No long-term gain in fallen acorns

A LOT of people ask me ab about the youth-focused in investing app Acorns.

Its ‘killer app’ is that it co collects your spare change an and invests it in the share m market on your behalf.

The company recently ch changed its name to Raiz In Invest, and this week it had an IPO (initial public of offering) and became a pu public company trading on th the ASX (ticker ‘RZI’).

If you’re one of the 160,000 young people who are already a Raiz user, or if you’re just an interested punter, you may be wondering if you should invest in RZI.

Well, thankfully, the difference between being a private company and a public company is kind of like the difference between going on a first date and going on your seven-year wedding anniversary: there’s a lot more disclosure. So let’s take a look-see. Raiz states in their prospectus that they make their dough by charging users maintenance fees, account fees, netting fees and advertising fees. Lotsa fees. However, these fees only amount to a small beer for the company, because the average Raiz account balance is just $1234 (not a typo), according to the company.

Looking at their cash flow statement, it shows ‘receipts from customers’ in FY 2017 was $990,424.

However, ‘payments to suppliers and employees’ for the same period was $3,005,078 (also not a typo).

Raiz has recently launched a super fund version of the app (which is cheap, but not cheap enough for my liking), and is also expanding overseas by targeting kids in South-East Asia, which seems like a very slow ramp-up to me … I’m not sure how much spare baht teenagers in Thailand will have to invest.

So, how did Raiz’s debut on the stock market go?

The share price plunged 20 per cent on the first day. Though I don’t think it helped that of the $15 million the company tapped investors for, $2 million was trousered by staff, including a $1 million cash bonus for the CEO.

So should you invest via the Raiz app?

I think it’s a great introduction for novice investors, which is why it’s been so successful. However, after a certain point the fees are too high for what is a cute index fund app.

So should you invest in the Raiz company itself?

Based on what I’ve read, they won’t be getting any of my nuts. After all, I’ve always thought of Raiz (Acorns) as being a little like your first teenage love:

Memorable, but you’re not going to stay with them long term.