Raiz Review 2021
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The Raiz App is a micro investing platform that enables Australian investors to build their wealth through investing small amounts of money frequently. Check out this Raiz review to see if their fees, investment options and cool features are worth it.
What is Raiz?
Raiz app is a micro investing platform for Australians, formerly known as Acorns it is publicly listed on the Australian Stock Exchange (ASX:RZI). Micro investing platforms like Raiz and Spaceship utilise the power of investing frequently with small amounts of money to build wealth.
It differentiates itself from its micro investing peers through the use of round-up technology. I will go into greater detail on how the round up technology works, but it essentially boosts your scheduled investment amount.
Users of Raiz can select from 7 pre-determined investment options, or create their own custom investment portfolio. It also provides a superannuation option too, which positions Raiz to be your complete wealth platform.
The Raiz app automatically invests your round-up money and you can set up automatic recurring investments and make one off investments if you want. As a result automated micro investing like this is your set and forget wealth building plan.
How does Raiz work?
Raiz app enables investors to build out a diversified investment portfolio through investing small amounts of money frequently. Its special feature of “round-up” technology has been deemed a game changer among millennial investors.
But what exactly is this magic “round-up” technology? Raiz has a feature where you can link the account to your debit or credit card for daily purchases. Consequently everytime you make a purchase, Raiz will “round-up” the purchase to the nearest dollar value.
The beautiful thing about round-ups is that they can really grow quickly over time. With the best part being that you won’t notice that extra money being invested. The only caveat to this is if you use a zero-sum budget, where you allocate every dollar you spend.
As well as adding funds through round ups, you can add funds in one off payments or on a recurring basis. What I really like about Raiz’s platform is the flexibility it provides for choosing your recurring payments.
You can select between daily, weekly, fortnightly or monthly automatic recurring payments. More importantly you have the ability to choose what day of the week or exactly what day of the month you want the roundups to occur. This is a great feature to help manage cash flow and have it lined up perfectly with your pay cycle.
Raiz app has 5 different pre-made ETF options that are constructed purely based on risk tolerance levels. They range from a conservative portfolio all the way through to an aggressive portfolio.
There are two other pre-made portfolios to choose from; the Emerald portfolio and Sapphire portfolio. The Emerald portfolio has a greater focus on Socially responsible investing. It has an allocation of over 72% to socially responsible Large cap companies.
The Sapphire portfolio is a relatively recent addition and enables investors to gain exposure to Bitcoin. This portfolio has an allocation of 5% to Bitcoin while the remaining allocation is similar to the aggressive portfolio. This portfolio has gained a lot of interest due to the recent surge in cryptocurrencies. Check out these reviews on Celsius and Bamboo if you are looking for a cryptocurrency platform.
The final investment portfolio Raiz app offers is a custom built portfolio. This enables you to choose from many investment options and set whatever allocations you like. The only exception to this is you can’t allocate more than 5% of your portfolio to Bitcoin.
This is a great feature for those that want a bit of control over their asset allocation but don’t want to invest in individual stocks. One thing to note here though is that fees are higher for this portfolio than the others.
How Does Raiz Invest Your Money?
Raiz invests through a managed investment scheme. While this sounds like something Margot Robbie was explaining in “Wolf of Wall Street”, it is actually a simple investment structure.
Your money gets pooled together with other investors on the Raiz platform to purchase units within the fund. You don’t own any of the underlying assets, only a fraction of the Raiz Investment Fund.
You are able to add or withdraw your investments at any point of time from the fund, just be aware of any Capital Gains events that may occur.
Raiz Invest Fees
Fees are always one of my main deciding factors on a platform’s suitability for investors. They make up a crucial part of this Raiz review, so let’s dive into how Raiz Invest fees are charged and whether Raiz is worth it.
Raiz app charges $0 for setting up an account or switching between portfolios, and doesn’t charge accounts with $0 balances.
It does charge a flat monthly (maintenance) fee of $3.50 for all accounts under $15,000 portfolio value. With the exceptions being Sapphire ($3.50 all accounts) and Custom portfolio ($4.50 for under $20,000).
There is also an account fee of 0.275%, but this only gets charged for accounts with over $15,000 portfolio value. The exception being the 0.275% fee gets charged on all Sapphire portfolios.
There are also underlying issuer fees which are charged from the ETF managers, which range from 0.04% to 0.59%. I will use a median number of 0.25% for calculations below.
So what does this mean for you? Let’s use an example; If you have $500 invested in a moderate portfolio then you will be paying roughly $43.25 in fees. That equates to about 8.65% of your portfolio in fees alone.
This means you would require your portfolio to return roughly 8.65% to break even and 10.65% to match inflation. Which suggests Raiz isn’t worth it with little amount of funds!
What if you had $6,000 invested in Raiz in a moderate portfolio? With this amount invested you would be paying roughly $57 in fees. This equates to about 0.95% of your portfolio value in fees.
As you can see that is significantly less than the account investing with $500. Achieving a portfolio return of 0.95% to break even sounds a lot better than 8.65%.
These fees are one of the reasons why Raiz is a better option for people investing with portfolio values of $5,000+. If you have a lower portfolio value then you should review the effect Raiz fees will have on your return and whether Raiz is worth it.
Another great feature that has become more common among investing platforms is their accompanying educational content. It is great to see this has become almost a requirement among investing platforms.
Given the target audience for Raiz app is investors with small amounts of money, or those investing for the first time. It is fair to assume these investors have little experience and may want to learn more about investing.
That is where Raiz’ educational blog content comes in, it’s very easy to consume and is visually appealing. While I still think it is lacking a bit of the educational form content for investors, it does do a good job of explaining their platform.
Raiz is really doing a good job of positioning itself as your complete wealth management solution. As such it also has some other cool features included in its app.
Let’s review one of the Raiz features that is called Raiz Rewards. This is their rewards feature for you buying goods through their platform. For example the rewards program works by crediting your investment account by a certain percentage or fixed dollar amount from your purchase.
Rewards programs are always designed to get you to buy more, however if you use them correctly you can get rewarded on purchases you were going to make anyway.
For example, if you needed to use Canva Pro for some uni work you would get 17.5% (yearly subscription) invested in your account. Not a bad way to earn some extra money for something you needed anyway!
Cool Feature- Raiz Kids
They also have the Raiz Kids feature, which enables you to automatically stash money away for kids or grandkids. As a result it provides a great option to help investing money for a child and setting them on the financially savvy path.
The one thing to consider here is that any income will be in the parents name until the child is 18. The other consideration is capital gains tax when you transfer the shares upon the child’s 18th Birthday.
Unless structured as a trustee of the funds this will be treated the same as if you sold the shares and your child purchased them, which may mean it’s not worth using the Raiz Kids feature.
That said though, it’s a cool feature to see small amounts starting to add up for your child’s future.
Raiz also provides a cash flow snapshot with your linked account. Which shows how much money you have coming in versus going out and where your money gets spent.
Lastly, Raiz has just started enabling you to link your Self Managed Super Funds within their platform. This will provide current investors with a SMSF to move theirs across to use the Raiz invest platform.
Review Raiz Pros & Cons
- Low barrier to entry for investing
- Round up technology
- Diversified investment options
- Automated investing
- All in 1 wealth management platform
- Custom Portfolio options
- Rewards platform
- High Raiz fees on low accounts
- Educational content is lacking
- You don’t own any of the underlying assets, just units in the fund
- Limited amount of ETF’s
- Inability to purchases individual stocks, so won’t suit all investors
Is Raiz Worth it?
For someone that knows investing in diversified portfolios regularly is a great option and has over $5,000 to get started with, then I would say Raiz Invest is a great platform. Raiz fees as a percentage become lower with larger sums of money.
If you also don’t want to think much about your investments, but want quick access to see how they are going this is a great platform. Subsequently you can also combine your super and have an all in one wealth management platform.
The person Raiz isn’t worth it for, is the investor with less than $5,000. This is because the Raiz fees are huge as a percentage of your money, just like CommSec Pocket. While round-up technology is an amazing feature, it really won’t help much when the fees are killing your returns.
If you fall into this category I would suggest you start your investing journey with Spaceship Voyager as this platform is fee free for the first $5,000. Once you have built that platform up to $5,000 you could then consider Raiz Invest as your platform. This is because their fees become very similar and Raiz actually has much better features.