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This Stake app review highlights how Stake works, what your investment options are and if Stake is safe. It includes the fees involved with the free level and the premium level “Stake Black” and a brief introduction to Stake SMSF. Check this Stake review out to see whether this is the greatest Australian investing platform to use for investing in American and soon Australian Stocks.
Have you wanted to invest in US stocks like Disney, Apple and Tesla, but never knew how or always been faced with huge fees? Enter Stake to simplify and enable fee free trading along with fractional shares for all Australians.
As Stake says, “Hello Wall St”.
What is Stake?
Stake is an Australian founded investment app that provides non-US residents the ability to invest in US listed companies brokerage free. More recently Stake has expanded to New Zealand, Brazil and the United Kingdom. Opening up US investing for residents of those countries too.
There are currently over 300,000 Australians investing in the US markets via Stake. This is an extremely impressive number given how the company has only been around for a few years.
Stake has a fully comprehensive Web and App based platform that is available for both Android and IOS. Investors have over 4,000 options of investing in individual companies or ETF’s via Stake app. These includes some of the biggest companies in the world.
Stake is an authorised representative of Sanlam Private Wealth Pty Ltd. This means they have been authorised to provide a financial service on behalf of Sanlam Private Wealth. Stake just utilises their financial service license.
It is interesting to note that Sanlam Private Wealth has also authorised two other Australian investing platforms. This includes Stockspot and Maqro just like Stake.
How Does Stake Work?
Stake provides its users the ability to invest in US listed companies such as Apple and Amazon with zero brokerage. Currently a share of Amazon trades at over $3,000 (USD). This could seem a long way out of reach for most investors.
Stake enables fractional investing to make investing in companies like Amazon much more accessible at a fraction of the cost. Fractional investing means that you can buy a fraction of a share in a company like Amazon.
If you invested $50 (USD) into Amazon you would own 0.016 shares. This fractional amount of shares you own will still be subject to the usual volatility of the stock market. If Amazon increased by 50% over a couple of years, so would the value of your fractional investment.
Stake facilitates non US residents investing in US listed companies through one of their partner platforms Drivewealth. Drivewealth is a US based company that provides execution and clearing services to Stake users.
As is very common among American brokerage companies, Stake operates via a custodian structure. That means Stake users’ investments are held in custody by the appointed Custodian, which is Citibank.
This custodian structure is what enables Stake to offer fractional shares. As it pools investors money together to buy multiple shares.
Stake provides a two tiered platform, one free and one premium option “Stake Black”. You can take full advantage of the free level as it provides commission free trading. As well as all the 4,000+ companies and ETFs that you are after. I will go into further detail on the premium level “Stake Black” later in this Stake review.
Is Stake Safe?
It is important to note that investing in any equity or ETF carries risk that the value of your investment may decrease. This has nothing to do with the platform you use and everything to do with how and what you invest in.
That being said, we can look into the security and safety of Stake as an investing platform for Australians.
Stake never actually holds or touches your money. It goes from your account to their FX partner and straight to DriveWealth. Drivealth holds your cash & equities in Custody with Citibank.
Stake has the ability for two-factor authentication via the app and web based platform. It also enables normal face-id via your mobile device.
Your assets are protected for up to $500,000 USD (including $250,000 for cash). This is via DriveWealth’s membership to the SIPC (Security Investor Protection Corporation) and its registration with FINRA (US Regulator).
Should something happen to Stake and it no longer exists in its current capacity, investors would still have access to their equities and cash. This is due to the custodian partnership with DriveWealth and Citibank. Investors would be able to obtain access to their assets via the custodian.
Investing through Stake doesn’t provide CHESS Sponsorship. While this seems like a big issue for some Australian investors, it’s certainly not the norm for the rest of the world.
CHESS Sponsorship does provide greater security over the ownership of the shares. However it also comes with greater costs involved, and the inability to provide fractional share ownership. So it is certainly worth weighing up whether you are happy with the custodian structure or not.
How Does Stake Make Money?
This is a commonly asked question when companies aren’t charging fees for trades or inactivity fees etc. Stake makes money in 3 simple ways;
- 0.7% FX conversion fee
- Stake earns interest on cash that sits in your cash account
- Stake Black, the premium subscription model
The conversion fee is the most visual way Stake makes money from all its users. When you transfer your AUD to USD you will face a 0.7% FX fee. This is the same whether you are on the premium model or the free model. You will also be charged a fixed $2 fee for withdrawing any funds from the platform too.
Another way Stake makes money is from receiving interest on any cash that sits in your brokerage cash account. This is not as visual for users as we don’t see any money leave our accounts. You just don’t receive any interest for your cash kept in your account.
The other way Stake makes money is through Stake Black. This is their premium tier of the app, which includes a few extra features for $9USD per month, I will touch on these features shortly.
The Stake app has a two tiered premium model approach. Stake Black is their premium offering for $9USD per month, or $90USD paid upfront ($7.5pm).
Stake’s free version allows all users to access free trades, fractional share investing and live market data. This is still a great free model offering. Not to mention the app’s easy to use interface and access to their educational blog form content.
The premium offering through Stake Black includes some added features that are unavailable for free users.
Stake Black Features
- Instant Buying Power
- Analyst Ratings
- Price Targets
- Full Company Financials
Instant buying power allows users to trade on unsettled funds. Usually after the sale of an asset you have to wait 2 days for the funds to be available to use again. T+2 is the trade date, plus two more days. This feature would be handy for those that are looking to actively trade, however not as beneficial for long-term investors.
Analyst ratings are a helpful feature to see what industry professionals are thinking. Usually subscription services to information like this costs a significant amount through brokers or research houses. It is worth noting though, that analysts are wrong very often, and you’re better off doing your own research.
Price targets are another interesting feature and often driven from analyst predictions. There can be some serious merit in valuing a company and finding its intrinsic value and therefore expected stock price. I prefer to do this research myself as I know what input went into the calculation. This way I can have accountability for my investments.
Company Financial data is a very helpful tool, while it can be openly sourced for the most part. Having the ability to be able to access this from within the app is a great feature. This could save you a lot of time trying to find these yourself. Which makes this a very handy feature offered by Stake Black.
Stake Black certainly provides value to those users that are looking more into trading, than long-term investing. I think there will be continued development on the premium offering to entice long-term investors as well.
What Can I invest in?
Stake currently provides users the ability to invest in US listed companies and ETFs. You currently can’t invest in Australian companies or ETFs through this app. I am awaiting Quarter 3 as it was recently announced Stake will provide ASX trading then. So I eagerly await this addition to the Stake app, and will report back with my findings.
Stake offers over 4,000 options for you to choose from, whether you want to follow Warren Buffett’s investing style and invest in low cost ETFs or take a more technology driven approach and invest in companies like Apple. Either way you have plenty to pick from, and a lot of help within the app too.
As I mention in all my reviews, fees are a big deciding factor about the suitability of an investing platform and whether it matches your investing strategy.
While Stake itself is a fee free investing platform, there are still some costs involved that you need to be aware of.
When you sign up to Stake for the first time you are required to hold a valid W8-BEN form. Stake will complete this for you, for a once off $5USD fee. This form is required for the IRS to monitor withholding tax on dividends and avoid the user being hit with double dividend taxation.
There are regulatory fees charged when selling assets for anyone that invests in the US market, if you aren’t being charged these fees it would be very concerning. SEC fee $0.051 per $10,000 of sales proceeds and FINRA TAF Fee of $0.0000119 per share.
You may recall FINRA registration is what helps provide coverage of your assets up to $500,000, so I view this more as a tiny insurance premium for my assets than anything else.
You will be charged a minimum of 0.7% FX conversion fee when you fund your account or $2 minimum (whichever is greater). I say minimum because if you choose to fund your account with either the express option or by using a card you will incur higher fees.
This $2USD fee is important to note, because if you want to send $50AUD over, and get charged $2USD ($2.59AUD) this equates to a 5.18% fee. Ideally you should look at transferring at least $300 AUD to keep the fee at 0.7%.
So while the actual brokerage is free, there is still a small fee to pay through transferring funds. You need to decide if that small price to pay is worth the opportunity to invest in the US markets.
One thing to consider is the cost other platforms charge to invest in the US and Australian markets, like CommSec Pocket, NAB and SelfWealth. It is also worth noting Stake is not a micro investing platform, so if you have small amounts of funds to invest, look at Spaceship Voyager or Raiz Invest.
Sign Up Process
As with most businesses these days, you can take advantage of their sign up bonuses. With Stake, if you sign up using a referral code like this, you will win a free share of either GoPro, Dropbox the much coveted Nike or now a mystery share!
This referral sign up bonus has been going for a few years now, and I love how it encompasses a spin the wheel style unveiling of the free stock. It adds a bit of fun to a process that is usually quite boring.
Stake will complete the w8BEN form for you, at a cost of $5, and apart from that the sign up process is pretty simple. You require a few identity and verification checks so make sure you have some ID handy for a quick sign up process.
You also have the choice of investing in your individual name, company or Self Managed Super Fund. So make sure you choose the appropriate account for what you are trying to achieve. You can have multiple accounts with the Stake app, but it is best to get this correct the first time.
Dividends & Tax Reporting
Once you are a user of Stake investing app and have invested in a company that pays dividends, you will notice your Dividend receives a 15% withholding tax paid to the US tax office. You will need to report this dividend income to the ATO, and depending on your tax situation you may need to pay tax on the remaining dividend amount or not.
Eitherway, recording and reporting information like this can be very confusing and difficult. Fortunately Stake has partnered with Sharesight to help track and manage your brokerage app and tax reporting.
You can sign up for free here to Sharesight and track your portfolio and make it easier come tax time!
I have had a great user experience to date with Stake (I have Stake Black), only experiencing a glitch 2 times with the use of the app. Both of these glitches occurred during the peak of the Reddit meme stock saga, when Stake had a huge influx of new investors.
It appeared their servers struggled to cope with the increased investor activity and obviously they had to limit the trading activity on the Reddit stocks. I wasn’t involved in the trading for this but did experience the following glitches.
I wasn’t able to log into my account for 24 hours while this was all going on, and the referral stock spin wheel wasn’t working. Neither of which were major issues for me, as I was able to log back in the next day and was credited for the referrals I received 48hours later.
When I reached out to their customer service they were very quick to respond via e-mail, but their Instagram service has been pretty slow. I understand Instagram isn’t an official customer service channel, however it is generally a good way to communicate with their target audience.
Another recent additions to Stake has been the launch of a Self Managed Super Fund option, with two tiers available, Stake SMSF and Stake SMSF Plus. The two tiers differ greatly in price, but also functionality and the flexibility to invest in different asset class’s.
The cost of Stake SMSF is $990 per year ($770 for Beta users), it enables users to invest in US equities and soon ASX equities too, as well as support and independent fund auditing. The premium option costs $2,640 per year, which is considerably more, however it provides much greater flexibility too. With Stake SMSF Plus you are able to invest in Crypto, property, precious metals and more as well as having a dedicated account manager.
I participated in the SMSF Beta and am in the process of opening up my Stake SMSF account. I will compile a more complete and in-depth review of the Stake SMSF once I have been using it for a while. So I can give my honest feedback on the sign up process, ease of use of the platform and my general experience of Stake SMSF.
Another key feature I like to look at with investing platforms is whether they are putting an effort into their educational content. Investing platforms should ensure their users are educated around all aspects of investing.
Stake has a great weekly blog that offers a few cool prizes for user interaction and also highlights some market commentary. I do hope they expand on their educational platform more, as I really advocate for greater financial education and Stake has a great platform to help spread the knowledge among its users.
They also have their podcast Stocks on Socks and Stake Academy, which includes information on specific things regarding investing. Whether it’s Tax time or regarding Stake SMSF it has a range of educational content to choose from.
Pros & Cons
Stake is by far my favourite investing platform and plays a huge part of my wealth building plan. As it provides access to the biggest companies in the world at a fractional cost of what other brokers charge.
- Zero Brokerage on Trades
- Fractional Share Ownership
- Access to 4,000+ Investing options
- Simple Set-up process
- Sharesight Partnership for Tax reporting
- Only Enable US Investing (For now.)
- Fees on FX conversion
- Account funding takes a few days
- Custodian Structure (If you are a big believer in CHESS sponsorship)
Who Is Stake For?
Stake is really for anyone that wants to have access to US listed companies and ETFs and doesn’t want to pay extortionate prices to do so. There is no better investing platform available for Australians to get access to these companies.
You should consider how investing in US companies fits with your overall investing strategy. Also whether you have sufficient funds to transfer across into your account, so the minimum FX fee doesn’t eat into your portfolio returns.
Stake provides users the opportunity to invest in US equities and ETFs with no brokerage and a small FX conversion fee. There is no better platform out there currently for Australians to access US markets and I am a big fan of using Stake.
Sign Up Bonus
If you found this Stake review helpful and think it might be a good option for your investing goals then you can sign up here. Fingers crossed you win a Nike share!