Index funds are a low cost, diversified way to invest in the stock market. The reality is that most retail investors who try and pick stocks on their own will end up either losing money or not beating the market index. That’s why index funds are a great option for investing. They’re hands off and contain a well rounded selection of stocks. And the numbers don’t like – individual investors see better returns when investing in index funds!
So how do you invest in these type of funds? Well here are our favourite options for investing in index funds for Australians:
Raiz is a micro-investing app that invests your money in a diverse portfolio of stocks and bonds. It’s not a pure a “index fund” as it contains a mix of assets. But it’s still going to give your the same result – a diversified portfolio.
The best thing about Raiz is the cost of investment. You can get started with as little as $5. This means you can invest small amounts at regular intervals and take advantage of dollar cost averaging.
Raiz does charge a monthly fee. So I recommend starting on Raiz with at least $100 and then building your account with regular, automated investments. Your money gets invested in one of 6 different portfolios. You’re free to swap between them at any point and they’re each designed for people in different life stages.
I personally invest in the Raiz Aggressive portfolio.
Spaceship Voyager lets you invest in either a fund of future important companies or a regular index fund of top Australian and international companies. It’s a lot like Raiz – you can start with just $5 and then invest small amounts on a regular basis.
The one big difference between Raiz and Spaceship are the fees. Spaceship Voyager doesn’t charge any fees for the first $5000 invested. And then they charge a small % fee from then on. But both the fees or Raiz and Spaceship Voyager are much less than traditional investing products and much less than what you’d pay a financial advisor to pick stocks for you (and they wouldn’t do a better job!).
I think both Raiz and Spaceship Voyager are good options for most young Australian’s. If you’re looking to buy or trade ETFs directly then here are a couple of options. Remember this will be both more expensive and more risky.
IG is CFD, Share and Forex trading platform. You can trade a number of ETFs from Australia and around the world. The advantage of using IG is you can trade ETFs alongside other financial products. The minimum amount of capital required to get started on IG is $450 and I’d recommend this only to more experienced and advanced investors with trading knowledge.
eToro is a lot like IG but with a simpler interface and a larger range of products to trade. They offer a good selection of ETFs from around the world. In Australia you’ll be trading these ETFs using CFDs. Buying and holding these CFDs don’t incur any fees except a spread. Although there are fees if you want to trade with leverage or open short positions.