The concept of micro-investing is not new in any sense. The idea of saving and investing small amounts of money at regular intervals is a simplistic method of earning large returns over time. As the financially conscious university student that you are, you choose to forgo your daily cup of $5 coffee and invest this amount daily into a savings account with 3% interest per annum. Over the course of a three year BCom degree that’s over $5700 accumulated. With the advent of the internet age, there has been a trove of opportunities for fintech in micro-investing with companies like Raiz, Stocklight, SelfWealth and Simply Wall Street being introduced to Australian consumers. However, in perhaps the biggest shake-up in the Australian micro-investing landscape yet, Australia’s largest bank has introduced their new CommSec Pocket app that allows investors to invest small sums of money in ETFs.
The popularity of micro-investing for millenials is ever-increasing. It is an alternative solution for those that dislike the hassle of traditional investing. According to Tony Stenning, head of UK retail at BlackRock, micro-investing is “just nudging people to put money away when they’re not really thinking about it and not having to write out big cheques”.
Launching their first Australian-focused investment app in July 2019, CommBank is targeting those who are “new to the share market and want a simpler investing experience.” Commsec Pocket launching on both iOS and Android it “is secure, built-on and using CommBank and CommSec’s security frameworks and infrastructure.”
Currently only just 4 per cent of Australian adults place a trade online in the sharemarket each year. “CommSec Pocket is our latest innovation that will help empower more Australians to grow their wealth. We will continue to listen to our customers and find new ways to help all Australians access the opportunities the sharemarket can bring,” declared in a statement by executive general manager Richard Burns.
CommSec Pocket operates “by significantly reducing the amount needed to get started, reducing the cost of investing as well as simplifying choice”. The app allows users to choose from seven themed Exchange Traded Funds (ETFs) and offers a competitive brokerage fee of only $2 for trades up to $1000. An ETF is a collection of securities created by issuers or fund managers —such as stocks—that tracks an underlying index on the stock exchange. Usually ETFs require a minimum investment of $500, however the app allows investors to have a lower investment minimum of $50. Similar to Raiz, it also allows for automated regular investing – fortnightly or monthly investments – to build your portfolio gradually. Moreover, there are zero account keeping fees.
To use CommSec Pocket, users must have a CBA transaction account and a CommSec ID or NetBank ID.
Upon downloading the app and creating an account, users are able to choose from 7 EFTs:
Cash is debited from your account 2 business days after your trade is done. This is when your trade settles. If there are insufficient funds when we debit, you’ll be charged a $10 Late Settlement Fee.
“Many people find investing in shares out of their reach or too complex,” said Burns. CommSec Pocket is a simple investing app that brings the share market within the user’s reach.
Competing with CommSec Pocket in the Australian market, there are a multitude of different apps that save money in creative ways. Acorns will round up your debit or credit card purchases and use that spare money for investing without you realizing it. Stash gives you the option to invest in portfolios, which consist of groups of ETFs clumped together or the ability to choose your own ETF like with the CommSec app. There is also an app that allows investors to set goals, either long or short term and offer a fixed rate of return. Fees between these apps also vary, some charge monthly or others per transaction. However, most of them have a relatively low cost compared to traditional investing intending to to attract new people into investing.
For young people, the barriers of entry into investing are only getting lower, and innovations like the CommSec Pocket app have made it possible to get started with as little as $50. In today’s low rate environment, easy access to ETFs may increase its popularity as a source of returns, with greater liquidity than their underlying securities. While greatly exciting, with only 7 ETF options, it remains to see what CommBank decides to do with the CommSec Pocket platform.
The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.
Maggie is a first-year Commerce student who moved to Melbourne from Brisbane at the start of 2018. She first developed a keen interest in Economics during high school and now wants to pursue a career in the Financial Services industry. When she’s not monitoring the latest market news, you can find her playing cards or making short films with her friends.
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