Tis the season again folks – Click Frenzy starts 7pm, 19th of May 2020. Many of our Raiz Rewards partners are participating in this limited time online sale. That means you can get money reinvested into your Raiz account on top of the Click Frenzy deals. Read Post
Last week global equities continued their rapid rebound despite the COVID-19 pandemic and dismal news on the state of the global economy. Read Post
Want to get some context on next week’s global economic data points and to understand what they mean? Raiz has you covered! Read Post
The world remains gripped by the COVID-19 crisis as the economic impact of government lockdowns globally are becoming clearer. Read Post
On 23 January 2020, when I gave my last update, the world was a very different place. Although COVID-19 (coronavirus) was gaining public attention, it certainly wasn’t a global health crisis affecting economic growth and investor sentiment around the world.
Today, Australia has been in lockdown for nearly a month and social isolation is the name of the game. Large sectors of the economy (notably tourism, hospitality, and much of retail) are closed for business and others are suffering.
We remain primarily concerned for the health, safety and wellbeing of our customers and staff during this period.
At Raiz we are weathering this difficult period. We will soon report revenue from our Micro Investing Platform, that grew in the March quarter as we continue to increase the number of customers and activity on our platform.
Our business, which derives about two-thirds of its revenue from the $2.50 management fee, continues to retain the loyalty of our valued customers, and also add new customers. At 31 March 2020 we had 215,398 customers, up from 211,657 at 31 December 2019, despite the uncertainties caused by the Government lockdown.
For this outcome we can only offer you our sincere thanks. The team and I will work hard to meet your expectations and assist you in taking control of your finances in these difficult times.
That we can retain and increase customers during this quarter tells me a few things. Firstly, that the products and services we offer, and the customer service that accompanies them, still meet your expectations, even during this crisis. Customers are aware of the need for a robust savings plan to assist them in controlling their finances.
Rest assured we will continue to maintain the high level of service that you have come to expect. And continue to listen to your feedback to enhance our product offering and services.
Secondly, our customers are increasingly appreciating that investing can be a long-term game, and that despite the current volatility they understand the need to stay in the market, realising this crash may be the precursor of the next bull market.
Finally, that you understand that even during this extremely challenging period, Raiz’s financial management, rising revenues and the capital raised in December last year has put the business in a secure position that bodes well for its corporate future. This gives us a much-needed financial cushion in these troubled times.
Raiz entered the market to offer Australians, especially young Australians, a smart alternative to the established players in the financial services sector by putting control of their financial futures into the palms of their hands. The current crisis has not changed that.
So, during these uncertain times your ongoing commitment to savings and controlling your finances via Raiz is deeply humbling and a very promising sign for all our futures.
Again, my heart-felt thanks, and stay safe.
Sincerely,
George Lucas
Managing Director /CEO
Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
If you’re starting out as an investor you may have heard about something called “liquidity”, but you may not be exactly sure what it is or what the term refers to.
That’s totally understandable as there are lots of concepts to come to grips with when you’re getting investing and it takes time to figure them all out.
The concept of liquidity is an important one to understand because in the context of financial markets it affects many aspects of how markets operate.
Simply put, liquidity refers to how easily an asset or security, such as shares, can be bought or sold in the market at a price reflecting its true worth, or in other words, its intrinsic value.
In a practical sense, this means that liquidity can be thought of as how easy it is to convert an asset to cash, which is considered the most liquid asset of all.
Assets can be placed on a scale from liquid to illiquid, depending on how easily they can be converted to cash. So-called tangible assets, like collectibles (cars, rare books etc) property and fine art, are considered relatively illiquid, while stocks are considered rather liquid.
Meanwhile, the liquidity of other assets such as contracts, currencies, commodities and derivatives commonly depends on how many players are in the market, their size and the amount of assets listed.
Cash is considered the most liquid asset as it can be exchanged for goods and services instantly with no loss of value. In other words, you don’t have to wait for a suitable buyer of the cash and it can instantaneously be used to do things like selling, buying or paying down debt.
This contrasts with an illiquid asset that’s tough to sell unless you drop the price significantly. This could be to a lack of market actors (buyers and sellers) or to scepticism about the asset’s underlying value.
So, we’ve covered liquidity generally, but what about liquidity as it relates to the share market, or other financial markets. This is what’s generally known as market liquidity and it refers to how easy or hard it is for assets in a particular market to be bought and sold at stable prices reflective of true value.
The stock market is generally characterised by higher market liquidity meaning that, unless it is uncharacteristically dominated by selling, the bid price (the price a buyer offers per share) and the ask price (the price the seller is willing to accept) will be pretty close. One of the advantages of ETFs is their liquidity.
Liquid markets are usually a good thing. High levels of liquidity occur when there is a lot of trading activity and both high supply and demand for an asset, leading to less risk. But even in share markets, remember that some shares trade more actively than others on, meaning there is more of a market for them and they are more liquid than other, less traded, stocks.
By contrast, in an illiquid market, there may be only a few market participants and trading is infrequent, meaning that they carry higher risks. This is known as liquidity risk and becomes more prominent during times of market turmoil when holders of illiquid assets may find it hard to sell without losing a substantial amount of money.
The most widely known illiquid investments include hedge funds, property, private equity and infrastructure, and investing in these types of assets is usually not done by newbies.
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Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
14-04-20
From George Lucas, Raiz CEO
This week COVID-19 continued to cause upheaval across the globe. In the US, another $2.3 trillion was added to stimulus measures aimed at softening the virus’ impact on the US economy. This time, the focus of the stimulus was corporates, giving the US Federal Reserve more fire power in buying up US corporate debt. Asian markets reacted well to this new stimulus.
More broadly, the size of the stimulus packages coming out of the US, Europe, UK and Australia dwarf the stimulus packages that were rolled out during the global financial crisis and indicate how significant the economic effect of COVID-19 will be on output and unemployment worldwide.
The unprecedented global impact of COVID-19 makes last week’s rebound in equity markets so surprising. On the plus side, the rally partly reflects hopes that the peak in pandemic may be close. On the other hand, large increases in equity prices are quite common after major corrections.
In short, it’s hard to read much into the rally. That’s because it’s difficult to determine how much economic bad news is currently priced into the market given the unprecedented fiscal stimulus currently propping up the global economy. Indeed, governments themselves are finding it hard to forecast the pandemic’s economic impact as the multiple rounds of stimulus being rolled out makes clear. Governments around the world are all playing catch up with COVID-19 at the moment.
Ultimately, COVID-19’s full economic impact will become clearer when social-distancing restrictions are wound back and business starts to get back to normal. It’s hard to predict when this will be.
Air travel provides a case in point. With airlines grounded due to COVID-19, the International Air Transport Association (IATA) has projected a possible hit to worldwide revenues of up to $113bn this year – 20 per cent of 2019’s total revenues. It’s far from certain when things will return to normal.
However, what is clear is that air travel will not return to anything resembling business as usual until a vaccine is readily available in 12 to 18 months’ time. Until that point, this will have flow-on effects for domestic airlines, hotels, restaurants, bars and any tourist related industry linked to international air travel.
With so much uncertainty, the recent market rebound relies on the belief that governments are getting it right with their stimulus packages. That’s what largely occurred during the GFC.
But there’s no guarantee they are getting it right. This economic downturn is not a financial crisis, but a shut down in consumer ability to buy and travel.
Important Note: The information on this website is provided for the use of licensed financial advisers only. The information is general advice and does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this website.
Investors only: The information in this Document is confidential it must not be reproduced, distributed or disclosed to any other person unless it is part of their statement of advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Document to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.
General advice warning: The information contained in this Document is general information only. It has been prepared without taking account any potential investors’ financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. No responsibility or liability is accepted by Instreet or any third party who has contributed to this Document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.
“Live long and prosper” are the words often spoken by Star Trek’s fictional character Spock, the half human, half Vulcan science officer aboard the USS Enterprise.
Now you may be wondering why we’re mentioning Star Trek in this blog article.
Is it because as a species, Vulcans have perfected the art of suppressing emotions, and maybe we all need to be a little more ‘Vulcan like’ to keep a steady nerve as we watch our investment balances decline?
Well yes, that’s a good reasons, but we mentioned Star Trek because one of the most endearing qualities of that TV show is its ability to frame its episodes in an allegory. Telling stories, which upon reflection, can readily illustrate and convey a complex concept in a more comprehensible way to the viewer.
Now for a moment, come on a journey with us. Let us take you back in time a few years ago. A time when the Australian housing market bubble had ‘burst’.
Can you remember the influx of real estate that came onto the market? Owners that were falling over themselves to put their properties up for sale? No, we don’t remember that happening either!
Obviously, some people had no choice to sell, but as evidenced by the lack of properties for sale and the mass crowds of bargain hunter investors at every open house at the time, most owners had no intention of selling. First time home buyers and property investors saw it as an opportunity to buy at a “bargain price” but choice was limited as owners chose to simply wait it out and hope for the housing market to improve. Fast forward 12 months and sure enough most major cities were reporting modest property price increases.
If you were fortunate enough to own a property during that time and did not sell it, in real terms how much did you lose when the bubble burst? Well the answer is nothing. After all, it was only the current market value of your real estate that had changed, and you still owned the original investment. Therefore, the current market price is only ‘relevant’ if you want, or need, to sell your investment.
The example of the property market can equally be applied to other types of investments.
When you make a deposit into Raiz, that money is fully invested into Exchange Traded Funds (ETFs) which are effectively baskets of shares that are traded on the ASX. You own ‘units’ in these ETFs, and depending on your portfolio choice, your portfolio is made up of either 4 or 7 different ETFs. The balance you see within your Raiz account is the current market value of all the units you own as part of your portfolio, and at no time is cash held as part of your balance. For more information on Raiz fees, click here.
In reality, the price of units in each of the ETFs will have a different current market price, but to simplify things, let’s just assume there is one unit price for a moment.
Say for example, you decided to invest $100, and the current unit price is $0.50. When you make that investment, your $100 would buy you 200 units.
Now say that unfortunately there is a downturn in the market, and the unit value is now only $0.40. Your 200 units would now have an investment balance of $80. So, you have lost $20, yes?
Well, yes and no! You see, you still have 200 units, like you still had your real estate investment in the example above. You only really lose $20 if you sell your units because at this point in time their value is currently less than it was when you bought them. However, if you don’t sell you still have the 200 units, and you have not realised the loss.
Keep in mind that the reverse is also true. If the market has an upturn, and the unit value is now $0.60, your 200 units would now have an investment balance of $120, so you are in profit by $20. Well again, that is only true if you sell, because from an investment perspective you still only have 200 units – and markets go up and down!
Sometimes we refer to this $20 profit or $20 loss as a ‘paper gain/loss’ because it does not become real until you sell. Every time you put money into Raiz, you are buying units, and every time you request a withdrawal you are selling units. It is only when you sell an investment that you ‘crystallise’ the profit or loss from having owned it.
It’s good to remember that when it comes to investing, there are only two key points in the whole investment cycle that really matter. The price you paid at the time that you bought the investment, and the price you get when you decide to sell it.
At the end of the day, every price your investment is “worth” between those two points is effectively just noise and is just a part of the roller-coaster ride of investing, which inevitably has highs and lows along the way.
Peace and long life. 🖖
Download it for free in the App store or the Webapp below:
Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
30-03-20
From George Lucas, Raiz CEO
Over the last week we have witnessed the roll-out of government stimulus packages around the world aimed at supporting the global economy amid the COVID-19 pandemic.
Health impacts aside, governments are currently facing an economic emergency larger than the 2008 global financial crisis. Unlike that crisis, where banks stop dealing with other banks, COVID-19 has caused corporates to stop dealing with other corporates in a large and unexpected way.
Given the gravity of the crisis, government responses have been both on the fiscal and monetary sides, with the fiscal policies being slower to be enacted as some have been delayed by politics of the day.
In the US, President Donald Trump signed the largest stimulus package in that nation’s history, approving a US$2 trillion bill intended to buoy the coronavirus-hit economy where the number of cases continues to rise.
Despite the package, worth over 10 per cent of their GDP, it will not be enough to stop a sharp fall in US economic growth in coming months as the restrictions being imposed mean that fewer people will be on the streets buying essentials items or spending on entertainment or luxury goods.
On the monetary policy side, the US Federal Reserve also announced unlimited support for the US treasury market and the purchase of corporate bonds. This too is their largest response to an emergency.
In Australia, it’s a similar situation as the federal government tries to insulate the domestic economy from the worst impacts of the pandemic.
The Morrison Government has announced two major stimulus packages, worth around AUD$189 billion.
In total, the Australian stimulus package is in line with other global governments — almost 10 per cent of GDP — and there will be more to come aimed at ensuring businesses can resume trade quickly and re-employ workers when the crisis resolves.
Elsewhere, Japan is also planning a stimulus package of around 10 per cent of GDP with details yet to be finalised. This is the same in Europe where nations are still working through the politics.
Globally, the biggest problem faced by all economies is that while coronavirus restrictions remain in place people are not doing business with shops, shops are not doing business with suppliers, and suppliers are not doing business with other companies.
This is known as the velocity of money, which describes the rate at which money is exchanged in an economy. The challenge right now is that the velocity of money in economies worldwide has fallen off a cliff and will not come back until the restrictions are removed.
So, despite fiscal and monetary stimulus, we all must prepare for a drop in GDP over the coming months due to layoffs, huge reductions in revenue for companies, and the shutting down of many companies.
Stimulus plans, both monetary and fiscal, take time to work and stabilise markets. It is not an instant cure. Although it may not be until next week, or next month, that they begin to work, governments are now in the process of doing all they can to ensure that the global economy can weather the current crisis, and recover as quickly as possible when it ends.
Important Note: The information on this website is provided for the use of licensed financial advisers only. The information is general advice and does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this website.
Investors only: The information in this Document is confidential it must not be reproduced, distributed or disclosed to any other person unless it is part of their statement of advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Document to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.
General advice warning: The information contained in this Document is general information only. It has been prepared without taking account any potential investors’ financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. No responsibility or liability is accepted by Instreet or any third party who has contributed to this Document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.
23-03-20
From George Lucas, Raiz CEO
I have been frequently asked in recent days how long this market volatility will last. The past two weeks have seen extreme volatility in equity markets, with moves (up and down) of up to 7% a day (and greater) compared with last year when a 1.5% move would have captured newspaper headlines. Now, if the market only moves 2% or 3%, it’s no longer newsworthy.
Make no mistake. If the current market volatility is not unprecedented, it’s rarely seen on this scale. But it has happened before.
It’s not just equity markets. Market volatility can be highly infectious. Although most commentary has understandably been about the share market, it’s worth noting that this extreme volatility started in the oil market.
Two weeks ago, Russia and Saudi Arabia shocked markets globally when they could not agree on production cuts to help prop up prices, prompting Saudi Arabia, the world’s largest producer, to flood production, causing a huge decline in the price of oil.
So, at the very time the global economy is slumping in the wake of COVID-19, two major oil producers flood the market. The inevitable result saw the oil prices crash 30% in a day, sparking market volatility not only in equities, but in the currency and fixed income markets too.
In the foreign exchange (FX) market, the Aussie dollar last week fell as low as 55 cents against the greenback (US dollar) before rallying to close on Friday at around 58 cents. These are large moves for our currency.
In the three-year Australian Government bond market, yields on this government debt last week started at 0.85%, rallied up to as high as 1.60% and has fallen back by the end of last week to about 1.15%.
Certainly, this is not my first rodeo. I’ve been riding these extreme market selloffs and volatility events since the 1987 share market crash, so I know there’s no short-term remedy and it takes time for markets to calm again. Like everyone else, I wish there was a short-term fix.
That said, experience also tells me that the markets will recover in the long-term, that the record share market high of 20 February 2020 will be overtaken. I just don’t know when.
In what feels like unprecedented days, it’s worth reminding ourselves that other upheavals, global wars, September 11, even pandemics, such as the 1918-19 Spanish flu outbreak, has never stopped economic activity picking up and markets recovering.
As Douglas Adams (Hitchhiker’s Guide to the Galaxy) tells us, “don’t panic”. For many, this will not be the last market meltdown in your lifetime. Although, if you have a long-term plan that involves investing small amounts regularly, then you are on the right track.
Right now, I know it’s hard to focus on the long-term when the immediate future looks so bleak.
And it’s easy for me to write about how you should stick to your investment/savings. I know it’s hard to execute at the moment, but I firmly believe that if you do, it will be worth it in the long run.
Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
