Say What Wednesday

The skinny on spare change investment apps and building wealth when you’re earning $25,000 or less a year.

Welcome to Say What Wednesdays – Where we answer your personal finance questions each week.

Two questions this week from Chris:

No 1

what are your thoughts on investing through a platform such as acorns? In your opinion do you see it as reliable and a worthwhile investment option? Furthermore, with such platforms would you say that there is a degree of double fees being taken out (platform fees and ETF fees for underlying investments e.g. ASX ETF’s) which erode earnings?

No 2

What is the best way for people on a low income (around $25,000 p.a.), such as students and job seekers to start building a growth portfolio?

Platforms

What are they? – Ways to hold all of your investments in one place

  1. Types – three types
    1. Raiz (Acorns) – Investment application (app)
      • Allows for micro investing – automatic investments
      • Limited choice of options – Growth Option, etc
    2. Investment Platforms are a bit different
      • Allows for accessing managed funds, shares at wholesale level
      • Range of choices of funds
    3. Broking platforms
      • Direct shares mostly
  2. Costs – Admin fees
    1. Raiz – 0.275% p.a.
    2. Investment platforms – platform fees generally higher
      • Flat fees – $175 to $600 p.a.
      • Percentages – 0.4% to 0.1%
    3. Broking platforms
      • Transactional costs when you buy/sell investments
  3. Benefits
    1. Raiz
      • Nice, simple easy way to start
      • Automatic savings takes away the hands-on approach
      • Passive
    2. Platforms
      • You can have actively managed funds
      • Specialist Managed funds in certain sectors
      • I have an account – Buy small cap, micro-cap, international, emerging market fund etc. Wouldn’t really get that much in the way of large cap here, as that is ETF
        • Small cap – 25% p.a. for the past 8 years
        • Worth it if you know how to use it right
        • For ETFs, shares, Large cap, probably not worth it.
        • They do consolidated tax statements for you (that’s what the admin fees are for)
        • Don’t have to meet minimums on fund purchases – $25k to $500k
    3. Broking
      • Benefits – no ongoing holding costs
      • Can buy the same ETF in RAIZ in broking platforms, for broking costs
      • Upfront costs may be higher, but no ongoing.

In my opinion, if you are starting out, probably better to start somewhere than not start at all

  • Especially if you aren’t familiar with investments or good at saving, may as well go with app to do it for you. Better to start with something then never start.
  • Broking platforms – Can have large upfront costs
  • Investment platforms are good, if you have enough to justify it
    • But only if you use the specialist funds that you have access to – geared, emerging markets, micro-cap, etc.

 

To answer Chris’s second question

There are two options for students

  1. Hands on/personally invest
    • Focus on Franking credits, or high growth long term – You will get more back in income than what you would pay in tax
    • Need low transaction costs and diversified – Good Fully Franked LICs or ETFs are an easy place to start
    • Super co-contributions – free money
    • $1,000 (post tax) = $1500 investment
    • Comparison over 3 years at university, while earning below $37k p.a
  2. It’s a boring answer for long term benefits – superannuation as an investment vehicle!

Each year you put $1,000 into super, or $1,000 into the same investments personally. Who wins?

  • Either way you put $3,000 towards investments
  • In super you get an extra $1,500 (or 50% return) straight away!
  • By the time you access it, say 40 years, earning 8% p.a. (4% income, 4% growth)
  • Personally, after you get taxed on the income at say 34.5% = $37,031
  • Super gets taxed at 15% = $72,965

Awesome questions Chris! I hope I covered off on it all.

(Intro Series) The wrap up party

Intro - Episode 6 The wrap up party Hey guys! Welcome to the wrap up party for this little intro series Well done if you’ve made it to this point listening. I know a lot of it could have come across pretty confusing …and don’t worry I was quite confused myself by this...

Buying Property & Financial-Crash proofing your investments: how to get yourself into a position to survive any market correction

Episode 10 Buying Property & Financial-Crash proofing your investments: how to get yourself into a position to survive any market correction Financial-Crash proof your investments This is a flow on from the last Say What Wednesday, this episode talks about how to get...

Give the people what they want; Socialism for the masses & the human economy

Furious Friday - Part 1 Give the people what they want; Socialism for the masses & the human economy Haven't Liked us on Facebook yet? Show some love This is going to be a bit of a longer episode in order to unpack this topic fully… You’re probably going to need to...

Recent market volatility – is the market crashing? Are we on the way to another GFC?

Episode 33 Recent market volatility - is the market crashing? Are we on the way to another GFC? Welcome to SWW …on a Monday … because we have been receiving a LOT of questions about what’s happening with this so-called “market crash”, why has the share market dropped...

Economic sanctions, tariffs and what they mean for both sides

Say What Wednesdays Economic sanctions, tariffs and what they mean for both sides Welcome to Say What Wednesdays - Where We Answer your finance questions Question from Rhys “I’ve been seeing stories on the news about Trump putting tariffs on China and sanctions on...

Cover your butt! A closer look at diversification

Episode 6 Not all returns are created equal; diversification (and over diversification), correlation and covering your butt Welcome to Finance & Fury! I’m sure that everyone’s heard the saying, “playing it safe” before. And in any game, it’s generally a good idea. If...

Furious Fridays: Dissecting Labor’s plans for housing affordability

Furious Fridays Dissecting Labor’s plans for housing affordability Welcome Finance and Fury’s Furious Friday episode. Today we’re answering the question we asked on Wednesday about Labor’s polices and their promises to lower housing prices/increase affordability. If...

Say What Wednesday: Financial Independence, spending habits, neurotransmitters, and what you can start doing today

Say What Wednesdays Financial Independence, spending habits, neurotransmitters, and what you can start doing today Today’s Say What Wednesday question is from Paul; “Hey fellas! I think you guys are doing a great a job. Always a fun listen. Question; I was wondering...

Furious Friday: Do you work full time? Are new tax cuts only going to the “top end of town”? Is this “selling Queenslanders out”

Furious Friday Do you work full time? Are new tax cuts only going to the “top end of town"? Is this "selling Queenslanders out"? Welcome to Furious Friday… The Tax Bill has Passed…Yay! Now, let’s clear up a little misconception floating around, we’re going to talk...

Say What Wednesday: Welcome to the Wild West

Say What Wednesdays Welcome to the Wild West Welcome to Say What Wednesday This week we’re going to answer some of the burning questions that have been on a lot of peoples’ minds around the banking royal commission…and rather than repeat everything you’ve been hearing...

Pin It on Pinterest

Share This