Let’s be honest; long-term investing is rarely sexy or exciting. Squirrelling small amounts of money away over the years can be boring, tedious and to be frank, difficult.
You decide to put $500 a month toward investing. Fantastic! But maybe you were invited out for lunch, or your car needs repairs. Maybe an unexpected bill came up, or someone’s birthday is right around the corner.
Whichever way it happens, the money is gone, and your only option is to try again next month … right?
Wrong. The secret to successfully exercising self-control is organising your life so that you never have to.
In this article:
- Investing through direct debits
- Using robo-advisors
- Investment apps
- Bringing it home
Pay yourself first out of every pay cheque with an automated transfer and watch your investment balance grow without having to square up against temptation over every extra purchase.
There are several ways to automate your investments so that you never have to think about paying into them again. The most obvious method is paying a financial advisor to do it all for you, but few people have the cash to make it worth the fees.
There are three main methods for the retail investor: Direct debits, robo-advisors and investment apps.
Investing through direct debits
Most investing accounts allow for direct deposits from bank accounts. It’s fairly straightforward to set up a recurring payment through your bank to regularly pay a set amount into your investment account, or alternatively into a dedicated stockbroking account.
If you don’t have a stockbroking account, most banks offer one, often with competitive rates.
Set up the direct deposit to come out of your account on the day your pay comes in, and you’ll never be short on investing money for the month again. Just don’t forget to buy your shares!
Using robo-advisors
Robo-advisors are making a big splash in the investment world at the moment, representing a step up from indexed funds into fully automated, AI-driven investment. Robo-advisors take the emotion out of investing, reducing irrational behaviours that cost investors money.
They will not only create a portfolio for you but leverage for tax advantages, send you automated reminders for milestones and allow you to set up fast, cost-effective brokerage with low fees.
There are several robo-advisors emerging at the moment, with the popular InvestSMART offering $4.95 per trade or 0.099% of the trade's value with additional management fees based on the portfolio size.
Investment apps
Investment apps put your broker in your pocket, easily accessible with a host of options for whatever your investment goals may be. They tend to be more rigid in what investments you can make, but also generally carry low brokerage and account fees.
A leading micro-investment app, Raiz (formally Acorn) automatically invests your spare change into a diversified portfolio of exchange-traded funds (ETFs) by connecting to your debit or credit card and rounding up each of your purchases to the nearest dollar.
When the money deposited in your account reaches $5, Raiz deposits it in your Raiz investment account, where it’s distributed among ETFs depending on your chosen risk level.
The portfolios include Conservative (least risky), Moderately Conservative, Moderate, Moderately Aggressive, Aggressive (most risky), Emerald (socially responsible) and Sapphire (5% of funds invested in Bitcoin).
You can change your portfolio whenever you like, without incurring a fee, and the app asks for no brokerage or withdrawal fees, instead charging $3.50 per month for accounts under $15,000 and 0.275% for balances above $15,000.
Pearler is an Australian investment platform founded in 2018. They don’t currently have a phone app, but accounts are easily accessed online.
Unlike Raiz, Pearler gives you access to all assets listed on the ASX, including but not limited to securities, ETFs and listed investment companies (LIC).
The company is also planning to expand to US stocks, but that functionality is not yet available.
Pearler requires a minimum initial deposit of $500 but allows you to manually select individual stocks yourself or set up auto-investing to buy shares for you.
The company also offers templates to aid in deciding where to invest, but, as always, do your research before taking investment advice from anyone.
Auto-investing in Pearler is slightly different from Raiz, in that it offers you three different methods of automatically buying shares:
- Lowest share - invests in the one asset that is the lowest weighted share.
- Rebalance portfolio - invests by rebalancing your pool of assets to a specific percentage that you determined.
- Equal invest - invests equally across all shares within your pool.
Pearler charges a flat $9.50 fee for buying and selling shares but waives brokerage for a number of ETFs if you hold them for more than a year.
There are no account fees for Pearler and you can set your own amounts and time frames for direct deposits.
Spaceship requires a minimum deposit of $50 and charges flat monthly fees of $2.50 for balances over $100 with no brokerage fees.
It offers three investment portfolios:
- Spaceship Origin - a passive index fund consisting of 100 listed Australian companies and 100 listed global shares. It’s aimed at growth investors with a high-risk tolerance.
- Spaceship Universe - managed fund of 70-100 Australian and international companies, selected to meet the Spaceship team’s ‘Where the world is going’ criteria. High-risk growth investment with minimum recommended holding time of seven years.
- Spaceship Earth - an active portfolio with 30-50 Australian and global securities, selected by Spaceship’s investment team. Excludes companies deemed environmentally unfriendly, especially those involved in fossil fuels, nuclear power and animal cruelty etc.
As with Pearler, Spaceship gives you the option of setting up weekly, fortnightly, or monthly payments.
Commsec Pocket is the Commonwealth Bank’s micro-investment app. It charges a $2 brokerage fee up to $1,000 and 0.2% on amounts above that. It’s a cheaper alternative to the Commsec trading platform and has seven different ETFs available to invest in.
Starting from as little as $50 a transaction, investors can buy into the Aussie Top 200, Aussie Dividends, Global 100, Emerging Markets, Health Wise, Sustainability Leaders and Tech Savvy.
As with the other apps mentioned, you can set up fortnightly or monthly recurring payments.
Bringing it home
Whatever method you choose – and this article is by no means an exhaustive list of automation options – taking the temptation to spend your investment money out of the equation is an excellent way to ensure your portfolio continues to flourish.
Do your research to make sure the option you choose is right for you, and ensure you can afford to invest an amount regularly before setting up automatic transfers — having to pull money from your portfolio for daily expenses is the last thing a savvy investor wants.