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.

The freedom in financial freedom

Welcome to Finance and Fury. What does your future have in store for you? It is hard to say exactly – so instead, what does your ideal future look like? You might be thinking about next year, the year after that, or 20 to 40 years in the future – Let’s say that in...

All else being equal, what influences property prices more than anything else?

Welcome to Finance and Fury. In this episode we look at the most important factor that moves property prices. In other words, what one thing affects property prices more than anything both positively or negatively. This doesn’t mean that it is the only thing that...

Don’t get tricked! How to avoid living in a Trauma-based society by building towards your own future

Welcome to Finance and Fury, the Furious Friday Edition Today's episode is number 3 in this series – check out last 2 FF eps  episode 1 episode 2 Last ep – talked about media and the realities that they create – but they are not consistent – and massive hypocrites...

Is it possible to outperform the share market?

..Welcome to Finance and Fury. In this episode we will be covering studies by some of the most famous financial economists, Eugene Fama and Kenneth French, F&F for short – two prolific economists who often collaborated and came up with many influential pieces that...

Debt ceilings and defaults

Welcome to Finance and Fury. Debt ceilings, at the moment there are many media pundits warning about the US defaulting on their debt and the fallout that would follow, being a complete economic meltdown. We are going to do a deeper dive into this in today’s episode....

Current Australian Share Market

Episode 39 Current Australian Share Market Welcome to Finance and Fury Shares are at almost the same price as 2 years ago in Australia – What is happening? Mid Dec 2016 – 5,580 and last week the 3rd of December – 5,667 Today – is it a great time to buy some shares or...

Democracy has never existed in The City of London

Welcome to Finance and Fury, the Furious Friday edition Today we will talk about democracy never really existing in The City of London We are continuing on with the series of Brexit – nothing really new to report as the vote has been pushed back until October The...

The Federal Budget: How will you be affected and will the proposals benefit you?

Welcome to Finance and Fury. This episode we’ll be talking about latest federal budget that was announced this week - and the implications this will have for individual There were many announcements in the budget – few good things like the reduced tax on innovated...

The Economics of War – conducted for the benefit for the very few, at the expense of millions

Welcome to Finance and Fury, The Furious Friday Edition. War is a racket – Something that always catches my attention is when politicians get on What is one thing they seem to get on about? Police enforcement, regulations on industries On a more global scale - Going...

How do coercive Government policies turn competitive markets into monopolistic competition into government-granted monopolies?

Welcome to Finance and Fury, The Furious Friday Edition Today – Run through SDG Goal 17 – Sneaky side to the SDGs along with the method of creating global monopolies – part 1 of two – today 17, next week 12 – they go hand in hand SDG17: “seeks to strengthen...

Pin It on Pinterest

Share This