End of 2016 I got the interested into actually investing the money my wife and I earned, instead of letting it just sit in the bank account. In fact, because of my wife mentioning it over and over again I actually got interested in it in the first place.
Real-estate investment was too much upfront cost at that time (especially here in Sydney) and I had no experience or even confidence about investing into the stock market. I always thought stock investments are risky and just a gamble. Beside that I found the topic very unapproachable and it seemed like something only "experts" can do. It turns out I was wrong.
I don't remember how I stumbled over Acorns at that time. They just entered the market in Australia and they provided something very appealing to me: simplicity. Instead of bombarding potential new customers with all the complex details about investing into the market, they provided five different portfolios with different risk/reward predictions. A few calculations later I was hooked. I downloaded their app, identified myself with their system and started to invest small amounts to find out how this worked, maybe still a bit overly cautious. Granted, Acorns round-up feature was a bit confusing at first and actually not really what I was looking for, but I simply ignored it at the beginning.
What made me finally a bit more serious investor was the great communication from Acorns. Their regular emails described the underlying parts of the portfolios (which are mostly Exchange Traded funds or ETFs), different investment strategies and explained more and more about potential risks and rewards when investing into diversified portfolios. I got basically free financial education. Their pretty great app also increased my confidence. After a while I started regular (weekly) investments and a bigger portion of our monthly savings went into Acorns portfolios.
How Acorns Australia became Raiz Invest
I don't want to dive too deep into the history of Raiz Invest and how it emerged out of Acorns Australia. In 2017 Acorns was mostly focused on user growth and did a great job educating people about personal finance and personal investing. A year after, in April 2018, Acorns Australia listed on the Australian Securities Exchange (ASX). It also became clear that the Australian branch of Acorns wanted to fine-tune the app for the local market, introducing a super fund (comparable to a 401k in the US) and other features relevant for the Australian market. Shortly after Acorns listed on the ASX, they semi-seperated themselves from their US parent company and renamed themselves Raiz Invest. The name was apparently chosen based on a customer survey. Regardless, their basic value proposition stayed the same, so did the fees and portfolios. Nothing really changed for me at that time. As far as I can tell, Raiz is also still kind of part of Acorns in general.
Only recently I realized though, that the Raiz email communication frequency dropped quite significantly after the separation. Acorns used to send weekly market updates. My feeling is that Raiz does the same only once a month now.
Raiz Invest features
One of the major advertised features when starting up in Australia was the round-up feature of Acorns. How it works is basically that you connect your bank account with Raiz/Acorns and for each transaction which is not a round dollar value (e.g. $3.95) the remainder (e.g. $0.05) to the dollar will be recorded. This will add for every transaction done through the bank account. When you reach a certain amount (e.g. $10), they will invest that amount into you investment account. I think this is a good way to get people to start investing, even if it is just a little. Once you are more serious the feature does not matter much anymore. Instead you would set up a regular schedule to invest into it. I do weekly investments, mainly because of dollar-cost averaging (more about that later).
The other main features are (now) Raiz Super, which basically makes Raiz a provider for Australian super (like a retirement/investment account), Raiz Kids (save & invest for your kids) and Raiz Rewards, which is there affiliate program to invest part of the value you shop with their partners (or sign up through them) back into your Raiz account. I used a Raiz rewards a few times, when I had to for example book a hotel somewhere, but can not share any experience with Raiz Super or Raiz Kids yet.
Beside the features, the app is really well made. You get an overview over your investment in different time-periods and you can track when you did what, like regular investments, got dividends or when your round-ups happended. The Raiz Invest app also offers tracking your expenses. Two more things I really like are their carbon-offset program and their ethically concious portfolio (called Emerald). This is just a personal preference though.
About dollar-cost averaging & is it a good idea?
If you like most people and you have regular income through a job, then dollar-cost averaging is probably the best approach to invest. The way it works is to invest the same amount of money in regular intervals, rather than in one big chunk. This is done in order to level out market volatility. If you buy a stock or an index today for $1.00 the share price and the market goes down the next time you could buy the same stock/index for $0.90, so you would get "more" for paying "less". The same is true the other way around. Regardless, in the long term you will sometimes pay more and sometimes pay less for the same. When the market is up, your total returns will be higher, but each time you buy into the market again you will pay more. If the market is down you total return will be low or even negative, but you will buy new shares for much less (and therefore more of them), which will benefit you when the market goes up again.
The only reason I would not use dollar-cost averaging is if I would have a bigger lump-sum to invest right now. In that case, go ahead and invest it. There is a never a better time to invest than as soon as possible. Beside it is very hard for most people to time the market if not even impossible, so there never is the best time to invest.
Personal outcome & market returns
My personal investment returns with Raiz have been great so far. I started to invest a bit over two years ago and have a total return of 20% since then (that is year-over-year compounded market returns + dividends + invested money from rewards).
Admittedly, we are in one of the longest ever bull markets right now. What that means is that the stock market is generally going up and stocks are increasing in value since the last global financial crisis in 2008/2009. Many predict a bear market (the stock market going down) is soon to come. Obviously nobody knows when. Would that change my opinion about Raiz? Not really, because the market change will affect all long-term investors, regardless what approach they are using. It could even be good, if you are really in for the long-term, because buying into the market will be much more affordable.
Is there anything bad about Raiz?
In my opinion there is nothing obviously bad with Raiz Invest. Personally they introduced me to personal finance and investing and I am grateful for that.
What troubles me a bit is that since their listing on the ASX, the stock price of Raiz dropped quite a bit (from $1.40 a share to $0.56 today). This probably isn't that troublesome by itself since the Australian market is relatively small and I think they reached a certain point of saturation when it comes to acquiring new customers. I am more worried about the less frequent (email) communication I mentioned above already. I would really appreciate to hear more from Raiz in regular intervals.
The fee Raiz is charging is very fair in my point of view (0.275 % pa). It isn't comparable with low-cost index funds in the US or even their counterparts on the ASX, but I think the additional services and the great app are worth it.
Regardless of my opinion about Raiz and my experience with them so far, there are few things I will probably change in the future:
- Since I am a now a bit more confident when dealing with (market) investments I will probably try to invest directly into the ASX using a broker like CommSec (the online share trading and investing platform from the Commonwealth Bank of Australia). The reason is simply because I like more options and the lower cost Vanguard ETFs in the ASX are quite attractive. For information Vanguard is the biggest provider of mutual funds (like index funds). Sadly there are no low-cost index funds available in Australia, like the VTSAX in the US, but the ETF options listed on the ASX are all right as well. Once I really get started with this, I will most like review this here as well.
- I am currently also using an app called Spaceship Voyager. The company behind it, Spaceship, is originally a super fund provider in Australia. They started an index fund portfolio last year. I will certainly review them in an upcoming post.
- A friend of mine suggested an app called Stake, which is a bit like Robinhood, but helping Australians to invest into the US stock market. Their value proposition seems great, so I will probably have a look into it in the future.