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?
Currently, Raiz offers seven different investment options to suit a range of risk-tolerances and ethical consideraitons. While I am not offering financial advice, I have done my best to simplfy the different investment portfolios to highlight their main holdings and their major appeal.
|Portfolio Type||Main Holding/s||Risk Level||Predicted Returns|
|Moderately Conservative||Corporate Bonds|
|Moderate||Australian Large Cap|
|Moderately Aggressive||^ With a higher weighting of large cap||Moderate +||Moderate +|
|Aggressive||Australian Large Cap|
Asia Large Cap
|Emerald||Socially Responsible Global and Australian Large Cap||Moderate +||Moderate +|
|Sapphire||Same as Moderately Aggressive with 5% Bitcoin added||Moderate +||Moderate +|
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.
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.
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.
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.
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 reducing carbon emissions. For ethical investors or people who believe in the future of these companies, this is a viable option.
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.
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 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 every-day 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.
As the name suggests, this feature enables you to make a one-time investment to 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.
For example, if you recently received your tax-return, have some savings that you want to invest, received cash gifts etc., then this method will be the most useful. However, if you intend on investing more frequently, particularly with lower sums, then the automated feature will probably be better suited for you.
Alternatively to One-Time investments, this feature enables you to invest a pre-determined amount of cash daily, weekly, fortnightly or monthly. This is a great way of dollar cost averaging, as you can spread out your purchasing pattern to reflect ups and downs in the market, averaging your profits and losses.
This is my favourite feature of the app and the way I would personally use this method is by aligning it to my pay cycle. So for example, if you get paid every fortnight on a Thursday, 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 guess work and stress out of investing on different days where you may not have the money to invest.
Another feature that separates Raiz from other micro-investing platforms is that it offers a rewards program. By utilising the Raiz app to buy from popular brands such as Bonds, Ebay and Ray-Ban among others, you the companies will invest a % of the purchase price to your Raiz profile. This can be a useful tool for investing without ‘investing’ assuming that you were going to purchase these items anyway.
Raiz comes with fees for its services and compared to other competitors (particularly Spaceship Voyager), they are substantially high. Raiz charges $2.50 per month for balances under $10,000. For balances above $10,000 they charge 0.275% per year, charged monthly and computed daily.
Alternatively, 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. For this reason, it’s impotant to weigh up the pros and cons of both apps to see if the higher fees in Raiz are worth it.
|Multiple Investment Options||Confusing Portfolio Weighings/Overlap|
|Option to Invest Ethically||Lack of Exposure to US Market (Highest performing market)|
|Raiz Rewards||Higher Management Fees than Competitors|
Raiz is a useful investment app for beginners who want to dip their toes into the world of investing. They have 7 different investment portfolios, which offers more diversity than some of their competitors. 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 their rewards program gives them an edge on their competition.
However, there is a significant amount of portfolio overlap, with several portfolios being very similarly weighted. The weighings of their portfolios may also be confusing for beginner investors who are unsure about aspects of the portfolio and how they got their weighing. 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 above reasons, I personally prefer Spaceship Voyager based on its lower management fees, it being an easier app to navigate and its portfolios outperforming Raiz’s based on their much higher US market weighting. However, these features come at the expense of having a higher US concentration and more exposure to equities which are much higher-risk higher-return assets. Therefore, if you have a high-risk tolerance and a long term investment horizon (7+ years), Spaceship will likely be your best choice. if you are seeking exposure to defensive assets, are interested in investing ethically or plan to make use of the Raiz Rewards system, then Raiz may be more suited for you.
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.