Sharesies is the latest addition to the growing list of platforms that let you get started in the sharemarket with small change. Others include Raiz, CommSec Pocket and Stake to name a few. They all share the common thread of providing access to listed securities for far less than the $500 minimum required to invest directly on the Australian Securities Exchange (ASX). The question is, how does Sharesies compare to other micro-investing platforms?
What can you invest in?
Sharesies subscribers can also buy into US markets including the Nasdaq, New York Stock Exchange (NYE) and Chicago Board Options Exchange (CBOE). This opens the door to buying a stake in some of the world’s biggest and most dynamic companies including Google, Tesla or Apple – all with change from a fiver. You’re free to choose your shares or ETFs rather than facing a limited menu.
This breadth of choice is a key point of difference, especially compared to some of the more established platforms. Raiz, for example, provides a menu of seven readymade portfolios comprised mainly of locally listed ETFs. CommSec Pocket offers a choice of seven themed investments, but each theme is backed by just one ETF, so you’re really looking at a selection of seven ETFs.
Other micro-investing platforms provide access to global markets. Stake, for instance, lets investors choose from more than 3,800 US stocks and ETFs – but it doesn’t offer trading on the ASX.
From this perspective, Sharesies gives investors a valuable opportunity to diversify across Australian shares and ETFs, as well as international markets.
How much do you need to get started?
As the number of micro-investing platforms has grown, the minimum deposit needed to get started appears to be falling. With CommSec Pocket, you’ll need at least $50 to place a trade. There’s technically no minimum to open a Raiz account, though your money isn’t invested until the balance reaches at least $5. And with Stake, you’ll need a minimum of $US10 to trade.
With Sharesies, you can start investing with as little as one cent. That’s fine in theory but as we’ll see, platform fees mean it’s not always economic to have such tiny sums invested.
How fractional investing works
Sharesies makes it possible to invest with minimal capital by offering fractional investing. It’s worth having an idea of how this works because it’s not for everyone.
By way of background, when you buy shares directly on the ASX, you are allocated your own unique Holder Identification Number (HIN). This clearly identifies you as the legal owner of the securities. So, you can sell the shares any time, with any broker or even off-market. And if your broker goes belly-up, you are still the undisputed owner of the securities.
When you trade through Sharesies, your investments are not held under your own HIN. Rather, they are recorded under the HIN of Sharesies’ nominee company, which holds your investments plus those of other subscribers, in trust.
This system is not unique to Sharesies. It’s also used by Stake (among others). The main issue is that you are not the legal owner of the investments. However, you are the beneficial owner, which means you’re still entitled to a slice of any capital gains or dividend payments.
The upside of fractional investing is that you don’t have to buy an entire share. You can invest in a tiny fraction of a share. As a guide, in mid-May 2021, a single CSL Limited share cost $274. With Sharesies you could buy 10% of a CSL share for $27.40 or even 1% for $2.74. This can open up the sharemarket to low-income earners, and be a confidence builder for first-time investors. After all, not many of us will lie awake at night worrying about an investment that cost less than a family-sized pizza.
Nonetheless, you’re putting your faith in Sharesies to accurately allocate your investment – plus any ongoing returns, to your account.
Importantly, you can’t sell a fraction of a share on the open market. You can only sell your shares through Sharesies, so you’re pretty much locked into the platform. Even if you buy a whole share, it can’t be transferred out of your Sharesies account, though Sharesies says this is something it’s looking into for the future.
How do the fees compare?
Sharesies charges a transaction fee based on the dollar value of your buy or sell order. Orders up to $3,000 cost 0.5%, plus a further 0.1% for orders above $3,000. If you want to invest $30 in, say, Woolworths shares, the fee will be $0.15.
Orders to buy and/or sell securities listed on the US or NZ markets attract a foreign exchange fee of 0.4%. So, if you’re investing in US shares you’ll pay total fees of 0.9% on a trade below $3,000.
As a comparison, Stake doesn’t charge brokerage, though a fee of 0.70% applies every time you move your money from Australian dollars into US dollars to invest. Stake offers tiered levels of membership, and while there’s no fee for a basic account, additional monthly fees apply if you want more platform functionality. The premium tier, for example, costs $US9 per month.
Raiz subscribers pay a monthly fee of $3.50 ($42 annually) on account with a balance below $15,000. This fixed fee can be expensive as a percentage of your balance if you have only small sums invested. For a subscriber with $300 in a Raiz account, the annual fee works out to 14%. At that level you need to earn some solid returns just to see your balance forge ahead.
CommSec Pocket charges $2 for trades up to $1,000 and 0.2% for trades over $1,000. On the minimum $50 trade that works out to a 4% fee – a cost that can quickly add up if you trade small amounts frequently.
Bear in mind, if you are investing in ETFs, the fund will charge its own management fees regardless of the platform you use. While these fees are generally low, they will impact your returns.
→ Related: The 20 cheapest ETFs listed on the ASX
As each platform has variations and different underlying investments, it’s hard to make an apples-for-apples comparison of fees. But there are other aspects that can help you decide which platform is right for you.
Sharesies is price competitive especially when it comes to trading US stocks – as long as you’re comfortable with fractional investing. You also need to be prepared to take a hands-on approach as it’s up to you to select the securities you buy into.
If you’re happy to let the platform do most of the legwork behind the scenes, Raiz lets you invest a set amount regularly, providing the benefit of dollar cost averaging. Raiz also has a round-up function where small change on purchases is automatically invested.
For investors who want to own the investment in their own name, CommSec Pocket may be the way to go.
Unlike some of the other options, Sharesies does not have an app at the time of writing. However, subscribers can add the web-app bookmark to the home screen if they’re using an iOS or Android device.
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