{"id":3055,"date":"2017-08-11T00:49:44","date_gmt":"2017-08-11T00:49:44","guid":{"rendered":"https:\/\/raizinvest.com.au\/investors\/what-is-the-comparable-rate\/"},"modified":"2021-02-08T04:38:30","modified_gmt":"2021-02-08T04:38:30","slug":"what-is-the-comparable-rate","status":"publish","type":"post","link":"https:\/\/raizinvest.com.au\/investors\/blog\/what-is-the-comparable-rate\/","title":{"rendered":"What is the comparable rate?"},"content":{"rendered":"
\"image\"<\/figure>\n

When
\nit comes to investing, returns on investments (positive and negative) are
\ngenerally expected to vary from year to year.<\/p>\n

While
\nmarket fluctuations are completely normal, this can make it difficult to
\nmeasure how much you may potentially make when you are investing small amounts
\non a regular basis. This is further complicated with making withdrawals when
\nyou need the money, as Raiz lets you do. People also like to understand returns
\nin a similar way to interest on a bank account.<\/p>\n

This
\nis where the comparable rate needs to be calculated using the internal rate of
\nreturn (IRR) method.<\/p>\n

As of Dec 2018, the average Raiz user has made 12.4% p.a. (return includes all fees but before the monthly maintenance fee)\u00a0\u2013 IRR \u2013 comparable rate. But we don\u2019t know what the future
\nmay hold so this return cannot be relied on because of market risk going
\nforward*.<\/p>\n

 <\/p>\n

Let\u2019s
\nlook at two different market scenarios when opening an Raiz account.<\/b><\/p>\n

You
\nopen an Raiz account with $100 and add a recurring $20 monthly deposit for the
\nnext 12 months. However, after 6 months you then decide to take $50 out of your
\nRaiz account.<\/p>\n

In
\nthe first scenario, the market goes up 20% in the first 6 months and then falls
\n10% for the remaining. This means you would have invested $220 in the first 6
\nmonths while the market was rising \u2013 taken $50 out \u2013 and invested the remaining
\nwith $120 recurring in a falling market.<\/p>\n

In
\nthe second scenario, the market falls 10% in the first 6 months and then
\nrallies 20% for the last 6 months. This mean you would have invested $220 in a
\nfalling market \u2013 taken out $50 \u2013 and invested the remaining with $120 recurring
\nin a very strong rising market.<\/p>\n

While
\nboth these markets finished at the end of the year on 10%, the return on your Raiz
\naccount will be completely different and will depend on how the market got
\nthere. In the first example, the comparable rate is 4.75% p.a. While in the
\nsecond scenario the comparable rate is 16.4% p.a.<\/p>\n

These
\ntwo scenarios illustrate how the market gets there is important, hence the need
\nto do an IRR calculation which takes into account when you made your investment
\nand when you made your withdrawals to calculate a rate that is comparable to,
\nfor example, a bank account rate.<\/p>\n

To
\nlearn more about IRR please visit Investopedia link\u00a0here<\/a><\/span><\/p>\n

*Please
\nrefer to the product disclosure statement and the additional information
\ndocument to understand more about the markets risks that can affect your
\nportfolio.<\/i><\/p>\n

For more information on Raiz fees, click here<\/span>.<\/a><\/p>\n

 <\/p>\n

\n

 <\/p>\n

Don\u2019t have the Raiz App?<\/h3>\n

Download it for free in the App store or the Webapp below:<\/p>\n

\n
\"download-raiz-app\"<\/a>
Click to download the Raiz app<\/a><\/figcaption><\/figure>\n

 <\/figure>\n

Important Information<\/strong><\/span><\/em><\/p>\n

The information on this website is general advice only. This means it does not take into account any person\u2019s 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.<\/em><\/p>\n

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.<\/em><\/p>\n

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.<\/em><\/p>\n

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.<\/em><\/p>\n

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.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

When it comes to investing, returns on investments (positive and negative) are generally expected to vary from year to year. While 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 […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[1],"tags":[61,59,71],"yst_prominent_words":[1983,158,926,1980,98,1984,1985,151,245,1982,289,313,97,82,117,100,166,125,239,1981]}