateModerate
Moderately Aggressive^ With a higher weighting of large-capModerate +Moderate +
AggressiveAustralian Large Cap
Asia Large Cap
HighHigh
EmeraldSocially Responsible Global and Australian Large CapModerate +Moderate +
SapphireSame as Moderately Aggressive with 5% Bitcoin addedModerate +Moderate +
CustomDepends on Chosen AllocationVariesVaries

Raiz Review Australia – Pros

Beginner Friendly

As a micro-investment platform, Raiz is tailored to beginner investors. Whereas traditional investing typically requires a high starting capital, expensive brokerage fees and extensive market knowledge, Raiz overcomes these issues. Raiz achieves this by allowing you to buy in $5 increments, charging a maintenance fee rather than brokerage fees and it provides simple, yet tailored investment portfolios.

For these reasons, Raiz is a good option for people who are new to investing or people wanting to casually invest from the comfort of their phone/computer.

Raiz Rewards

Another feature that separates Raiz from other micro-investing platforms is that it offers a rewards program. When users shop with Raiz’s brand partners through Raiz Rewards, they earn a cash reward from the brand partner. This reward is then invested into your Raiz Investment Account.

Currently, there are over a hundred Raiz partners. These include popular brands such as Apple, Australia Post, Dan Murphy’s, Event Cinemas, Nike, Ray-Ban, Telstra, Woolworths and X-Box among others. The rewards vary between fixed cash rewards and commission-based rewards. Most commission-based rewards range from 2-7% cashback.

As such, if you regularly shop with these retailers or other brand partners, you can simultaneously earn rewards and increase your investment balance. This is a unique feature offered by Raiz that can make it a worthwhile venture for people looking to be rewarded for their spending habits.

Multiple Investment Options

Raiz currently offers 7 diversified portfolios that encompass a variety of different assets. These assets include Australian equities, global equities, Asian equities, cash, bonds and Bitcoin. This makes Raiz one of the most diversified micro-investment apps on the Australian market. As such, it is likely that most investors will be able to choose a portfolio that reflects their investment goals.

Additionally, Raiz offers a custom portfolio option that allows users to choose between 14 ETF options and BTC. This portfolio also allows users to choose their desired allocations. This sets Raiz apart from its competitors which primarily rely on pre-fixed allocations. As such, this may be a good option for investors looking to diversify into specific sectors and markets.

Ability to Invest in Bitcoin

Raiz is a pioneer in the space of cryptocurrency investing, being the first retail fund to offer Bitcoin (BTC) to its investors. BTC is a cryptocurrency that has delivered yearly returns of approximately 200% since its inception, making it one of the most profitable investments in modern history. However, its volatility and the complexity encompassing cryptocurrency investing often prevents people from investing in it.

Fortunately, Raiz overcomes this barrier to entry by allowing users to invest 5% of their portfolio into BTC through their Custom and Sapphire Portfolio options. This bypasses the traditional entry barriers of cryptocurrency investing, such as signing up to an exchange and securing a crypto wallet. Additionally, the maximal 5% allocation ensures that users get exposure to the asset without encountering as much volatility as people who exclusively invest in crypto. This makes it more beginner-friendly and a good option for people who want crypto exposure but aren’t familiar or comfortable with entering the cryptocurrency space.

If you would like more information on what Bitcoin is and how it works, I have written a comprehensive guide here:

Bitcoin Explained

Raiz Review Australia – Cons

Pre-Fixed Allocations

Raiz’s portfolios are all diversified. While diversification is a good investing strategy, Raiz’s portfolios have very specific fixed allocations. Due to these portfolios consisting of specific allocations, it is unlikely that users have the exact allocation of each asset class that they would like. Additionally, some portfolios may be considered ‘too diverse’ by containing exposure to markets or assets that they otherwise wouldn’t want to be exposed to.

While this may not be an issue for users who don’t care about having exact allocations, some investors may prefer a more DIY approach. This can be overcome in some aspects by choosing a custom portfolio where you can select the investments and their allocations. However, it is worth noting that this option has the highest fees.

High Fees

As previously mentioned, Raiz has monthly maintenance fees for balances under $20,000 and $15,000 that range from $3.50 – $4.50 depending on the portfolio. This is then increased on balances above these figures to a rate of 0.275% p.a. This fee is charged monthly and computed daily.

When compared to its nearest competitor Spaceship Voyager, these fees are substantially higher. For perspective, Spaceship Voyager charges $0 for balanced under $5,000 and its fees for balances over $5,000 are capped at 0.1% p.a. Therefore, Raiz is the most costly option in terms of micro-investing apps.

Lack of Pure Growth Options

High growth/pure growth portfolios are ones consisting entirely of growth assets. Growth assets are more volatile assets that have higher risk and reward ratios. These investments differ from defensive assets which aim to match/slightly beat inflation at the expense of chasing higher returns. All of Raiz’s portfolios (including aggressive) have exposure to defensive assets. While this can mitigate against portfolio volatility to some degree, it can come at the expense of long term growth.

Pure growth assets such as equities and BTC while being more volatile in the short term, tend to outperform defensive assets in the long term. As such, if you are a long-term investor with an investment horizon greater than 7+ years, you’re better off using Spaceship Voyager’s all equities portfolios or choosing a Raiz Custom Portfolio that consists exclusively of growth assets.

For more information on the difference between growth and defensive assets, please refer to this guide:

Growth vs Defensive Assets

Raiz Review Australia – Pros and Cons Summary

ProsCons
Beginner FriendlyPre-Fixed Allocations
Raiz RewardsHigh Fees
Multiple Investment OptionsLack of High Growth Options
Ability to Invest in Bitcoin

Raiz Review Australia – The Final Verdict

Raiz is a useful investment app for beginners who want to dip their toes into the world of investing. They have 8 different investment portfolios, which offers more diversity than other micro-investing apps. They also have the option to invest ethically through the Emerald Portfolio, which may appeal to people who are interested in supporting climate sustainability. Additionally, their multiple options for investing and unique perks such as their rewards program and option to invest in BTC gives them an edge over their competition.

However, there is a significant amount of portfolio overlap, with several portfolios being very similarly weighted. The weightings of their portfolios may also put off some investors, as they are very specific and may not necessarily reflect the ideal weightings of many investors. Additionally, there’s a distinct lack of exposure to the US market, which has traditionally been the strongest performing market. Lastly, their management fees are substantially higher than Spaceship Voyager, another micro-investing platform that I reviewed here.

For these reasons, it is important to weigh up the pros and cons of Raiz to ensure that it is the correct platform for your financial goals. For investors that want exposure to BTC, want to participate in Raiz Rewards or are looking to create a custom portfolio, Raiz is the best micro-investing option. Alternatively, for users wanting a simpler user interface, lower account fees and a pure growth portfolio, Spaceship Voyager is likely the better option.

Want a Bonus $5 to Get You Started on Your Investment Journey?


If you would like to sign up to Raiz and earn a $5 deposit bonus, you can use:

Alternatively, you can enter the referral code: P2S2CH when you sign up.

Additional Reading

Bitcoin Explained
Micro-Investing Explained
Spaceship Voyager Review
Spaceship vs Raiz

Credit Cards Australia – Financial Asset or Money Trap?

Welcome to my Credit Cards Australia Review. Today I’ll discuss Credit cards which receive a lot of mixed publicity, with a lot of people arguing for and against their use. Today, I’m going to cover whether credit cards are a useful tool for improving your personal finance or a money pitfall that can cause you considerable debt.

Credit Cards Australia

Credit Cards Australia – How Do They Work?

Credit cards work by allowing you to make purchases with borrowed money from a bank or other card issuer. This borrowed money is derived from a line of credit, which is a pre-approved amount of funds allocated to the card. By having access to credit, you can purchase things without having the physical cash in your wallet or bank account at the time of purchase, you can also use them to purchase things online or over the phone without the use of cash.

Each month, you’ll receive a statement that will detail how much money you’ve spent on your credit card and whether you owe any interest. As you are borrowing this money from the bank as opposed to spending your own money as you would with debit cards, this borrowed money can incur substantial interest payments between 12-20% depending on the card you have selected.

However, it is important to note that credit cards offer interest-free periods which are typically every 55 or so days, and if you manage to pay off all the debt on the card by this period, you won’t pay any interest payments.

Credit Cards Australia – Why Use One?

Now that you understand how credit cards work, you might be wondering what uses they may offer and the answer is dependent on several factors. However, there are three main reasons for owning a credit card in Australia and they are as follows: You can point hack, use interest-free periods to invest and accumulate further wealth and lastly, they can establish a credit history.

Point Hacking and Card Perks
Credit Cards Australia

Some credit cards offer unique perks to their users such as the ability to get cashback on purchases, free international transaction fees and point rewards from services such as Flybuys, Qantas and Virgin among others. While these cards often come with fees, depending on the frequency in which you use your credit card, how much money you spend on a routine basis and whether you do a lot of travelling, these points and benefits can end up saving you money over time, assuming that you pay off your debt during the interest-free periods.

Another way you can maximise these benefits is through a thing called point hacking. Point hacking occurs when you sign up for new rewards cards to take advantage of their sign up bonuses. In Australia, a lot of cards offer significant flight points for people who sign up and spend X amount of money within X amount of months.

If you would normally spend that amount of money, you can accumulate significant flight points and benefits by routinely swapping out your cards for new ones that offer bonuses. Most of these bonus cards tend to offer first-year free subsidiaries of significant discounts during their first year, meaning that you can maximise your returns whilst lowering your ongoing expenses with the card.

Using Interest-Free Periods to Invest/Accumulate Wealth

While point hacking is quite a common strategy, many people tend to underestimate the potential that the interest-free periods of credit cards offer. If you choose to utilise the interest-free period of a credit card, you can have up to 7 weeks worth of your pay at your disposal for investing/saving without incurring any financial losses.

If you invest in individual stocks or cryptocurrencies, you can use a credit card to cover all your daily expenses while holding a cash reserve to invest in dips in the assets you are looking to buy if you are that way inclined. Assuming you have enough cash to cover the balance owing at the end of the interest-free period, you will have more liquidity and potential to invest. 

On a more FIRE aligned method of investing/saving, you can put your money into a high-interest savings account, where you can make a slight increase on your cash before covering the credit card repayments. Perhaps the safest and most cost-effective way of using a credit card for this purpose is to use it to cover all your expenses while dumping all of your income into an offset account on your house or investment property.

If you are a homeowner, having your money in the offset until the day before your credit card repayment can offset your mortgage payments substantially over a long period, as you decrease the balance you owe interest on during the 55 days.

Building a Credit Score
Credit Cards Australia

This is more for American readers and other internationals, as a credit score isn’t particularly pertinent in the Australian system. However, having a credit card, even a no-thrills one can be a useful way to build a credit score. Through establishing a credit score, you can show banks that you have a history of being able to cover your debt which is looked upon favourably by lenders for when you decide to get a mortgage loan or perhaps an investment loan down the track. This can also be useful when trying to rent a house, as homeowners will typically look favourably upon people who have a good history of making payments on time.

Reasons for Not Owning a Credit Card

While the above perks may make the idea of a credit card sound appealing, there are reasons for some people to not use a credit card. Some of the reasons against using a credit card is the potential for accumulating debt, the misconception that point hacking is always profitable and the ongoing fees.

High-Interest Repayments

Credit cards can be a useful asset when paid off on time, however, if you fail to pay off your debt before the interest-free period you can end up paying a substantial interest fee on the borrowed money. This can be particularly dangerous for people who lead high consumerist lifestyles, as the convenience of being able to afford things immediately without the ability to finance them in cash can lead to overspending.

If you are prone to impulse buys or buying things that you don’t necessarily need, then a credit card can be one way to accumulate a lot of debt fast. Similarly, if you are forgetful or have a habit of missing deadlines then you can accidentally fail to make payments and get hit with unnecessary interest payments. If you fall into either of these categories than a credit card may do you more harm than good.

Point Hacking Done Wrong

Another common issue with credit cards is people who incorrectly utilise point hacking. For point hacking to work, you have to spend money that you otherwise would have under normal circumstances with your debit card on your credit card. However, a common issue people experience is that they over-spend or buy things that they otherwise wouldn’t have to meet the sign-up bonus spendings of their new credit card.

If you are spending an extra $1000 over three months to get $500 worth of flight points then you aren’t saving money, you are losing it. Similarly, if you are someone who doesn’t like to travel a lot but you’re going out of your way to point hack on flight points, there’s a significant chance that you’re just paying unnecessary fees to get points that you potentially won’t lose, which will also hurt your profits.

Ongoing Fees

Many credit cards incur a yearly renewal cost, which can cost several hundred dollars. Similarly, many cards have reductions in their perks after the initial bonus offering, meaning that the ongoing costs can significantly outweigh the perks and benefits offered by the card. For this reason, if you aren’t routinely changing your credit cards or looking for the best offer on the market, it can be counter-productive to hold onto the same card unless you have determined that the bonus points and perks cover the yearly expenses.

Credit Cards Australia Summary – Are Credit Cards for You?

As seen in both comparisons, credit cards can have their uses and downfalls. If you are someone who enjoys flying or the perks offered by credit cards, have an offset account or like to invest in volatile assets and if you are looking to establish a credit score, then credit cards can be useful financial tools.

Alternatively, if you are prone to overspending, you don’t need the perks offered by credit cards or if you aren’t prepared to spend time routinely comparing cards and their bonuses, then they may cause you more harm than good when it comes to your finances. If you do decide to get a credit card, make sure you do your research to find the card that best suits your needs and spending requirements and ensure that you continue to compare it with other cards on the market to maximise your results.

Useful Resources:

Compare Credit Card Reward Cards

Pointhacks.com – Resources for People Looking to Point Hack

Looking for your First Credit Card? – Compare Low Rate Credit Cards

Crypto.Com Review Australia – Is This The Best Crypto Rewards Card? (2021)

Welcome to my Crypto.com Review Australia edition. Today I’ll review crypto.com, an online cryptocurrency app that allows users to invest in various cryptocurrencies such as Bitcoin and Ethereum. They also offer metallic debit cards that can be used to purchase everyday items with crypto, in addition to providing significant cashback rewards.

Crypto.Com Review Australia


Crypto.com Review Australia – What Is Crypto.Com? 

Crypto.com Review 2021 - What is it?

Crypto.com is a crypto exchange and ecosystem that allows users the ability to enter the cryptocurrency market. With its easy to use interface, investors can buy and sell up to 100 different types of cryptocurrencies, including the likes of Bitcoin and Ethereum, as well as smaller altcoins. 

Unlike traditional crypto platforms, Crypto.com also offers various incentives for using their platforms such as metallic crypto rewards debit cards, discounted giftcards to popular retailers such as Coles, Woolworths and Itunes, the ability to stake and earn passive income on various cryptocurrencies and full crypto reimbursements on subscriptions to Amazon Prime, Netflix and Spotify. 

Why Invest in Crypto?

Cryptocurrencies are an immensely unique asset class. With deflationary, finite supplies, extremely high liquidity, unique use-cases, advanced technological applications and extreme volatility, crypto can be a useful asset class to invest in. With popular cryptocurrencies such as Bitcoin and Ethereum challenging the traditional financial system, these assets can also be a good hedge against traditional financial assets such as stocks and ETFs.  

Similar to brokerage platforms with stocks, crypto exchanges such as crypto.com allow you to purchase cryptocurrencies. A key difference is that, unlike the stock market, crypto exchanges never close. This in part allows for cryptocurrencies to fluctuate significantly in prices. If utilised correctly, returns in the range of 100s and 1000s of % can be attained. Due to this volatility, some traditional investors prefer to allocate a small portion of their overall portfolio to these assets such as Bitcoin. Whereas more modern investors with high-risk tolerances may choose to allocate all of their portfolios to cryptocurrencies to maximise on returns. Regardless of your crypto-allocation, Crypto.com allows users to gain their desired level of exposure.

Crypto.com Review Australia – Is it Safe?

As far as crypto exchanges go, Crypto.com is one of the safest, offering bank-like security measures. Firstly, they are teamed with Ledger, one of the most trusted companies in the crypto wallet space. This partnership means that all user funds on Crypto.com are held offline in cold storage, mitigating against exchange hacks. Additionally, the company has secured 360 million USD in cold storage insurance against physical damage, destruction and third-party theft.

Users’ fiat currencies (government issued currency) are also held in regulated custodian bank accounts. As such, balances are covered by up to $250,000 depending on that country’s insurance policy. In Australia, this is covered under the Financial Claims Scheme (SCI). The US has a similar policy which is regulated by the Federal Deposit Insurance Corporation (FDIC).

Security is further enhanced on the app by their multi-factor authentication system. This system applies password, biometric, email, phone, and authenticator verification for user transactions. While this may sound excessive, it greatly decreases the risk of hacking and financial fraud from external threats. Crypto.com also offers additional optional safeguards, such as address whitelisting and live 24/7 customer support.

Lastly, according to Crypto.com ‘Crypto.com is built on a solid foundation of security, privacy and compliance and is the first cryptocurrency company in the world to have

and independently assessed at Tier 4, the highest level for both NIST Cybersecurity and Privacy Frameworks’.

For these reasons, Crypto.com is one of the safest options for buying crypto in Australia. If you’d like to learn more about their security protocol, please refer to the Crypto.com security page.

If you’re still looking to increase security, you can store coins purchased on Swyftx on a hardware wallet. A hardware wallet is a device, specifically designed to hold your private keys. It is another example of ‘cold storage’ meaning that it does not connect to the internet. You only have to plug it to confirm transactions, the private keys never leave the device, making it the most secure way to store your crypto.

If you’re interested in purchasing a hardware wallet, I recommend Ledger or Trezor, as they are the most reputable wallets available. You can purchase them here:

Ledger  

Trezor  

Crypto.Com Review Australia – The Pros

Crypto.com is a full crypto ecosystem, meaning that it is one of the few platforms to offer a complete user experience. Currently, the app offers a range of unique features such as crypto debit cards, an exchange, fiat deposits and withdrawals, crypto tracking and price alerts, crypto.com pay, crypto earn and the ability to access crypto back loans.

User Friendly (Great for Beginners)

As previously mentioned, Crypto.com is a full crypto ecosystem. It has all the necessary components for an investor to buy, sell, track, deposit and withdraw their cryptocurrency. In fact, Crypto.com was designed to engage beginner investors who have little to no experience in the crypto space to help increase mass adoption of cryptocurrencies. So far, they have done a great job.

The user face is very easy to navigate and the process of verifying your account and linking it to a bank is relatively straight forward. Given the app’s popularity, there are a range of tutorials on YouTube for beginners who get lost and they offer 24/7 live support for anyone requiring additional help. For these reasons, if you’re a beginner investor, I highly recommend this platform due to its simplicity and ease of use.

Metallic Visa Rewards Cards 

The main thing that distinguishes Crypto.com from its competitors is their visa crypto rewards cards. When you sign up to Crypto.com, you have the option of applying for one of their five different visa cards. Each card operates on a different tier and has a range of perks such as crypto cashback, full crypto reimbursement for services such as Netflix, Amazon Prime and Spotify, Airport Lounge Access and 10% crypto reimbursement on Expedia bookings. Additionally, as they are Visa cards, you can tap and go these cards at virtually all retailers that accept card payments. These cards can be topped up with fiat currency, as well as cryptocurrency, making your crypto assets even more liquid.

The first tier visa card Midnight Blue is free and comes with no registration fee. This card offers 1% CRO (the native cryptocurrency of crypto.com) cashback on all purchases. While not metallic, this can be a decent option for beginner investors who aren’t sure on whether crypto is for them. 

The second tier visa card Ruby Steel requires a CRO staking worth $400 USD. While more expensive to attain, this is still a relatively low-cost option that provides a stylish, metallic visa card in addition to 2% cashback on all purchases and a full CRO reimbursement on Spotify. Meaning that each time you pay your monthly Spotify bill, you get the equivalent cashback in CRO, providing a slow but consistent passive income stream. 

The third tier and most popular visa cards come in Royal Indigo and Jade Green. These cards require CRO staking worth $4,000 USD. While a much more substantial investment, this card comes with 3% crypto cashback, bonus staking on eligible cryptocurrencies and a full CRO reimbursement on Spotify, Netflix and Airport Lounge Access.

The last two tiers require a much higher initial investment and if you’re reading reviews on the website, it’s unlikely that you’ll pursue these more expensive options. But I have attached a screenshot of all the tiers below to provide more information on the perks and rewards:

Crypto.com Pay

Crypto.Com Review Australia - Crypto Pay

Crypto.com Pay is another feature that rewards users with crypto for making payments on their platform. Simply by navigating to the ‘Pay’ feature on the app, users can top up their prepaid phones, send crypto to their friends for free and even purchase a range of gift cards at a discount. Currently, Crypto.com Pay is linked to dozens of popular retailers in food and beverage, hotels, groceries, games, entertainment, telecommunication, fashion, airlines and even gas and diesel.

These retailers include: Amazon, Coles., iTunes, Woolworths, Bunnings, Caltex, Dan Murphy’s, Kmart, Myer and Oakley among others. Depending on the amount of CRO that you have staked, you can earn up to 10% cashback on these retailers. So if you were already planning on buying from these companies, this can be a great way to lower your day to day transactions and save money.

Crypto.com Earn

Crypto.Com Review Australia - Earn

Crypto Earn is a feature available on Crypto.com that allows users to earn interest on their crypto assets by locking them up to provide liquidity to other users. By putting your assets in the Earn program, users can then borrow that crypto as credit for their investments. In exchange for you providing this liquidity, Crypto.com will pay you an attractive interest rate in that cryptocurrency. These interest rates are paid out weekly and range up to 14%. For these reasons, Earn is a great option for people looking to increase their crypto positions by accumulating more on a weekly basis.

There are three options when it comes to the lock period of your crypto assets. Flexible, One Month and Three months. Flexible means that you can access and withdraw the funds at any time, making it the most liquid option. Alternatively, with the one and three-month lock, the funds are locked for that period of time and cannot be accessed by you until the period is over. The longer the locking duration, the greater the earn reward payment.

Crypto.Com Review Australia – The Downsides

Although I am a fan of the service Crypto.com offers, the company is not without its faults. Largely due to this service being relatively new and operating internationally, some features are not available in Australia currently and while there are plans to fix these, they are worth notating if you plan to invest now. 

Fees With Credit/Debit Card 

Currently, the Crypto.Com app charges 3.5% to purchase cryptocurrencies with your linked credit or debit card. This is a substantially large fee and can eat away at any profits. You can avoid these fees by using the fiat wallet. Although, it can take up to 5 days for your bank transfer into this wallet to be processed. As such, if you’re looking to make timely crypto purchases, it comes at the expense of these fees.

For this reason, people looking to quickly purchase and sell crypto may find another exchange such as Binance more beneficial, due to it being Osko backed.

Limited Range of Assets

Currently, Crypto.com offers just over 100 different cryptocurrencies. While this is likely sufficient for investors looking to pick up large cap coins such as Bitcoin and Ethereum, there are another 4,000 + cryptocurrencies that Crypto.com doesn’t provide exposure to.

Due to being a large exchange that targets beginner investors, a lot of lower cap altcoins are not included on the Crypto.com exchange. With that in mind, if you’re looking to trade low cap altcoins or have specific coins that you want to invest in, then you may need to utilise another exchange with more diversity.

CRO Staking Required

While not uncommon on crypto platforms, Crypto.com requires users to hold significant amounts of their CRO token. To utilise their cheapest card, users have to deposit the equivalent of $400 USD. This means that users need a moderate sum just to get started on the platform. For users looking to further optimise their experience by receiving greater cashback and staking rewards, they will need to stake thousands worth of CRO for a 6 month period.

This investment may pay off in the long run. However, the high start-up costs associated with Crypto.com can be off-putting for new investors and should be considered. I personally started with the cheapest debit card and decided after a few months to upgrade given how often I used the app. This approach is the safest for people who are unsure about the ecosystem, as it allows you to upgrade if and when you decide.

Crypto.com Review Australia – Pros and Cons Summary

ProsCons
Beginner FriendlyHigh Fees with Credit/Debit Card Crypto Purchases
Metallic Visa Rewards Debit CardsLimited Range of Crypto Assets
Crypto.com Pay (Discounted Giftcards)Requires Substantial CRO Staking
Earn Feature – Passive Income

Crypto.Com Review Australia
– Final Verdict

Crypto.com is a rarity given that it’s a complete crypto ecosystem tailored to beginner investors. With a range of features such as an exchange, crypto earn, visa rewards cards, crypto pay, tracking and the ability to access crypto credit, it provides a full user experience. These features are easy to navigate and are designed for beginners, making it perfect for people with little or no experience in trading cryptocurrency.

For more advanced users, the higher fees, limited range of crypto assets and the requirement for staking substantial amounts of CRO may be offputting. If you fall into this more advanced category of trader or simply don’t want to join an exchange that requires you to purchase their tokens to navigate it, I recommend using Binance.

However, for the majority of beginner investors who don’t want the hassle of setting up multiple apps and wallets to achieve the numerous features offered by Crypto.com, this is a great beginner friendly option.

Want to Sign Up and Order Your Crypto Debit Card?

If you would like to sign up for one of the Metallic Crypto Debit Cards, you can use this link to receive $25 USD when you stake $500 worth of CRO or more. This will give you access to the Tier 2 Ruby Steel Debit Card which offers 2% cashback and 100% CRO cashback returns on your Spotify subscription.

Alternatively, you can manually input the following code when you sign up:

Referral Code: qunhmcrzta

By staking $500 CRO or higher, you will not only receive access to the benefits of these debit cards but we will both earn 25 USD (Currently valued at about 34 AUD) to top up your debit card or invest in other cryptos.

Want to Increase Your Security with a Crypto Hardware Wallet?

If you’d like to increase your crypto security by purchasing a hardware wallet, I recommend using Ledger and Trezor. These are two of the most reputable hardware wallet providers.

Buy Ledger Wallet Here

Buy Trezor Hardware Wallet Here

Hardware Wallets Explained

Want to Learn More About Crypto?

If you would like to learn more about crypto or competitors to Crypto.Com, I have the following posts to give you a more comprehensive overview of the crypto space.

Binance Review Australia

BlockFi Review

Celsius Network Review  

Swyftx Review

How to Buy Shares and ETFs on the ASX – 2020 Guide

Investing in stocks and Exchange Traded Funds (ETFs) has traditionally been a relatively esoteric task, with only a select few having the drive and interest to learn the ins and outs of investing. However, in this modern era, it has never been easier to invest, due to the abundance of investing apps and services. Today I will cover how to buy shares and ETFs on the Australian Stock Exchange (ASX). I will be going over what the different buy options are, how you can place an order and how you can sell your stocks.

How to Buy Shares Step 1 – Open your Brokerage Account

The first thing you will need to do is log into your brokerage account. If you don’t have a brokerage account, I personally recommend using SelfWealth as it offers the cheapest brokerage fees in Australia. Once you are in your brokerage account, utilise the search feature to search the stock that you would like to purchase.

This will typically work using the full name of the stock or the ASX code which is generally 3-4 letters. For example, if you would like to purchase the Vanguard Australian Shares Index ETF you can either type it in full or use the ASX code which is VAS. Googling the full fund name will typically provide you with the code at the top of your search results, as seen in the photo below:

Once you search your ASX code, you will be met with a screen similar to this. For this guide, I am using SelfWealth so depending on what brokerage platform you are using, you may encounter slightly different pages and information.

From this point, simply click on the ‘Buy’ feature and it will take you into a new page

How to Buy ASX

Assuming you have topped up your account and have a sufficient cash balance, you will be able to make a purchase. For any purchases, it is typically recommended to buy in chunks of $2,500 or higher to offset the % of the purchase price that goes towards brokerage costs. From this point, you have two options when it comes to your purchase amount. You can either buy a Quantity of units or a Value of units.

How to Buy Shares – Purchase Amount Options

Option 1 – Quantity

When you purchase a quantity of units, you will end up paying the unit amount x the value of the unit. For example, if you wanted to purchase 50 units of VAS that were trading at $75 per unit then it would cost you 50 x $75 = $3,750 to cover the cost of those units. In addition to the $9.50 brokerage fee from SelfWealth, resulting in a total expense sum of $3759.50. This method can be useful for people who like to keep an even number of units or like to purchase the same quantity of units with each transaction. However, your expenses will fluctuate depending on the unit price.

Option 2 – Value

When you purchase using the value feature, you insert the amount of money that you are willing to spend on your transaction. The value sum that you enter will then have the brokerage cost subtracted and the new sum will then be divided by unit price. As a result, you will purchase the maximum amount of units that your value sum can cover factoring in brokerage cost.

For example, if you wanted to invest $3,750 to buy VAS that is trading at a unit price of $75 it would work cost you: $3750 – $9.50 = $3700.50. $3700.50 divided by 75 = 49.34 units. You can’t own 34% of a unit so you would pay the cost of 49 units + brokerage and be reimbursed the remainder. In this instance that works out to be: Value Sum Total (minus brokerage fee) – Unit Cost Total = Remainder


$3750 – $9.50 = $3700.50 (Value sum total minus brokerage fee)

49 x $75 = $3,675 (Unit Cost Total)

$3,700.50 – $3,675 = $25.50 (Remainder)

In this instance, you have spent $3,675 to purchase 49 units of VAS and an additional $9.50 on brokerage, resulting in a total expense of $3,684.50. As you didn’t have the funds to purchase an additional share with the remaining amount, the remaining $25.50 gets returned to your cash balance.

How to Buy Shares – Price Options

The next purchasing option to consider is your Price Type.

Price Option 1 – Market then Limit

When you using Market then Limit, you effectively place an order against the best bid when buying shares. If there are insufficient shares in the market to complete the order then the remaining balance of your order is then placed into the market as the best offer price and will remain there until more sellers are available to sell at that price.

This typically means that the majority of the time, your purchase price will go through based on the most recent pricing for that unit in the market. It should be noted that this order will only be processed immediately if placed when the ASX is trading, which is 10:00 AM – 4:00 PM Sydney Time from Monday to Friday. If you place a market order outside of these hours, it will default to the market price on open the following trading day.

Price Option 2 – Limit

Limit allows investors to set a limit on the maximum price they are willing to pay for a unit. For example, if you believe that your stock is selling at an unreasonably high price but believe that it will drop to a price that you consider to be a good deal, you can place a limit order based on that amount. When you invest through a Limit, regardless of whether you select Quantity or Value as your purchase type, you will need to input the maximum price you are willing to pay for that unit.

For example, if VAS is trading at $75 and you are only willing to pay $70 for it, you can execute a limit order where you say you are willing to either purchase X amount of units at that price (Quantity) or you want to invest the total value of your sum to purchase the maximum amount of VAS when it hits a $70 trading price.

How to buy shares and ETFs on the ASX - Limit Order

If you select the Limit method, you also need to select an Expiry Type option. When you select this option, you put a time-frame on the length in which you want to keep your Limit purchase valid for. The minimum expiry type for a limit order is the remainder of that trading day. At 4:00 PM, if the stock doesn’t drop to your limit unit price, then the order will be cancelled as that trading day is officially over. Alternatively, you can select your limit order to last weeks or even months.

Finalising your Purchase – Review Order

To finalise your purchase, you will then need to select ‘Review Order’. It will then open a popup which I highly recommend you double or even triple check before purchasing. This is to ensure that all your order is correct before processing. You can also enter additional information such as why you chose this particular investment and whether you are Bearish or Bullish. This information is optional and is used to provide analytics to other investors.

Once you are happy that all the details are correct, you simply click ‘Confirm Order’ and it will be processed. If you have chosen Market, then Limit it will likely be processed immediately. If you have entered a Limit order, then it may be up for a while before the price drops to your Limit amount.

How to Cancel an Order

If you have entered a limit amount that you are unhappy with, you can cancel it by doing the following:
Go into ‘My Orders’ then click on the order that you are unhappy with. From there you will see a prompt:

How to Buy Shares and ETFs - Cancel Order

Click ‘Cancel Order’ to cancel the order completely. If you wish to adjust your limit price or the quantity/value of your purchase, you can also click ‘Edit Order’ and re-enter the updated data.

What Happens After You Buy Your Shares?

Once your purchase is finalised you will receive a notification from your broker stating that your order has been filled. This will include the Order ID, the quantity of units purchased, what you purchased, your limit number (if you entered one), the Avg Price (what you paid per unit) and the total value of your purchase.

Additionally, you will receive an email from your broker confirming your purchase with all the relevant purchasing information to store for your record keeping. Over the next week or so, you should also receive a paper copy of your purchase and a way in which you can update these details to be reflected on a portfolio tracker such as Sharesight for tax purposes.

What Investing Options Are There?

There are several investing options available on the ASX. These include ETFs, Shares, LICs and Reits among others. If you are looking for more information on these investing options, I have attached some easy to read guides below:

ETFs Explained

LICs Explained

REITs Explained

Looking to Sign Up Through SelfWealth? Here’s how you can Have 5 Free Trades

If after reading this review you have decided to open an account through SelfWealth, you can use my referral link to get 5 free shares during your first month. This means that you can save up to $47.50 on brokerage fees, regardless of how little or how much you invest with each transaction.

New members also receive a complimentary 90 day free trial of SelfWealth Premium which is an optional service that provides market depth, stock analysis and live pricing. After the trial ends, you can either elect to continue your subscription to SelfWealth Premium or you can simply use the free version.

Dollar-cost Averaging vs Lump-Sum Investing

A very common question that gets raised in the investing community is whether it is better to invest a large amount of cash in one hit (lump sum investing) or if it is better to evenly distribute your sum over a longer time period (dollar-cost averaging). Today, I’m going to cover both of these theories to help you decide which method is better for you. 

Lump-Sum Investing

People who have accumulated considerable savings, have recently sold a house or business or who have received inheritance may come across a situation where they have a large sum of money to invest. If you are one of these people, you will be faced with the dilemma of whether to invest your sum all at once or to invest it in smaller chunks over a longer time period. On paper, lump-sum investing will typically yield a greater result. The reason this strategy works more often than not is that the market will typically grow in value each year as opposed to dropping in value. However, with the stock market being forever volatile, the fear or a market correction or recession occurring directly after a person invests their lump sum can often deter people from this strategy. 

Example – VGTSX 

Vanguard Total International Stock Index Fund Investor Shares (VGTSX) is an index fund that has more than 6,000 different holdings spread across the globe. Due to their diverse spread, I am using them as an example of how not just the Australian or US market performs but how the majority of markets perform over a long period. 

Over a 24 year period, VGTSX has 9 negative returns which equate to a 37.5% chance that lump sum investing directly before these years would have yielded poorer results than dollar-cost averaging. However, 15 of these years or 62.5% of the time, you would have grown your wealth faster utilising lump-sum investing. Using DCA during these periods would mean that you were gradually paying more for the same amount of shares. 

Based on these stats, and similar stats found from other index funds, lump-sum investing is statistically more likely to yield you greater results, as you avoid constantly purchasing shares during a growth period. However, this can be a hard approach to stick with due to a thing called analysis paralysis. Analysis paralysis is where people become so fixated with trying to anticipate market fluctuations that they avoid investing altogether because they are adamant that the market will continuously drop. Ultimately, this boils down to timing the market which is something that is impossible for professional investors and fund managers to accurately predict on a frequent basis. If these financial experts can’t predict it with all the time, tools and information that they dedicate to speculating, the chance of you or I being able to do it is nigh impossible. For that reason, lump-sum investing is often the most likely investing option to yield greater long term results. 

Dollar-Cost Averaging (DCA)

DCA occurs when you divide your large sum into smaller sums that get invested routinely in even amounts at even time periods. This can be used as a hedging method as by investing continuously throughout the year, you are spreading the purchase price of each share. If the market is on a decline, this means that you will continuously purchase shares at a lower price each time. Alternatively, if the market is on an incline, you will continuously be purchasing shares at a higher price each time. 

Because you are averaging out the purchase price of shares through DCA, it is psychologically a more reassuring investment method, as you will be impacted less severely during recessions and market corrections. However, this psychological benefit can often come at the expense of potential financial gains as the above stats illustrate that more often than not, the market will grow on any given year. 

Another important thing to note is that most investors who do not have a lump sum acquired from selling a house, business or receiving an inheritance will be doing DCA unintentionally by investing at intervals will they acquire enough cash to warrant the brokerage fee of purchasing shares. This is often around $2,500 – $5,000 depending on who you ask and what your brokerage fees are. 

However, while lump-sum investing will typically work better for people who have recently inherited a lump sum, this is very different to someone who is diverting their regular investments to horde cash in hopes of there being a recession where they can buy everything ‘on special’. Currently in Australia, if you hold your money in the highest interest savings account available, you will be losing money when factoring inflation and tax (unless you’re making below $18,200 per year). Subsequently, hoarding money into savings accounts for a long period of time to try and time the market will often yield poor results. 

When your money is sitting in a savings account that yields interest below that of inflation, you are slowly losing your money. If you factor in the fact that most years, the market grows as opposed to decreases then you can lose money in your savings account while missing out on the potential gains from the market increasing during your withholding period. For these reasons, I personally prefer to DCA if I do not have an unexpected lump sum inbound, as timing the market is impossible to do with certainty and the opportunity cost of withholding money as opposed to investing it far outweighs the potential for being able to accurately time a recession or market correction. 

Summary:

Lump-sum investing when you have recently received a large sum of money will more often than not be more effective than DCA. However, while lump-sum investing in this circumstance is typically the better option, DCA can offer more peace of mind by hedging against unexpected market corrections and recessions, albeit at the potential expense of your growth returns. 

For people who do not have large sums of money readily available to invest, DCA will typically offer greater results, as time in the market is better than timing the market. By withholding your regular investments to accumulate a lump sum, the opportunity cost of doing so combined with the impossibility of timing the market makes this an often detrimental strategy. Therefore, I personally use the following two options:

Recently Acquired a Lump Sum? Use lump-sum investing
No Current Lump Sum? Use DCA 

REITs Explained 2021 – Are REITs Good Investments?

Real Estate Investment Trusts or REITs are commonly talked about by real estate and stock market investors alike. However, for most people REITs remain far less understood than traditional stock market and real estate investing. Today I’m going to explain REITs to give you an understanding of what exactly they are and if they can help you on your journey to financial independence.

REITs Explained – What is a REIT?

REITs are corporations that own and actively manage a portfolio of real estate properties and mortgages. These properties are typically commercial properties such as shopping centres or hotels. REITs are traded on the ASX and can be purchased like ETFs, LIC and shares through a brokerage account.

Due to being traded on the ASX, REITs offer investors an opportunity to invest in the real-estate without having to physically purchase a house or save up for a 20% deposit. Similarly, as the fund is managed, investors in REITs do not have to worry about the responsibilities that come with being a landlord. At the end of the financial year, most REITs pay the majority of their taxable income to their shareholders in the form of a dividend. There are two common types of REITs offered in Australia – Equity and Mortgage REITs

REITs Explained – Equity REITs

REITs Explained - Equity REITs

Equity REITs invest in and own properties. They generate their income by collecting rent from tenants who have leased their properties. These REITs can specialise in specific property types such as hotels and shopping centres or they can diversify and hold a multitude of different property types. 

REITS Explained – Mortgage REITs

REITs Explained - Mortgage REITs

Mortgage REITs generate income through loaning money to owners of real-estate in the form of mortgages and mortgage-backed securities. Whereas Equity REITs generate their income from rent, Mortgage REITs generate income through the interest paid back on the mortgages that are issued. 

REITs Explained – The Benefits of REITs

REITs Explained - The benefits of REITs

Exposure to the Property Market

An obvious advantage of REITs is that they offer potential real estate investors a cost-efficient way of entering the property market. While traditionally, real estate investing involves saving a 20% housing deposit and acquiring a mortgage, REITs offer the exposure to real estate investing without the need for the deposit or mortgage. Currently, you can invest in REITs with as little as $500, making it a lot more accessible for beginner investors. 

Convenience

Convenience is another significant benefit of investing in REITs over acquiring an investment property. Due to REITs already being a managed fund, you bypass the responsibilities of becoming a landlord, while still being able to generate an income through the collected rent which is distributed in the form of dividends. This eliminates the stress of trying to find and maintain good tenants, responding to call-outs at 2 AM to fix unexpected plumbing issues and having to worry about extensive tax reporting obligations. The management fee that you pay entails all of these issues so that you don’t have to worry about them. 

Liquidity 

Liquidity isn’t a term most would consider with investing in real estate. It can take months or even years to sell a house after all depending on how the property market is performing. However, as REITs are traded on the ASX, you can sell them during trading hours, making them a higher liquid asset than traditional real estate.

Diversification 

REITs contain a portfolio of multiple property investments. For that reason, you are already more diversified with a REIT than you would be purchasing one investment property. Subsequently, your investment can be a lot less volatile than traditional real estate investments, as you don’t have all of your eggs in one basket. 

REITs Explained – Their Downsides

REITs Explained - Downsides to Reits

Management Fees

REITs can have substantial management expense ratios (MER) of 1% upwards. This can eat away at your potential profit margins as you can be spending 1% of your portfolio on management costs. 

Inactive Property Ownership

While this may be seen as a benefit to some, you have no control over the physical properties themselves, as management takes this responsibility entirely. If you are a hands-on person or enjoy renovating houses, for example, this can be detrimental, as you can’t add value through your own intervention. 

Outperformed by Other Investment Options

While REITs can offer modest returns for investors and are a viable way of diversifying an investment portfolio, they typically underperform when compared to other asset classes. LICs which can have equally as high management fees typically will provide much larger dividend yields. Whereas ETFs which have minimal management fees will often provide much larger capital gains. Subsequently, REITs are generally more tailored to real estate investors than asset investors. 

Property Market Volatility 

If there is a housing crisis or another downturn on the property market, your REIT will likely feel the full brunt of that force as it is only investing in property. Subsequently, even though a REIT is more diversified than an individual investment property, you can still see substantial losses during a property market downturn. 

REITs Explained – Summary

REITs offer a cost-efficient way for people to invest in real estate without having many of the responsibilities that come with real estate ownership, such as being a landlord. They also bypass the need for real estate investors to have to save substantial deposit amounts or to go into debt through mortgages. With REITs being diversified and highly liquid assets, they also mitigate some risk when compared to traditional investment properties. However, their high management fees, the lack of hands-on interaction with the properties and other asset classes outperforming REITs may deter some investors.   

What Other Investment Options Exist?

There are several investing options available on the ASX. These include ETFs, Shares, LICs and Reits among others. If you are looking for more information on these investing options, I have attached some easy to read guides below:

ETFs Explained

LICs Explained

Want to Purchase REITs but Don’t Have a Brokerage Account?

If you would like to invest in REITs, I recommend using SelfWealth. As it offers the lowest flat-rate brokerage fees among any CHESS-sponsored trading platform in Australia. For more information, you can find my in-depth review on SelfWealth Here.

If you would like to sign up and receive 5 free trades during your first month, you can also use my referral link.

 

Income-Producing Assets

As we all know, the path to financial independence requires spending less than you make and investing the surplus in such a way that your money works for you. Income-producing assets (IPA) also known as income-generating assets are the key to the puzzle, whether you want to grow your wealth, accumulate a passive income stream or simply want to boost your annual income, these assets are quintessential for reaching your financial goals.

What Are They?

An IPA as the name suggests is something that produces an income, which for the most part is passive. By investing your money, time or both towards an asset, you can tailor it to produce a recurring income stream. Through doing this, you essentially begin to pay yourself an income that is passive, meaning that you can generate income while you are at work, sleeping, watching TV, walking the dog etc. 

What Types of Income Producing Assets are there?

There are numerous types of IPA that are accessible through different means. You can invest directly into an investment property and if it is positively geared, generate income from the rent. Alternatively, you could invest in a real estate investment trust (REIT) which is a managed portfolio of numerous real estate investments that distributes its yearly profit to shareholders in the form of a dividend. You can also attain dividend income from listed investment companies (LICs), exchange-traded funds (ETFs) and shares. Alternatively, if your risk tolerance is lower, you can use fixed income investments such as bonds that return consistent, predetermined returns.

How Do They Work?

IPAs may vary depending on which form you decide to invest into but for the most part, they operate in a similar capacity. You invest money and time towards something that initially, doesn’t produce any instant forms of income. You hold onto these investments and over a period of time, they produce a portion of your original investment back to you. Below I’ll give two examples:

Example 1: Investing in Dividend Shares

You purchase 1,000 shares of a blue-collar stock that produces a fully franked dividend of 5% per annum. Each share costs $10, meaning that you have invested $10,000. At the moment, you are down $10,000. However, during the end of the year, your stocks have grown 4% in value to be worth $10,400. You then receive your yearly dividend which is worth 5% of that. So in this instance, you make 5% of $10,400 which is $520. 

In this example, you have generated a passive income of $520, which is a 5.2% return on your original investment. Additionally, you have accumulated an additional $400 in capital. Assuming this dividend and annual growth rate continues over a long time frame, you can comfortably generate larger returns each year until eventually, the dividend yield can supplement your income. 

Example 2: Investing in Government Bonds

You deposit $10,000 into a 5 year Government Bond offering a fixed coupon rate of 4%. In exchange for allowing the government to borrow your principal deposit of $10,000 for a period of 5 years, they will pay you 4% of that amount twice per year until the bond reaches its maturity date. In the above example, you would receive 10 x 4% coupons over your 5 year investment period in half-yearly instalments. 

$10,000 x 0.04 = $400 (1 coupon)

Yearly Coupon Returns = $400 x 2 = $800 (2 coupons) 

Total Coupon Return on Investment = $400 x 10 = $4,000

Once you reach maturation, you also receive your principal sum of $10,000 back as well.

What’s the Best Income Producing Asset for Me?

This one depends on how much spare time you have, how much money you have, what your risk tolerance is and how much work you are willing to put in. If you have spare time, perhaps making a small business and following the digital entrepreneur route is a good way to go. If you don’t have the time, investing in an ETF or LIC can be an easy set and forget way to generate an income through dividends. If you are willing to put work into renovations, then investment properties could be right up your alley. Ultimately, the best IPA is the one that you can stick with and invest over the long term, as this will compound your returns and accumulate wealth. It could be one of these options or you can use multiple options to diversify your IPAs. 

LICs Explained – What Are LICs and Are They a Good Investment?

Listed Investment Companies aka LICs are an investment option offered within Australia. Today I will explain everything that you need to know about LICs. I will be covering what they are and whether or not they may be a good investment option for you.

LICs Explained – What Are LICs?

Listed Investment Companies (LICs) are companies that are listed on the stock exchange that aim to generate income by investing in other companies on the stock exchange. Similar to ETFs, LICs offer a cost-efficient way of obtaining a diversified portfolio that can include multiple assets, commodities, currencies, sectors and bonds among others.

How do LICs Differ from ETFs?

However, while LICs share a lot of similarities with ETFs, there are some distinct differences. LICs, for the most part, are actively managed, whereas ETFs are typically passive investments. Subsequently, while ETFs may attempt to mirror the performance of a particular benchmark or index, LICs generally aim to outperform those indexes. LICs aim to achieve this through a team that actively manages your money, their ability to effectively or ineffectively manage the fund will result in the overall value of the LIC.

LICS Explained - Are they ETFs?

Because LICs are actively managed, the management expense ratio (MER) is generally higher than that of most ETFs. This is primarily because fund managers of LICs are actively attempting to beat the market through the selling and purchasing assets at different times, resulting in higher management fees. 

If you would like more information on ETFs, I cover them in more detail here:

ETFs Explained

Open-ended Versus Closed-ended

Another key difference between ETFs and LICs are that ETFs are open-ended whereas LICs are closed-ended. As ETFs are open-ended, they can create and redeem units based on the demand of the share market. However, LICs are closed-ended which means that there is a finite supply of shares.

LICS Explained - Open and Close-ended

A potential benefit of LICs being close-ended is that their share price can trade at a large premium or discount to their net asset value (NAV). ETFs utilise a market marker which is used to ensure that the price investors pay for units are closely correlated to the NAV, which is updated daily.

Conversely, LICs typically only produce their NAV in the form of a monthly report. This means that the price of LICs can be based on what investors are willing to pay on that given day, resulting in a potential premium (paying above the NAV) or discount (paying below the NAV). Subsequently, you as an investor can purchase LICs at a discount to attempt to optimise profits.

LICs Explained – Dividends

Dividends are another important factor to consider when looking into LICs as they offer some unique benefits compared to other forms of investments. Firstly, a LIC distributes its income when its board declares one and in this sense, they are not obligated to maintain a consistent dividend yield or rate of payment. This differs significantly from ETFs which operate under a trust, where they are obliged to return all of its income each year.

The negative to this is that a board can simply not declare a dividend or reduce the annual yield depending on how the LIC is performing. However, a benefit for dividends offered by LICs is that because they operate as an Australian company, they pay the corporate tax of 30%. This means that they typically offer fully franked dividends, which can have some great taxation benefits depending on your income bracket. 

Unique Reinvestment Plans

Another unique feature offered by LICs is that some offer the opportunity to accumulate additional shares instead of a dividend through Dividend Substitution Share Plans (DSSP) and Bonus Share Plans (BSP). While this may sound similar to a dividend reinvestment plan (DRP), which occurs when you reinvest the dividend towards purchasing additional shares, a DSSP and BSP differ from a DRP as the additional shares are offered in place of the dividend.

This means that the shares are not viewed as taxable income as they would be under a DRP or cash dividend. While this is less relevant for low-income earners as a fully franked dividend would be refunded to them in full, it has significant tax advantages for people in tax brackets above the corporate tax of 30%. The reason for this is that through not paying tax on dividends and utilising these plans, you grow the number of shares that you hold at a faster rate than through a DRP or using a cash dividend to purchase more shares. 

If you are interested in DSSP and BSP they are currently offered by AFIC and Whitefield respectively. 

The Pros and Cons of Investing in LICs Explained

LICs Explained Summary – Should You Invest in LICs?

LICs offer a cost-efficient way of diversifying domestically, as they can hold multiple assets, commodities, currencies, sectors and bonds through companies listed on the ASX. They also have unique tax advantages as seen through DSSP and BSP, in addition to the majority of their dividends being fully franked.

Additionally, as their sole business is through investing in others, they offer the possibility of outperforming the market and subsequently, have the potential to outperform ETFs. However, this potential extra return comes at the expense of higher MER, limited international diversification and the risk that despite the higher MER, that they do not outperform the market. 

Depending on your tax bracket, your investment horizon, your FIRE goals, your portfolio diversification and your faith in LIC managers being able to consistently beat the market will dictate whether you decide to incorporate them into your investment portfolio.

Want to Purchase LICs but Don’t Have a Brokerage Account?

If you would like to invest in LICs or ETFs, I recommend using SelfWealth. As it offers the lowest flat-rate brokerage fees among any CHESS-sponsored trading platform in Australia. For more information, you can find my in-depth review on SelfWealth Here.

If you would like to sign up and receive 5 free trades during your first month, you can also use my referral link.

SelfWealth Review – Is This Australia’s Best Share Trading Platform?

Welcome to my SelfWealth Review. Today I’ll discuss the popular Australian owned and operated share trading platform. I will be covering the pros and cons of this app to see if it is the right investment platform for you. 

What is SelfWealth?

SelfWealth is a CHESS sponsored, share trading broker that is Australian owned and operated. Downloadable as an app and accessible via desktop, this trading platform is extremely easy to use and access, making it ideal for people looking to invest in the Australian Stock Exchange (ASX). 

Pros of SelfWealth

Cheapest Flat Rate Brokerage Costs in Australia

SelfWealth Review - Flat Rate Brokerage

Currently, SelfWealth offers the cheapest brokerage fees in Australia, with a flat rate brokerage fee of $9.50. Meaning that if you decide to purchase $500 worth of shares or $500,000, you will always be charged $9.50. Other competitors such as the Big 4 banks have brokerage fees starting off around the $14.95 mark, with the majority increasing the fee as your transactions become larger. For this factor alone, SelfWealth can be the most cost-effective investment platform in the Australia.

CHESS Sponsored

SelfWealth Review - What is CHESS Sponsorship?

To make matters even better, SelfWealth offers CHESS Sponsored Shares.

If you join a broker that is CHESS sponsored, you’ll be given a Holder Identification Number (HIN). When you purchase or sell shares that are CHESS sponsored, the Australian Stock Exchange (ASX) keeps a record of it. Under this model, you are the sole owner of those shares.

Subsequently, in the event that SelfWealth or any other investment company that is CHESS sponsored were to liquidate, the shares still remain in your name and therefore won’t be sold or lost.

Backed by ANZ

SelfWealth Review - ANZ Backed

To add to the security of your shares being CHESS sponsored, SelfWealth is also partnered with ANZ bank. As a part of the registration process for SelfWealth, you will receive an ANZ trading account to store your money, purchase shares, receive dividends and actualise capital gains when you sell shares. This means that in the unlikely event of SelfWealth declaring bankruptcy, your funds will remain untouched, due to being held in a closed trust by ANZ. 

For the above reasons, I personally use SelfWealth to invest in ETFs and shares, as the easy to navigate user interface, CHESS sponsorship and cheap flat rate brokerage costs make it unrivalled at this stage. However, there are alternative investment platforms out there that may be more suited to your investing needs. Subsequently, I will go over a few of the things that may make SelfWealth less appealing in your eyes. 

Limitations of SelfWealth

You Have to Use Their Designated Account 

This next point wasn’t an issue for me, but SelfWealth doesn’t allow you to use your own personal bank account to purchase shares, as you automatically create an ANZ account when you join. As a result, you will have to manually transfer money in and out of this account from your main banking account, which can take a few days depending on your banking institution. 

No Interest Rates for Holding Account

The last issue with SelfWealth is that there are no interest rates for cash held in the ANZ holding account. For people who like to hold a lot of cash and try and time the market, this can be detrimental as the lack of interest means that you lose money due to inflation depending on how long you keep it in there. Other investment platforms typically offer some form of interest, meaning that the money depreciates at a slower rate. However, if you simply move funds in and out to purchase shares on a routine basis through dollar-cost averaging then this shouldn’t be much of concern. 

Summary – Pros and Cons of SelfWealth

ProsCons
CHESS Sponsored + Backed by ANZNo interest on cash in your holding account
Cheapest Flat Rate Brokerage Fee in Australia at $9.50 per transaction. You can’t use your banking account to purchase shares
Very easy to set up an account and use the app

SelfWealth ReviewConclusion

In my eyes, SelfWealth is the best share trading platform available in Australia. With the cheapest flat rate brokerage fees, a great user interface, offering CHESS sponsored shares and being backed by ANZ, I highly recommend SelfWealth for people looking to invest in the ASX. However, if you are adamant about keeping your everyday account as your investment account or if you’re looking for a brokerage account with interest rates, there are better options elsewhere.

Added Bonus – 5 Free Shares for the First Month

If after reading this review you have decided to open an account through SelfWealth, you can use my Referral Link to get 5 free shares during your first month. This means that you can save up to $47.50 on brokerage fees, regardless of how little or how much you invest with each transaction.

New members also receive a complimentary 90 day free trial of SelfWealth Premium which is an optional service that provides market depth, stock analysis and live pricing. After the trial ends, you can either elect to continue your subscription to SelfWealth Premium or you can simply use the free version. 

To further help you on your investment journey, please refer to this Investment Frequency Calculator. It will help you determine the optimal investing frequency for your budget, to ensure the highest possible returns with the lowest brokerage fees over a long investment horizon.

Guide on How to Buy and Sell Shares/ETFs on SelfWealth

If you would like a step-by-step process on how to purchase and sell equities through SelfWealth, you can use my easy to follow guide.

Want to Learn About Popular Investment Options offered on SelfWealth?

If you decide that you would like to sign up with SelfWealth, I recommend having a read on these popular investment options. In these guides, I review the common types that exist and cover their pros and cons.

ETFs Explained

LICs Explained

REITs Explained

How to Invest During a Recession

Recessions can be a daunting prospect, particularly for beginner investors and people who aren’t well versed in the history of the stock market. To make matters worse, news outlets and financial analysts are often prophesying an unprecedented, catastrophic recession. But fear not, because today I’ll show you how to invest during a recession and why a recession can actually be a gift for investors.

What Do I Do if a Recession Occurs?

Many people who invest often ask the question “What do I do if a recession occurs?”. The answer to this question is simple, do exactly what you were doing before the recession. Whether there is no recession, a recession is about to begin or a recession is about to end, your best chance to ride it out and profit in the long run is to maintain your current investment strategy and here’s why:

Capital Gains and Losses

When a stock fluctuates in price, the capital amount changes. While on paper it may appear that you ‘made’ or ‘lost’ money on any given day, depending on the trend of the stock market, you haven’t made any profits or loss at that stage. To actualise any form of capital gains or losses, you need to physically sell your asset. The intrinsic value of your holdings may be different from when you purchased them, but if you aren’t planning on selling, then there is no actualised gains or losses.

If you are on the path to FIRE, you likely have a long term investment horizon because you will be looking to live off of the income generated from your investments. Recessions don’t inherently pose a risk to your path towards financial independence because you are in it for the long term. This is particularly true for people utilising ETFs that are tracking market indexes because history has shown that on average, the markets generate a positive return more often than not. So while you can be looking at an intrinsic drop of 20-50% of your portfolio during a recession in a given year, if you can hold onto your investments and ride it out, you are virtually guaranteed to make your money back and then some over a long-term investing horizon.

This is why ‘aggressive’ superannuation portfolios that consist of a lot of shares, ETFs and mutual funds suggest a holding period of 10+ years. The 10+ year time frame is factoring in that there may very well be a colossal market correction or recession where your assets drop significantly in value. Yet, this also assumes that from 120 years of market analysis, it is likely that your portfolio will not only recover from that decline in value, but it will also soar above its previous peak value. 

Now all of this above information is going on the pretence that even if you stopped investing altogether and simply held onto your portfolio, that you would still come out on top over a long (10+ year) period. However, that’s not in line with your current investing strategy, is it? 

Stick to Your Plan

Simply put, the most efficient way to come out on top during a recession or bear market is to invest in the exact same way that you have previously been doing. The reason this is a good idea is that if we are facing a recession, the market index and subsequently the shares contained within that index will continuously decline. No one knows exactly how long recessions will last, no one can predict when we are at the worst point during a recession and no one can ascertain whether we are recovering or if it’s destined to drop further. For this reason, simply continue your normal investing patterns and maintain dollar-cost averaging (DCA). DCA is a risk-mitigation strategy that hedges against lump-sum investing before a catastrophic event like the Global Financial Crisis.

Why you Should Dollar-cost Average

When you DCA during a recession, you will continuously be purchasing shares while the market is at a decline. Each time the market drops during your investment window, you will be able to purchase shares at a discount. Each time the market rises, you will be purchasing shares at an increase in value. Through averaging it out, you lower the potential setbacks the recession can cause, as you average out the highs, the lows and everything in between. If you do this, not only will you bounce back once the market returns to its tendencies of growing as opposed to diminishing, you will profit even further from buying shares at a discount. 

For the above reasons, recessions aren’t all doom and gloom. They can offer some great discounts on stocks and index funds that can even propel your investment portfolio further than normal. While the temptation may be to hold your money and try and buy at the bottom of the recession, it’s impossible to know when that is. Simply continue investing as per usual, you’ll get some great discounts along the way and won’t have to worry about lump-sum investing at a bad time. 

Conclusion:

A recession is a great opportunity to purchase assets at a discount. By not panic-selling and trying to time the market, you can expect great long term results if you simply continue investing through DCA. By investing as per usual, you will ride the highs and lows of the economic decline, averaging out any setbacks and increasing your revenue as you ride the economic rollercoaster to new heights.

Aussie FIRE Movement