Raiz just launched custom portfolios – what you need to know
Investors can pick and choose from between 14 exchange traded funds plus Bitcoin.
Raiz investors might notice a new portfolio option in their accounts this week. Starting from today, users have the option to completely customise their investment portfolio by selecting from seven additional ETFs as well as Bitcoin.
The update comes after Raiz launched its Sapphire portfolio last year, which offers a 5% allocation of Bitcoin together with Australian and global-themed ETFs.
How does it work?
Raiz (called Acorns in the US) is a micro-investment app that rounds up and invests spare change into ETF portfolios. Users have seven portfolios to choose from, ranging from conservative to aggressive.
Most of the portfolios feature the same seven ETFs which are weighted depending on risk. For example, the conservative portfolio invests 30% of funds into a government bond ETF (considered a safe bet) and just 3% into US stocks (riskier), while the aggressive model does the opposite.
The latest update breaks that mould by allowing users to design their own portfolio from scratch by selecting from up to 14 ETFs plus Bitcoin.
Here's a full list of the ETFs on offer:
- AAA – Australian Money Market
- STW – Australia Large Cap Stocks
- IAA – Asia Large Cap Stocks
- IEU – Europe Large Cap Stocks
- IAF – Australia Government Bonds
- RCB – Australia Corporate Bonds
- IVV – US Large Cap Stocks
- RARI – Australia Socially Responsible Large Cap
- ETHI – Global Socially Responsible
- FAIR – Betashares Australian Sustainability Leaders
- NDQ – Betashares NASDAQ 100
- VGE – Vanguard FTSE Emerging Markets
- IOO – iShares Global 100
- IXJ – iShares Global Healthcare
You decide how much you want to allocate to each of the funds. You can invest up to 100% into any of the ETFs and 5% for Bitcoin.
That means you could essentially invest 100% of your funds into a single ETF if you chose, the result being much the same as if you'd bought ETF units through an online broker.
What are the costs?
The account fees are higher if you decide to use a customisable portfolio. They jump from the standard $2.50 per month to $4.50 for balances up to $20,000 and 0.275% p.a. for higher balances.
On a positive note, you don't need to pay any brokerage or transaction fees, meaning you can switch between ETFs as often as you like without worrying about the costs.
One point worth mentioning is the ETF management fees (MER). These fees are charged by the individual fund managers (not Raiz) and are built into the price of the ETF. These fees do vary, so it might be worth checking out what they are before investing. You can typically find these in the fund's PDS with a basic Google search.
As a starting point, the average ETF MER fee is around 0.49%, although it pays to remember that lower fees don't always equal better returns.
The customisable account is certainly an interesting move by Raiz. On the one hand, it appeals to a growing demographic of Australians that are wanting more control over how their money is being invested. At the same time, it limits the range of ETFs to a manageable number that won't overwhelm newcomers.
It also sets Raiz in a more competitive position against other mini-investment apps such as CommSec Pocket, which allows you to pick from up to seven ETFs.