You no longer need at least $500 to start investing in the sharemarket. Micro-investing apps Commsec Pocket and Raiz Invest let you get started with as little as $50 and $5 respectively. We take a look at how they work, the fees and their performance.
Launched in mid-2019, CommSec Pocket lets investors buy into a choice of seven exchange traded funds (ETFs) with as little as $50 – a fraction of the minimum $500 needed to buy most sharemarket securities. Investors can make one-off investments, or set up a regular investment – either fortnightly or monthly.
With Raiz Invest (formerly Acorns) you can get started in the sharemarket with as little as $5. The app’s round-up function automatically rounds up transactions made with a linked debit card to the nearest dollar, and invests the “change” once the balance reaches $5. There’s an option for regular investing – either daily, weekly, or monthly, or to make lump sum investments any time you have the spare cash.
How does it work?
To get started you’ll need a linked Commonwealth Bank transaction account to debit or deposit funds when you buy/sell investments. From there, you can make a minimum trade of $50, with the flexibility to mix and match your investments based on seven “themes” corresponding to the seven ETFs available through CommSec Pocket. It’s possible, for instance, to focus on Australia’s largest listed companies with the “Aussie Top 200” strategy (iShares Core S&P/ASX 200 ETF), dabble in healthcare with the “Health Wise” option (iShares Global Healthcare ETF), or invest indirectly in technology stocks by opting for “Tech Savvy” (BetaShares NASDAQ 100 ETF).
Raiz doesn’t require a particular bank account, though you will only start investing once you have accumulated $5 in your Raiz account.
Investors can select from seven readymade portfolios. Six of these are comprised of varying blends of ETFs, while the seventh gives investors exposure to Bitcoin. In January 2021, Raiz introduced an eighth option – the Custom portfolio – which allows users to build their own personalised portfolio by choosing the target weightings for up to 14 ETFs and Bitcoin.
Five of the readymade portfolios are named for their different levels of risk, from ‘conservative’ (least risky) to ‘aggressive’ (most risky), the idea being that you can pick the portfolio that best matches your tolerance for risk.
As a guide, the ‘conservative’ portfolio aims to invest about 13.5% in Aussie shares (SPDR S&P/ASX 200 ETF), whereas the ‘aggressive’ portfolio has a 54% target weighting to Australian shares. The lower-risk portfolios have a higher proportion invested in ETFs representing fixed interest assets – mainly Australian government and corporate bonds.
The ‘Emerald portfolio’ follows a theme of socially responsible investing, and is a mix of ETFs focusing on local and international shares.
Then there’s the Sapphire portfolio, which was introduced in May 2020, and has a 5% target allocation to Bitcoin. The remaining 95% of the portfolio will comprise US, Australian, European, and Asian large-cap stocks, as well as the Australian corporate debt and money markets, all via ETFs.
How much does it cost?
You only pay whenever you trade with CommSec Pocket – there are no starting or ongoing account fees. Trades up to $1,000 cost $2. This is vastly cheaper than regular online brokerage. CommSec charges brokerage of $10 on trades up to $1,000 if you settle with a Commonwealth Direct Investment Account or $29.95 for trades up to and including $9,999.99 if you use your existing bank account. Trades over $1,000 attract brokerage of 0.20% of the trade value.
Exactly how much you pay over time depends on the frequency and size of your trades. If you plan to grow a $1,000 portfolio by sticking to the minimum trade of $50, it will cost $40 in total brokerage. Using the same process it would cost $200 in brokerage to build a $5,000 investment. These are all one-off costs.
There is a slight catch. As noted earlier, you’ll need a Commonwealth Bank transaction account to use CommSec Pocket. CommBank’s Everyday Account comes with a $4 monthly fee. This can be avoided if you deposit $2,000 into the account each calendar month. If you only use the account for trading with CommSec Pocket though, the fees adding up to $48 a year can gobble up the value of a single $50 trade. Commonwealth Bank may also waive the monthly fee in other circumstances, for example if you’re under 25 or are a student.
Raiz has zero start-up fees and charges no brokerage. Instead, a monthly fee of $3.50 applies for active account balances of less than $15,000, or 0.275% annually on balances over $15,000.
The flat $3.50 fee means you’ll pay $42 each year regardless of whether you have $1,000 or $10,000 invested.
The fees are slightly higher for the Custom portfolio. You’ll pay $4.50 a month if your account balance is less than $20,000 or 0.275% a year for balances of $20,000 and more. This will remain the same.
The Sapphire portfolio has a different fee structure from the other portfolios. You pay an account fee of 0.275% a year and the $3.50 monthly maintenance fee, regardless of balance size.
Bear in mind, the underlying ETFs for both CommSec Pocket and Raiz charge their own management fees (or MERs). Part of the appeal of ETFs though is that the fees are very low – typically well below 1% annually.
How have the funds performed?
|CommSec Pocket performance|
|CommSec Pocket Investment option||Selected ETF||Annual return 2019-2020 Financial Year|
|Aussie Top 200||iShares Core S&P/ASX 200 ETF (IOZ)||-6.84%|
|Aussie Dividends||SPDR MSCI Australia Select High Dividend Yield Fund (SYI)||-10.91%|
|Global 100||iShares Global 100 ETF (IOO)||10.91%|
|Emerging Markets||iShares MSCI Emerging Markets ETF (IEM)||-1.72%|
|Health Wise||iShares Global Healthcare ETF (IXJ)||13.96%|
|Sustainability Leaders||BetaShares Global Sustainability Leaders ETF (ETHI)||25.51%|
|Tech Savvy||BetaShares NASDAQ 100 ETF (NDQ)||33.64%|
|Raiz Portfolio performance|
|Raiz Portfolio||Annual return
2019-2020 Financial Year
How do the two services differ?
CommSec Pocket is all about exceptionally cheap brokerage coupled with wafer thin minimum trades so it’s easy to invest with the barest of capital. If you’re happy to invest largely in share-based funds, CommSec Pocket is a low cost way to get started in the sharemarket.
Raiz’s round-up function makes it effortless to gradually build a diversified portfolio that matches your tolerance for risk. By automating investing, the round-up feature delivers the benefits of dollar cost averaging, bypassing the need to overthink market timing. The downside is that building a reasonable portfolio can take time, and all the while you’re paying a fixed fee each month. But that may be a small price to pay to develop a lifelong habit of investing.
|At a glance: CommSec Pocket v Raiz Invest|
|Key features||CommSec Pocket||Raiz|
|How much you need to get started||$50||$5|
|Cost (exclusive of ETF fees)||$2 for trades up to $1,000
0.2% for trades over $1,000
|$3.50 per month on balances below $15,000
0.275% annually on balances over $15,000
|Number of investment options||7 exchange traded funds with varying themes||8 portfolios combined of a blend of ETFs, catering for different appetites for risk – two offer the option of investing in Bitcoin|
|Added extras||Features tips and articles on investing.||Raiz Rewards loyalty program – when you shop with a partner brand (including Woolies, Bonds, and Airbnb) the retailer will invest a dollar amount or % of your purchase price into your Raiz account.
Raiz Kids which lets you nominate a portion of your balance (or even all of it) to be transferred to your kids when they turn 18.
|Requires|| iOS 11.0 or later
Android 5.0 and up
|iOS 11.0 or later
Android 5.0 and up
|Both CommSec Pocket and Raiz Invest are free to download.|
If you’re comparing online share trading companies, the comparison table below displays some of the companies available on Canstar’s database with links to providers’ websites. The information displayed is based on an average of six trades per month. Please note the table is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Use Canstar’s Online Share Trading comparison selector to view a wider range of online share trading companies.
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