How to find the right investing app, tool or platform for you
Firstly, kudos to you for having savings to invest and being ready to take this exciting step!
Next question, where to stash your cash?
We know from surveying our community over the years, that it’s not unusual for people (women in particular) to accumulate significant savings in their bank accounts because they simply don’t know how to invest or don’t have the confidence to get started.
This article will help you explore different types of investments, apps and tools that are available to help you get started with building wealth through investing regardless of your experience level.
If you’re already investing, this could be a great way to check in and see if you can streamline any of your current processes.
First of all, let’s walk through a few considerations that should help guide your thinking. Take the time to think through the answer to each of the following:
- What’s the timeframe for my investing goals? When will I need the money that I’m investing? This is important as it will guide the level of risk that you might want to take and also the type of products that will enable you to access funds.
- How regularly do I want to invest? Do I want to invest a one off lump sum, or do I want to make regular contributions?
- How much money am I looking to invest? Am I talking a few hundred dollars or am I talking hundreds of thousands?
- What is my level of competence? Do I have the skills and the industry knowledge to confidently invest in individual shares? Or should I be looking for an app and/or investment fund that does this for me? (n.b this can be achieved cost effectively)
- What is my risk tolerance?
- What are my values, and what type of future do I want my investment to be contributing to? (If you’re interested in ethical investing, check out this great research from the Responsible Investment Association of Australasia that shows over the long term, historically, ethical funds have on average performed better than traditional funds – so you don’t need to compromise on your values or on returns if you care about making a difference!)
Ok, now that you’ve thought through your answers to the above questions, let’s look at some common ways of investing. We’re going to start with the most ‘hands on’ and time consuming options and work our way to the simplest 🙂
1. Buying shares through a broker or a trading platform
If you’re getting bombarded with investing ads on social media, then chances are they are for share trading platforms. There’s been an explosion in the market of apps and trading platforms that will help you buy shares directly, including: Superhero, Pearler, Sharesis, Toro, Tiger brokers, and CommSec.
But is this method right for you?
Buying shares directly requires you to research companies and/or Exchange Traded Funds (more on this below), determine which ones you want to invest in, and then place a trade.
Through this method, you’re fully in the driver’s seat. Before you buy, it’s a good idea to know the company’s fundamentals, why you should own it, what you think the growth potential is like and when you might sell it.
Bear in mind that it’s safer to have a diversified portfolio of stocks from different sectors and even countries to avoid major losses if a market falls. If you buy shares directly it is up to you to ensure that your share portfolio is diversified and to monitor the performance of your portfolio and take action to buy or sell shares when you see fit.
If you’re interested in ethical investing, it’s also good to understand that share trading platforms generally don’t provide you with access to some of the more innovative and impactful investments available, like direct investments in renewable energy projects or off market green bonds.
The cheapest and simplest way to buy shares is to use an online broker and place the trades yourself. Online brokers charge anywhere from $0–$30 per trade in brokerage fees.
You will want to way up the cost of each trade and whether it makes sense with the amount you are investing. For instance, if you only have $200 to invest one month, but it costs you $10 dollars to make the trade, you’ve already spent 5% of your total investment – and it could take you a significant period of time to earn that back.
2. Investing in shares through Exchange Traded Funds
If you want to invest in shares but do not want to research individual companies, then investing in an exchange-traded fund (ETF) could be an option.
ETFs are a type of ‘managed fund’. A managed fund is a group of individual investments (shares, alternatives, bonds), that have been combined together by an Investment Manager to create one entity. When you buy into the ETF, you own a share of each of these individual investments.
Let’s take an ETF of ASX Top 200 companies as an example. If you make one purchase of $1,000 worth of shares in this ETF, you’ll become a shareholder in every one of these 200 companies – all in one trade, rather than having to buy into each company individually.
ETFs can vary in respect of how many investments they hold and what their strategies are, so make sure you read the details.
Generally speaking, ETFs fall into 3 categories:
- Market tracking ETFs. You know the ASX 200 or the S&P 500? Well a market tracking ETF owns a small portion of all the companies on the index. The ETF provider will buy them on your behalf and re-weight it usually quarterly. These are the lowest cost ETFs.
- Actively managed ETFs. These are professionally managed ETFs with someone actively choosing what to buy and sell. As such, the fees are usually higher on these ETFs.
- Thematic ETFs. These are for investors who want to gain exposure to a certain industry or sector. Let’s say for example you think cyber security will be profitable next year, then you can get an ETF that is mostly exposed to this theme. These ETFs can be more risky than other forms of ETFs as you are only exposed to a few sectors of the market.
Investing in an ETF is similar to investing in shares, in that you transact with the ETF on the stock market. So you will still need to select which ETF you want to invest in and place the trade. ETFs are also only made up of shares that you can buy on the stock market, so you can’t invest in other investment types: like direct investments into new renewable energy projects, or direct investments in real estate.
Like stocks, the easiest way to invest in an ETF is through an online stock broker.
3. Investing in stocks with micro investing apps
Want to turn your spare change or rebates on your shopping into shares? Well you can through micro investing apps, like Raiz and Spaceship.
These apps are popular amongst newer and younger investors. They typically offer features like round ups, where a few cents are added to your investments each time you buy something. And many people use these tools more as savings apps.
If you sign up to one of these apps, your money will typically be invested in a bunch of market tracking ETFs (see above) and/or index funds (which is where the fund selects the individual shares) that should match your risk tolerance. The key advantage to this style of investing is that you’re generally charged a fixed fee. This means that you can invest with virtually any amount and you’re not charged a fee every time you invest. But be aware that a monthly fee can eat away at your balance if you only have a small amount in the app.
However, there tends not to be diversification outside of shares. Ethical investment options also tend to be limited, and often there is only one option that may or may not reflect the appropriate risk level for your goal.
While it will take a long time to fund larger goals, such as buying a house, through micro investing, it can help you get started in the market.
4. Ethical funds curated by experts, like Verve Money
If you look at any high net worth individual in Australia, you’ll notice that their investments typically include a range of shares, fixed income investments (like bonds), and ‘alternative investments’ (i.e. anything else that’s not shares or fixed income) like property and direct investments in other businesses.
Historically, its often cost relatively big dollars to have experts curate an investing portfolio this diversified.
And it’s also meant that everyday investors haven’t been able to easily benefit from some of the exciting ‘alternative impact’ investments on the market – like green bonds and direct investments into new renewable energy project funds. That’s because these types of investments can require minimum investment amounts of more than $100, 000.
Enter Verve Money. Our mission is to give everyone access to an ethically invested investment portfolio that historically only the big end of town has been able to access. Our expert ethical investment team apply our strong ethical screens and then buy: shares(sometimes directly, sometimes through ETFs), fixed income products (including green bonds and other investments with a positive climate impact), and ‘alternatives’ – this includes investments in funds and assets that are also driving a positive impact on our environment and society.
Whilst all three of Verve Money’s investment options are ethically invested, each option has a different asset allocation and a different suggested minimum investment timeframe, which means you can find an option that is suitable for your goal time horizon and risk tolerance.
We’ve made this form of investing accessible through a goal based investing app so you can start investing with $1, $10 or $1,000 and you don’t have to pay a broker fee each time you invest. This allows you to invest regular amounts if you prefer, or one off transfers. It also allows you to track progress towards achieving your individual goals.
Like the micro investing apps on the market, we charge a monthly fixed fee and a variable fee based on the investment option you choose and the size of your balance. However we don’t charge these fees on balances under $1,000 so you can focus on your goal and not worry about your balance being eroded by fees.
Before you make any investment decision, it’s important to do your research. The Australian Stock Exchange (ASX) has a product list of every individual stock, ETF, LIC etc listed in Australia, and includes information about each company or fund including what they invest in, where they invest and their performance. If you want to learn more about ethical investing, the Responsible Investment Association of Australasia (RIAA) has useful information on their website including an annual benchmark report.
This article is published by Verve Money Pty Ltd (ABN 71 653 669 366, AFS Representative No. 001294184), a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956; AFSL 238184), as the Manager of Verve Money. A friendly reminder that all the financial information contained in this article is general in nature and does not take into account your personal financial objectives, situation or needs. It’s important to do your own research and consider getting in touch with a professional adviser to access specific information tailored to your unique situation.
You should read the Product Disclosure Statement, Investment Guide, Target Market Determination and Financial Services Guide before making a decision to acquire, hold, or continue to hold, an interest in the Verve Money Fund. Visit www.vervemoney.com.au/documents to view these documents.
Interests in the Verve Money Fund (ARSN 662 622 899) are issued by Melbourne Securities Corporation Limited (ACN 160 326 545, AFSL 428289). When considering financial returns, return of capital is not guaranteed and past performance is not indicative of future performance.