How do you get started investing? Most people believe that investing is out of reach. But you can actually get started with as little as $5. And the sooner you start, the easier it will be later on in life. So i’ve put together a number of different options on how you can get started investing in Australia.
Raiz is a micro investing app where small amounts of your spare change are invested into a diverse portfolio of shares and bonds. The app connects with your bank account and automatically rounds-up your purchases to the nearest dollar. These small “round-up” amounts are then transferred to Acorns and invested in one of 6 portfolios that you can choose.
It’s a great option to start investing with as you don’t need any experience or knowledge of the stock market. And you can get started with just $5.
Spaceship Voyager lets you invest in the future! Like Raiz, it’s also a mobile app. It connects with your bank account and you can setup regular deposits or invest lump sums. Your money gets invested into one of two portfolios. One is just a regular index fund the other is a “future” fund made up of stocks that Spaceship Voyager believes will be important in the future. This includes companies like Apple, Amazon and Tesla.
If you’re a millennial who’s sick of investing in coal mining companies and big banks, then this gives you a different type of portfolio that will be more inline with your own values and beliefs. You can get started on Spaceship Voyager for as little as $5 and they don’t charge any fees for account balances under $5k.
One option many people try is picking stocks and investing in them. While your parents may have done this in the 80’s and 90’s and had success, we live in very different times. Anyone who invested in the stock market during the golden run of 1987-2000 would have made money. Unfortunately the next generation is now paying for that run with the massive debt and environmental damage caused. The stock market is much more fragile and is now dominated by high frequency traders and automated investors.
You will probably lose money if you try and pick stocks on your own. You also need to take into account the huge commissions you need to pay to buy and sell stocks. The cheapest you buy stocks for in Australia is around $9. And you’ll need to pay that same commission when you try and sell the stock too. So in order to make any gains you’ll need a large amount of capital to invest, just to offset the fees.
I no longer consider buying and selling stocks a legitimate way to start investing. If you have a lot of money and can buy a lot of stocks in a diverse portfolio, then it might be an option. If not, try something like Raiz or Spaceship instead.
Copy trading is where you copy the trades made by more experienced investors. So instead of picking stocks on your own, you rely on someone who actually knows what they’re doing to trade for you. Copy trading is much higher in risk then investing in something like Raiz, but it is less risky then simply randomly picking stocks.
One of the largest copy trading platforms is eToro. You can start copy trading with $200 and this will let you copy the trades of 2 different traders. You can browse through the profiles of members and invest in traders based on their past performance. As an investor you’re able to see every trade they’ve made in the past and how profitable they have been.
Many people confuse investing with saving. Putting some money aside in an emergency fund is a great idea. But putting all your spare money into a savings account isn’t. In the 80’s and 90’s if you had done this, it would have been fine. Back then, banks offered savings accounts with interest rates of 4%-6%. These days the highest you can get is around 1.25%. This is lower than inflation. Simple maths means your money will be worth less and less each year. So while your parents may have told you to use a savings account, they are still living in the past. It just doesn’t make mathematical sense anymore.
The easiest way to get started is through micro-investing. In Australia we have two options, Raiz and Spaceship. Both are decent. And both will grow your money over time. Don’t put all your money in a savings account. It’s fine to keep some savings for a holiday or big expense and you’d be wise to keep an emergency fund. Just remember that a savings account won’t grow on it’s own. And don’t forget your super. It’s the one investment we all already have. Don’t be afraid to top it up on your own from time to time.