Micro-investment platforms disrupt the piggy banks

Micro-investment platforms disrupt the piggy banks
April 12, 2018 Editorial Team

Minimum initial deposit. Those three words often pose a significant roadblock for many who are seeking more than the small percentage they earn from their bank’s savings account, or for those who are interested in beginning their investment journey. However, micro-investing and smartphones have revolutionised the investment space and it is now easier than ever before to start building your wealth.

Micro-investing refers to investing small amounts of money at regular intervals. You create an account on a platform and link it to your bank account. Then, whenever you make a purchase from your bank account, the purchase amount is rounded up to the nearest dollar and that amount is deposited into your micro-investing account. For example, when you purchase a cup of coffee for $3.50, the $3.50 is rounded up to $4 and the 50 cent difference is swept into your micro-investment account.

The new contenders:

Possibly the most well-known micro-investing platform is Raiz (previously Acorns). Once you open a Raiz account, you may make a lump sum deposit, activate ‘Round-Ups’ (as detailed above) or initiate a recurring deposit. The minimum investment amount is $5.00. The money in your account is invested in a mix of Exchange Traded Funds (ETFs) in a portfolio of your choice. There are no fees on zero balances, $1.25 per month for accounts with a balance under $5,000 and 0.275% per annum (charged monthly) for accounts with a balance of $5,000 or more.

Similar to Raiz, First Step Fund is an Australian company which also allows users to invest their rounded-up purchase amounts, or additional contributions, into ETFs. Fees include 0.275% per annum plus $1.25 per month if you link a bank account to your FirstStep account.

Similar toRaiz and First Step is Bamboo. This micro savings platform will be a way to buy cryptocurrency by rounding up spare change from your card purchases and investing that amount in diversified blockchain holdings. The platform is currently in closed beta testing but should be launched mid 2018.

Carrott is a savings app that allows you to sweep the virtual spare change from your purchases into your superannuation fund or mortgage. There are significant taxation benefits to adding to your superannuation, but the Carrot fees are high at 3.86% of the gross transaction and an account maintenance fee of $1.50 per month.

BrickX is a micro-investment platform tied to real estate, specifically Sydney and Melbourne residential properties. This platform allows investors to purchase fractional amounts of property. Each property purchased by BrickX is divided into 10,000 bricks and individual bricks for your chosen property can be purchased for as little as $58.00. The brick price will rise, or fall, in line with the valuation of the property and rental income is distributed to brick holders in proportion to their holding.

The peer-to-peer lender Ratesetter allows you to loan as little as $10 for a time period you determine and with an interest rate agreed on by you and your borrower. Interest is generally paid monthly. Current rates, after fees, are 4.2% for a month, 4.9% for a year, 7.7% for three years and 8.9% for five years.

Stake is an online platform which allows investors to purchase fractions of U.S. stocks and ETFs. There are zero brokerage costs, but there are FX fees when you transfer funds between AUD and USD as well as other regulatory fees on sales. You need to deposit $500 into your account to get started.

Keep an eye out for another Bamboo – not to be confused with the Bamboo mentioned above. This, soon to be launched, Australian financial planning platform, backed by BlackRock, will be a robo-adviser with a difference. The platform will allow you to open a separately managed account (SMA) with as little as $100, a choice of investment portfolios and fees and costs capped to a maximum of 0.8%.

With so many options to invest your spare change, there is sure to be a platform that suits your investment style, interests and risk profile.

The information in this article is general guidance only and the product and fee information is subject to change. Consider your own circumstances, and obtain your own advice, before relying on this information.

BDH Leaders can advise you on your investment and wealth building strategies.