Commonwealth Bank customers can now invest within their bank app from $2, with Krish Waje (right) saying you don’t need as much money as you think to get started. (Source: Getty/Krish Waje)
Commonwealth Bank (CBA) is now offering millions of its Aussie customers the ability to start investing in managed funds from $2. The major bank says the banking first is aimed at making investing more accessible, but Aussies are being warned to watch out for the fees.
The CBA’s Everyday Investing offering allows customers to invest in four funds, ranging from conservative to high growth, from within the CBA banking app. Just over 25,000 customers have invested in the funds since it launched in June, with nearly two-thirds aged between 18 and 34.
CBA Crew Lead of Investing and Guidance, Vanessa Rowe, told Yahoo Finance the majority of first investments were between $2 and $50.
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“You can invest with as little as $2, less than a cup of coffee these days, in four professionally managed funds, so no need to pick stocks and it’s fully integrated into the CommBank app,” Rowe said, adding the offering was a “first for a bank in Australia”.
The Motley Fool chief investment officer Scott Phillips told Yahoo Finance that while it was positive to see Commonwealth Bank removing the barriers between saving and investing, people should be mindful of the fees involved.
“Let’s be honest, some of their fees, 0.35 per cent, is five times as big as the Vanguard ASX 300 ETF [at 0.07 per cent]. So it’s a massive difference,” Phillips said.
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The Motley Fool’s Scott Phillips said people needed to be aware of the fees involved. (Source: The Motley Fool/CBA)
CBA’s Everyday Investing charges a 0.35 per cent per annum management fee calculated on the total value of the fund, along with a 0.05 per cent per annum transaction cost to cover costs incurred when buying or selling.
There’s also a $2 monthly access fee for account balances of $1,000 and over, however, the fee is waived for balances under this amount.
Phillips said CBA was naturally trying to push people into their own products by removing that layer of friction to invest within the app.
“They’re entitled to do that. But let’s be honest about what’s actually happening here in terms of why they’re pushing people, which funds they’re choosing, all that kind of stuff that goes with it,” he said.
The other potential downside is that by making it simpler to invest, it also makes it easier to dip into.
“The easier it is to get in, the easier it is to get out, and that can potentially disrupt what can be wonderful long-term compounding, if it’s just to click away on the app to take the money back out of that investment account and go spend it,” Phillips said.
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Everyday Investing is in addition to other CBA platforms — CommSec Pocket, which provides access to 10 ETFs with a minimum investment of $50, and online broker CommSec.
Rowe noted she saw users eventually “graduating” to these platforms when they felt more confident to do so.
Barriers to investing remain for Gen Z
Research from the bank found there were still major barriers that young Australians were facing when it came to investing.
Its survey of 2,000 people found that 69 per cent of 18 to 24-year-olds were open to investing, but nearly 26 per cent said feeling like they needed more money to start was holding them back.
Nearly 31 per cent believed they needed to develop more confidence before they started investing. For Gen Z, specifically, the main barrier was the perception that investing was too complicated.
Krish Waje began investing in 2020 while she was working at Apple and was introduced to the concept of an employee share purchase plan.
The 27-year-old small business owner told Yahoo Finance she started investing with a few thousand dollars and would set extra money aside for investing, and continues to constantly add to her portfolio.
Waje started investing around five years ago and encouraged people to get started if they could. (Source: Krish Waje/Getty)
“It’s across multiple different platforms, but I’d say it’s up to $100,000 across stocks, ETFs and crypto, those are the main ones,” she said.
Waje said investing can seem “scary at the start because it’s a whole new world”, but she encouraged Aussies to start today if they could.
“People often think you have to have a lot of money to invest, but I don’t think that’s the case,” she said.
“Whatever you have, and if you’re comfortably putting that aside for a while, it doesn’t have to be a huge amount. Just start and be consistent. That’s where you can really see the benefits of compound interest come through.”
Phillips said platforms like CBA Everyday Invest or micro-investing platforms like Raiz could help you get started with investing and create some momentum, even if the fees are high.
“Get started however you need to get started, but then once you are started, make the move to a lower cost option, preferably with no ongoing fees, preferably with no management fees,” he said.
“Keep your fees really low. Be a long-term investor. That’s the best way to go about it.”
As an alternative, Phillips suggested people could set up a separate bank account for their investments and then invest once they hit the minimum for whatever their preferred broker is.
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