it comes to investing, returns on investments (positive and negative) are
generally expected to vary from year to year.
market fluctuations are completely normal, this can make it difficult to
measure how much you may potentially make when you are investing small amounts
on a regular basis. This is further complicated with making withdrawals when
you need the money, as Raiz lets you do. People also like to understand returns
in a similar way to interest on a bank account.
is where the comparable rate needs to be calculated using the internal rate of
return (IRR) method.
As of Dec 2018, the average Raiz user has made 12.4% p.a. (return includes all fees but before the monthly maintenance fee) – IRR – comparable rate. But we don’t know what the future
may hold so this return cannot be relied on because of market risk going
look at two different market scenarios when opening an Raiz account.
open an Raiz account with $100 and add a recurring $20 monthly deposit for the
next 12 months. However, after 6 months you then decide to take $50 out of your
the first scenario, the market goes up 20% in the first 6 months and then falls
10% for the remaining. This means you would have invested $220 in the first 6
months while the market was rising – taken $50 out – and invested the remaining
with $120 recurring in a falling market.
the second scenario, the market falls 10% in the first 6 months and then
rallies 20% for the last 6 months. This mean you would have invested $220 in a
falling market – taken out $50 – and invested the remaining with $120 recurring
in a very strong rising market.
both these markets finished at the end of the year on 10%, the return on your Raiz
account will be completely different and will depend on how the market got
there. In the first example, the comparable rate is 4.75% p.a. While in the
second scenario the comparable rate is 16.4% p.a.
two scenarios illustrate how the market gets there is important, hence the need
to do an IRR calculation which takes into account when you made your investment
and when you made your withdrawals to calculate a rate that is comparable to,
for example, a bank account rate.
learn more about IRR please visit Investopedia link here
refer to the product disclosure statement and the additional information
document to understand more about the markets risks that can affect your
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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.