Investors turning to robo-advice
INVESTORS hunting for decent returns on their hard-earned cash are looking at other options outside of parking their money in the bank.
Interest rates on term deposits and online savings accounts remain at about 1-2 per cent, while the value of the Australian share market has climbed by 9 per cent over the past 12 months.
Shares have also paid dividends averaging a healthy 4 per cent.
Accountant Guy Bane, 29, said he was always looking to diversify his investments and he had steered clear of keeping cash in the bank.
Instead, he used robo-adviser Stockspot to do the hard work for him.
“I’m trying to build a bit more wealth, so if the property market does go down a bit more I can possibly buy,” Mr Bane said.
“I try to invest parcels of $5000$10,000 each time and it’s easy to have the money invested for me.”
Mr Bane said he had enjoyed returns of about 8 per cent annually over the past two years.
Stockspot is one of many robo-advisers – advice given by a computer instead of a person using a client’s details – helping Australians fatten their money by investing it in exchange-traded funds (ETFs).
An ETF is a simple and low-cost way to get returns on a share index or another underlying asset. At the end of August, there were 178 ETFs listed on the Australian Stock Exchange, including 23 new ETFs in the past 12 months.
The ETF market has grown by 70 per cent in the past two years – from $23 billion to $39 billion – and provides exposure to sectors including Australian and overseas shares, bonds and metals.
Stockspot founder Chris Brycki said many investors turned to its platform if they did not closely track financial markets.
“People come to us when they don’t have the expertise to go and select all the right investments themself,” he said.
“ETFs are a way to invest access lots of different investments at once rather than just buy a single share.”
About 70 per cent of Stockspot’s ETF money is put into growth assets and the remaining amount is tipped into defensive investments.
Financial adviser James Trethewie said using robo-advice was a cheap way to get into the sharemarket.
“It’s an accessible way for someone to get financial advice when they can’t afford it,” he said.
“For someone who is just starting out and not investing a lot, it could be a good way to start out.”
Before signing up to roboadvice, investors should understand the upfront and ongoing costs and what fees apply.