CommSec Pocket vs Raiz: Investment app comparison

This week we take a look at the two popular investment apps Raiz Invest and … CommSec Pocket is the Commonwealth Bank’s new microinvesting app … The popular Raiz Invest (previously Acorns) uses a similar low-fee strategy …

Posted: 5 August 2019 10:55 amNews

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CommSec Pocket and Raiz Invest both micro-invest into the stock market, so what are the differences and why should you pick one over the other?

We compare virtually everything at Finder and our Comparison of the Week isn’t afraid to tackle the big questions. This week we take a look at the two popular investment apps Raiz Invest and CommSec Pocket.

CommSec Pocket is the Commonwealth Bank’s new micro-investing app offering cheap and easy access to the stock market, yet it’s not the first to do so. The popular Raiz Invest (previously Acorns) uses a similar low-fee strategy as CommSec Pocket with both apps allowing users to invest small amounts of money into funds containing hundreds of companies listed on the stock market, but there are a few key differences.

The essentials

CommSec Pocket is the latest investment app to hit the Australian market, launching at the end of July by the CBA’s investment arm, CommSec. It caused a stir thanks to its low brokerage fees of $2 and low minimum investment requirement of just $50.

Raiz Invest (previously Acorns) launched in 2016 in Australia and quickly became popular for its round-up feature which invests spare change from daily purchases into an investment portfolio of your choosing. Today more than 1.1 million users have downloaded the app and it has over $331 million in funds under management.

Both apps work by investing funds into exchange traded funds (ETFs). When you invest in an ETF, you’re buying units in a listed fund that holds multiple stocks (and sometimes other securities). So instead of investing in one company as you might when you buy stocks, you can invest in many companies through a single trade.

The comparison

So how does CommSec Pocket differ from Raiz and which one is best for you? We compare how they work, their fees and their investment strategies.

CommSec Pocket Raiz Invest
Minimum investment amount CommSec Pocket has a minimum investment requirement of $50. There’s no minimum balance requirement, and you only need $5 or more to start investing.
Portfolio options You get a choice of seven different ETFs: Aussie Top 200 (IOZ iShares Core S&P/ASX 200 ETF), Global 100 (IOO iShares Global 100 ETF), Emerging Markets (IEM iShares MSCI Emerging Markets ETF), Aussie Dividends ( SYI SPDR MSCI Australia Select High Dividend Yield Fund), Tech Savvy (NDQ BetaShares NASDAQ 100 ETF), Sustainability Leaders (ETHI BetaShares Global Sustainability Leaders ETF), Health Wise (IXJ iShares Global Healthcare ETF). Raiz offers six investment portfolios to choose from, ranging from low risk to high risk. These are Conservative, Moderately Conservative, Moderate,Moderately Aggressive, Aggressive and an ethical portfolio, Emerald.
Investment strategy You select which ETF you’d like to invest in. When you invest in one, you’re buying individual units in that fund. Raiz doesn’t invest your funds into individual ETFs. Instead, funds go into a portfolio of multiple (nine in total) ETFs that vary in risk level. Raiz selects these ETFs based on the level of risk and aggressiveness each portfolio is targeting.
Fees CommSec Pocket has no monthly fees, but it does charge $2 brokerage for each trade of up to $1,000 and 0.2% on amounts over $1,000. So, if you invest $50 twice a month for a year, you’d be charged $48 per year on a total investment of $1,200. If you invested one lump sum of $1,200 annually, you’d be charged $2.40 (0.2% of $1,200) in annual fees. Raiz charges no brokerage fee but it does have a monthly fee. If your account holds $10,000 or less you’ll be charged $2.50 a month in fees while balances above $10,000 are charged 0.275% a year. So if your balance was $1,200, you’d be charged $30 a year, regardless of how many investments you make. If you had $15,000 invested for the year, you’d be charged $41.25 in fees.
Risk level Each of the ETFs offered vary in terms of risk. However, there is no risk categorisation. You’re encouraged to do your own research about the risks involved with each ETF. Each of the six portfolios offers a different risk level, starting from very low risk all the way to high risk. This means you can select the appropriate portfolio based on how much risk you’re comfortable taking on.
International investing Of the seven ETFs offered, five of them offer globally listed companies. The investment portfolios include a mix of Australian companies listed on the ASX and global companies listed on international exchanges.
Ethical investing The Sustainability Leaders ETF (ETHI) provides exposure to 100 global leading sustainable and ethical companies. The Emerald portfolio invests your money into socially responsible companies in Australia and international markets.
Payment options You can make one-off lump sum investments into your ETF of choice or you can set up recurring fortnightly or monthly investments. Raiz rounds up your daily transactions to the nearest $1. The spare change is then added to your investment portfolio of choice once it reaches $5. You can also set up recurring daily, weekly or monthly investments and additional one-off investments.
Do you earn dividends? Not all companies pay dividends. However, if any companies within your selected ETF do, the funds are automatically paid back into your settlement account. Any dividends will be automatically reinvested into your portfolio, rather than sent to your bank account. There’s a section in the app that allows you to see any past dividend payments.
Withdrawal options You can sell your units and withdraw your funds at any time. However, your brokerage fees for selling are the same as buying. Each time you sell units in an ETF, you’re charged $2 or 0.2% on transactions over $1,000. You can withdraw money from your investment account at any time without any additional fees.
How to download CommSec Pocket is free to download from the App Store and Google Play store. The Raiz Invest app is free to download from the App Store and Google Play store.

Fund comparison

It’s important to note that while CommSec Pocket lets you purchase units in seven individual ETFs, Raiz puts your money into a portfolio made up of several ETFs. The ETFs used by Raiz can be found on its website but the more important consideration is how these funds have been allocated into the portfolios.

The below tables show how Raiz’s funds have performed in the last financial year compared to the ETFs selected by CommSec Pocket. It’s important to remember that past performance isn’t always an indicator of how a fund will perform moving forward.

Raiz Invest portfolio performance

Raiz portfolio Performance FY 2018-2019
Conservative 6.88%
Moderately Conservative 8.35%
Moderate 8.78%
Moderately Aggressive 8.74%
Aggressive 8.75%
Emerald 10.92%

Source: Raiz Invest

ETFs featured in CommSec Pocket

CommSec Pocket’s select ETFs Performance FY 2018-2019
iShares Core S&P/ASX 200 ETF (IOZ) 11.64%
iShares S&P Global 100 ETF (IOO) 14.57%
SPDR MSCI Australia Select High Dividend Yield Fund (SYI) 10.06%
BetaShares NASDAQ 100 ETF (NDQ) 14.55%
BetaShares Global Sustainability Leaders ETF (ETHI) 16.77%
iShares S&P Global Healthcare ETF (IXJ) 17.57%

Source: ASX

Watch our hands-on video review of CommSec Pocket for more

The lowdown

Both CommSec Pocket and Raiz have their pros and cons. Ultimately, it comes down to personal preference – do you prefer to know that your money is being invested into a “conservative” fund or an “aggressive” fund managed by the experts? Or do you prefer to invest in an ETF theme, such as the healthcare sector or global tech sectors?

How the apps invest your money will also suit different people. Raiz charges a monthly fee of $2.50 ($30 p.a.) for users with less than $10,000 sitting in their portfolio, and you can invest additional amounts as often as you like with no extra broker fees. On the other hand, CommSec Pocket has no monthly fee but it charges $2 per trade for amounts less than $1,000, so if you set up a recurring trade of say $50 a month, your total annual fee will be $24 per year.

If you’re someone that prefers to invest small amounts very regularly, Raiz’s fee structure may be a better deal. On the other hand, if you intend to make fewer transactions or even one big investment over the year into an ETF of choice, CommSec Pocket could be the smarter choice.

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Vanguard Real Estate ETF (NYSEARCA:VNQ) Shares Acquired by TPG Financial Advisors LLC

TPG Financial Advisors LLC increased its holdings in shares of Vanguard Real Estate ETF (NYSEARCA:VNQ) by 12.2% during the 2nd quarter, …

Vanguard Real Estate ETF logoTPG Financial Advisors LLC increased its holdings in shares of Vanguard Real Estate ETF (NYSEARCA:VNQ) by 12.2% during the 2nd quarter, according to the company in its most recent 13F filing with the Securities and Exchange Commission (SEC). The fund owned 4,012 shares of the exchange traded fund’s stock after buying an additional 435 shares during the quarter. TPG Financial Advisors LLC’s holdings in Vanguard Real Estate ETF were worth $361,000 as of its most recent filing with the Securities and Exchange Commission (SEC).

Other hedge funds have also made changes to their positions in the company. JPMorgan Chase & Co. grew its stake in Vanguard Real Estate ETF by 53.6% during the 1st quarter. JPMorgan Chase & Co. now owns 10,398,358 shares of the exchange traded fund’s stock valued at $903,722,000 after purchasing an additional 3,627,626 shares during the last quarter. Beacon Capital Management Inc. grew its stake in Vanguard Real Estate ETF by 7,969.1% during the 1st quarter. Beacon Capital Management Inc. now owns 1,964,754 shares of the exchange traded fund’s stock valued at $170,757,000 after purchasing an additional 1,940,405 shares during the last quarter. Hartz Capital Inc. purchased a new stake in Vanguard Real Estate ETF during the 1st quarter valued at about $103,555,000. Ellis Investment Partners LLC grew its stake in Vanguard Real Estate ETF by 8,591.5% during the 1st quarter. Ellis Investment Partners LLC now owns 987,093 shares of the exchange traded fund’s stock valued at $987,000 after purchasing an additional 975,736 shares during the last quarter. Finally, Creative Planning grew its stake in Vanguard Real Estate ETF by 11.5% during the 1st quarter. Creative Planning now owns 7,797,048 shares of the exchange traded fund’s stock valued at $677,641,000 after purchasing an additional 805,312 shares during the last quarter.

Vanguard Real Estate ETF stock traded up $0.50 during trading hours on Thursday, hitting $89.39. 657,704 shares of the stock traded hands, compared to its average volume of 5,962,339. The firm’s 50 day moving average price is $89.07. Vanguard Real Estate ETF has a 1 year low of $71.08 and a 1 year high of $91.85.

Vanguard Real Estate ETF Profile

Vanguard REIT ETF (the Fund) is an open-end investment company. The Fund invests in stocks issued by real estate investment trusts (REITs), companies that purchase office buildings, hotels, and other real property. It tracks the return of the MSCI US RIT Index, a gauge of real estate stocks. The Vanguard Group, Inc provides investment advisory services to the Fund.

Further Reading: What is Cost of Capital?

Institutional Ownership by Quarter for Vanguard Real Estate ETF (NYSEARCA:VNQ)

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ETF strategists getting crowded out by big asset managers

… smaller players are devising new ways to stay competitive as multitrillion-dollar companies like BlackRock, Vanguard Group and State Street Corp.

With the flick of his wrist, Richard Michaud flashes his Apple Watch and presses on its sleek black screen. In a few taps, green and red squiggles appear, revealing how the market performed that day. But this isn’t a benchmark like the S&P 500 or the Russell 2000. Instead, Mr. Michaud’s screen reflects the trajectory of his firm’s own strategies, using an index he started earlier this year.

“You can check it on your phone in real time,” he said. “There’s no index like this in the world. These are all totally new.”

The proprietary gauge is one of several that Mr. Michaud, who runs New Frontier Advisors with his son, Robert, created to stand out from the crowd. His peers are starting podcasts, ramping up their social-media footprint, and even creating video content. But all this creativity is aimed at fending off an existential threat.

These companies are holdouts in a previously vigorous slice of the exchange-traded fund industry: independent advisers that craft investment strategies almost exclusively with ETFs. Once the dominant game in town, smaller players are devising new ways to stay competitive as multitrillion-dollar companies like BlackRock, Vanguard Group and State Street Corp. muscle in on their turf.

“It’s becoming such a competitive field that the term ‘ETF strategist’ will fall away,” says Scott Smith, a director at Cerulli Associates. “There was no barrier to entry before, but now you’re coming up against every asset manager in the world who wants to do this,” he says, adding, “I don’t know how many can survive.”

Close to 80% of strategists cited competition from the mega-managers as their most significant challenge last year, up from about 30% in 2016, according to research from Cerulli Associates.

ETF strategists — including BlackRock, Vanguard and State Street — managed $127 billion as of the second quarter of 2018, according to the latest available data from Morningstar Inc., up from $80 billion for the same period of 2015. Those three big issuers together account for about a quarter of assets, up from 2%.

“The ETF strategist space before, it was just really all boutiques and we kind of had the whole pie to ourselves,” said Rusty Vanneman, chief investment officer at CLS Investments, which oversees about $9 billion, some of which is in ETF strategies.

Now, “growth is dominated by the Big Three,” Mr. Vanneman said.

Rivals emerge

A crisis for ETF strategists five years ago gave the big boys their entry point. F-Squared Investmentsfiled for bankruptcy after regulators found it defrauded investors, and 13 other firms were later penalized for repeating F-Squared’s false claims about the performance of one of its strategies.

That created an avenue for large asset managers to enter the market, and create packages of their own funds to compete with strategists. These ready-to-go collections, now known as model portfolios, usually ensure that investors stay within their provider’s chosen ETFs — an appealing prospect for issuers.

“They decided, ‘You know? Let’s go in a different direction. In fact, let’s go right at them,'” says Bob Smith, president and chief investment officer of Sage Advisory Services, who’s been using ETFs for two decades. “They basically telegraphed to the world that the strategy part is meaningless. What’s really important is what’s inside and so, in a word, I think they cut us off at the knees.”

Modeling success

Companies like Vanguard, which offers ETF models on its website, have built their portfolios on some of the same ideas espoused by strategists. But Rich Powers, Vanguard’s head of ETF product management, believes that there’s still room for the older pioneers and that they have a good relationship with these strategists.

“I don’t look at us as competing for the same type of clientele,” he says. “They have tilts in their portfolios, they omit certain parts of the market, they’ll actively reallocate capital as they see opportunities or risks. That’s a big departure from what our ETF models are attempting to do.”

A spokeswoman for BlackRock declined to comment. State Street’s Sue Thompson, head of Americas distribution for the company’s ETF business, described strategists as “a very important client base,” and said that the firm charges similar fees on its portfolios to try to even the playing field.

Still, many ETF strategists are adopting novel methods to protect their businesses from the growth of the Big Three. Some firms are expanding their social media presence. Others are launching their own ETFs, while shops including 3D Asset Management Inc. offer podcasts. RiverFront Investment Group, one of the largest boutique strategists, produces weekly video commentaries.

CLS Investments started its podcast in 2015, and found it helped the firm reach new investors.

“It has built a little fan base,” Mr. Vanneman said. “People have listened to it that we haven’t even contacted before and they’ve become clients.”

New Frontier’s assets have also grown, more than doubling in the last five years. Its indexes, which highlight the performance of its investment approach, attract extra attention.

“I would not be surprised if other ETF strategists realize these advantages and follow,” says Robert Michaud, New Frontier’s chief investment officer. “We’re not just doing the standard practices of asset management. We’re innovative.”

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Microsoft’s $1B Investment a Boon for Artificial Intelligence ETFs

Software giant Microsoft recently opened its wallet and gave OpenAI, a startup co-founded by Elon Musk, to support the goal of developing artificial …

Software giant Microsoft recently opened its wallet and gave OpenAI, a startup co-founded by Elon Musk, to support the goal of developing artificial intelligence (AI) technology that can outdo human brain functioning. This generous investment could certainly put AI-focused exchange-traded funds (ETFs) in focus for investors looking to capitalize on the growing space of disruptive technologies.

“The creation of AGI will be the most important technological development in human history, with the potential to shape the trajectory of humanity,” says Sam Altman, CEO, OpenAI. “Our mission is to ensure that AGI technology benefits all of humanity, and we’re working with Microsoft to build the supercomputing foundation on which we’ll build AGI. We believe it’s crucial that AGI is deployed safely and securely and that its economic benefits are widely distributed. We are excited about how deeply Microsoft shares this vision.”

In the investment space, AI is increasingly gaining widespread attention for its ability to be a disruptive technology that spans across a variety of sectors, which makes it a viable alternative for exchange-traded funds (ETFs) opportunities. For one ETF, the AI-Powered International Equity ETF (NYSEArca: AIIQ), it’s been a year since inception and has already bested its benchmark by 7 percent.

Under the hood, the fund runs on the EquBot Model: a proprietary algorithm with the use of IBM’s Watson. The model analyzes and compares a multitude of data points and international companies on a daily basis to find and optimize portfolio exposures.

AI continues to disrupt the investment management space, prompting many asset managers and investors to rethink the way they invest, research and develop portfolio construction methodologies. EquBot recognized this need for advancement and broke the mold by pioneering a new method combining AI with ETFs.

Whether society is ready for it or not, robotics, AI, machine learning, or any other type of disruptive technology will be the next wave of innovation. For investors who missed out on the bull market run of FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks, they can look to capitalize on disruptive tech options in 2019 and beyond that.

Another ETF to consider is the ARK Innovation ETF (NYSEArca: ARKK). ARKK is an actively-managed fund that invests in domestic and foreign equity securities of companies that are relevant to the fund’s investment theme of disruptive innovation.

AGI has the “potential to shape the trajectory of humanity,” said Altman. “Our mission is to ensure that AGI technology benefits all of humanity, and we’re working with Microsoft to build the supercomputing foundation on which we’ll build AGI. We believe it’s crucial that AGI is deployed safely and securely and that its economic benefits are widely distributed. We are excited about how deeply Microsoft shares this vision.”

For more market trends, visit ETF Trends.

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