Stake app brings you cheap and easy access to Wall Street and its about time

Stake app

I’ve been contemplating some innovation investments in the US market for a couple of months now and on the weekend I decided to take the plunge. My next step was to find out how I could make the investment from all the way over here in Oz. Hopefully without paying exorbitant brokerage fees and without too much hassle. Enter Stake app.

Here’s how it all went down.

Having made my investment mind up, I consulted father Google about where I could make my purchase. The consensus on whirlpool forums (there were no other websites that could answer my question) was to do this through Interactive Brokers Australia (IBKR). IBKR is a brokerage firm here down under that markets itself as the lowest commission option for Aussie global investors.

So I jumped on their website to find out more and if it all looked good I planned to open an account.

That’s where my IBKR plans went to hell in a hand basket.

Why crypto, blockchain and DeFi will eat up the financial services industry, one millennial investor at a time

What I found when I read through the requirements to open an IBKR account incensed me. To lodge an account application I needed all the standard KYC (know your customer) requirements of a regulated financial services enterprise. Name, address, DOB, and government ID number. But here’s where it gets ridiculous. I was also obliged to provide my:

  • Citizenship information
  • Tax File Number
  • Employer name and address
  • Information on assets and income
  • Information on investment objectives and experience, and
  • Any bank or 3rd party broker account numbers for funding purposes

WTF, you say?

Why my TFN, my employer, my assets and income, and my investment experience is any of their business I’m yet to understand.

But it didn’t stop there.

On top of all that, IBKR required me to physically mail to them via snail mail certified copies of my government ID, my proof of Citizenship and blah, blah, blah at this point I just stopped reading and killed the page. It was going to take me weeks to set up an investment account just to send my money over to Wall Street…

Now, I’m a crypto and DeFi investor and enthusiast and I’m used to transacting at the bleeding edge of Fintech innovation. My investing world is now a world of mobile wallets, digital money, minimal and instant KYC verification, 3-minute account set-up and immediate access to global transactions that complete within minutes. It’s intensely gratifying to make up your investment mind and start making money on the spot. And I’m not going back

So I went back down the Google forum rabbit hole to find a better option. And that’s when I stumbled on Stake app.

Stake app – best for investing in US markets?

Here are all the critical questions answered about Stake so that you save time on research. The upshot? There are risks, and these are probably higher than investing through someone like the Commonwealth Bank’s trading and brokerage arm Commsec. But if you’re looking to invest in US markets, they offer a lot of convenience, some innovative features and cheaper fees to do so. Read on for all the benefits and our experience using Stake app.

What is Stake app?

Stake is a Fintech company that provides a mobile phone app to invest in US markets directly with zero brokerage commission. They provide access to more than 6000 US stocks and ETFs. Sounds total fly right? That’s because it is. It also explains why Stake has tripled its Aussie customer base in the 12 months to February 2021, hitting 300,000 users. On recent checking their user count has grown by another 10% in 6 months.

Now, Stake is not alone in increasing customer numbers. Stock market platforms overall have run up pretty widely with everyone bored at home in 2020 watching stock markets go on a tear and wanting to get in on the action.

But the interesting thing about Stake app is 65% of its customers are under the age of 35. More on that later.

How does Stake app work?

Stake partners with Macquarie Bank, DriveWealth, POLi and Airwallex and Citibank to deliver its services.

Drivewealth LLC is a US brokerage company. When you set up an account with Stake you are setting up a broker agreement with Drivewealth. Stake doesn’t place any trades but simply facilitates the order placement. Drivewealth acts as the broker and executes all trades on US markets.

Your shares are held in custody by Citibank in the US.

Airwallex provides mobile wallet services to Stake users.

Macquarie Bank provides services to users that operate Trust and Company accounts through Stake.

POLi provides bank integrations to move your funds into you Stake account direct from your bank account.

As Stake leverages US partnerships for its share trading service it’s not the same as buying Australian shares on Commsec. Staked does not provide your with a Holder Identification number (HIN) or Security Reference Number (SRN) for the shares that you buy. Instead, you investments are pooled with all other Stake users (which is how they provide fractional investments). You are the beneficiary of your shares not the legal owner (with a HIN or SRN).

They run the custodial share investing model, which is common place in the US so you’ll probably come across it irrespective of broker.

Who owns Stake app?

Stake is a division of Sanlam Private Wealth Australia and was founded by Matt Leibowitz, John Abitz and Dan Silver..

Sanlam Private Wealth Pty Ltd provides financial services for high net worth individuals and corporations in Australia and it seems a number of other locations worldwide.

Is Stake legit?

Stake is a registered Australian business trading as STAKESHOP PTY LTD (ACN 610 105 505, ABN 99 610 105 505) Registered to Sydney, NSW 2000.

The first thing to understand is that Stake operates under the Financial Services License held by Sanlam Private Wealth Pty Ltd. It is regulated by both the Australian Securities and Investments Commission (ASIC) as well as the US FINRA and SEC (because of its partnership with US brokerage firm Drivewealth LLC) – more below.

Stake’s website states that if their business goes under, you still have access to all your cash and securities through broker partner, DriveWealth and share custodian Citibank & Velox Clearing LLC. We’re not too sure how easy it would be to access these companies from Oz however.

Stake also holds Professional Indemnity Insurance cover for the activities conducted under its licensee authorisations of up to $500,000. The insurance is provided through US Securities Investor Protection Corporation (SIPC) who acts for investors if their broker goes bust.

What are the benefits of using Stake app?

After using Stake for a while now the benefits over a standard brokerage are pretty clear

  1. Easy, instant account set up with mobile trading
  2. Fractional investing
  3. Save on trading fees for smaller amounts

Let’s look at each of these.

1. Easy, instant account set up with mobile trading

It takes three minutes to set up your account. No need for certified documents sent via snail mail. No tax file number requirement and certainly no questions about your income and assets or your investing experience. Stake also submits your US tax filing document on your behalf for $5, saving you time and paperwork. The way financial services should be.

2. Fractional investing

You can buy fractions of a stock. This is a great offering for investors with a little money to start or for anyone who wants to dollar cost average in to the market. It also means you can buy a stake in some of the biggest companies in the US with shares trading above $1000 each. And you don’t need $1000. Think Google, Apple, Tesla, Amazon. The only thing to remember is the FX fee structure for Stake. You need to buy at least $300 worth of any stock or you will be paying more than their advertised 0.7% fee on the trade (they have a $2 minimum fee on small trades).

3. Save on trading fees for smaller amounts

For example, Commsec fees for international trades are:

  • Broker fees
    • USD $19.95 for trades up to USD $5,000
    • USD $29.95 for trades up to USD $10,000
    • 0.31% for trades above USD $10,0001
  • Plus, FX (exchange) fees of 0.6%.

Stake fees are 0.7% or a $2 minimum.

4. Easy tax reporting

Stake allows you to track your portfolio & run tax reports using Sharesight. This includes completing your CGT, Taxable Income Reports and calculating your Unrealised Capital Gains. They also generate a Sharesight CSV within two weeks of the end of each tax year. You can check out more information on Sharesight’s website.

How does Stake make money?

Stake charges an FX margin fee of 0.7% per trade (minimum $2 on any trade). It also makes 0.5% on any express funding requests you make (which provides cleared funds in USD the next trading day).

There is a 2% fee for funding your Stake account with a credit or debit card, but you can just fund for free via POLi bank transfer.

They also charge $2 to withdraw from your Stake account.

If you want to transfer your stocks out of your Stake account to another broker, be prepared to pay some hefty fees for the privilege ($100 per transaction)

The company also earns some interest on the cash in the trading accounts and earns revenue from their premium offering, Stake Black which comes with a $9/m subscription fee.

What is Stake Black and do you need it?

Stake Black is Stake’s premier trader service. It comes with a subscription cost of $9 per month or $7.50 if you pay annually. For the fee, Stake Black offers added extras like instant buy against sold trades (instead of waiting for settlement), Wall st analyst buy and sell ratings and price targets, as well as full company financials.

You’re only going to need it if you don’t have access to the data elsewhere or if you are day trading and need to access your capital quickly.

Our experience using Stake

Like I was saying at the beginning of this post, we chose Stake partly because it offers an easy three minute sign up with instant KYC verification. We literally had our account up and running and funded in under 5 minutes. Big tick.

Free stock offer ‘up to $150’ – is it worth it

While Stake advertises a free share valued at up to $150 and uses examples like Nike or Dropbox (worth a fair bit per share), you may also get what they call the ‘mystery share’ option. This is because the stock you actually receive is dependent on a ball drop game in the app. We ended up with a random share worth $3.26 or so from our ‘sign up bonus’. We’d like to know if anyone has has received the more expensive Nike stock, or the whether the game is designed to give you the random, cheap ‘mystery’ share each time. The offer seemed like a gimmick to us so don’t sign up for the free stock alone.

To qualify, you sign up with an individual account and fund your account within 24 hours of setting it up. It’s easy to fund your account by sending a few hundred bucks from your bank account through POLi.

You’ll be able to claim your free stock during the sign up process. The free share lands in your account within 3 days and then you can sell it for cash or keep it as an investment.

Funding our account

We didn’t choose their express service to fund our account (for a $3 fee) and needed to wait 3 days for our money (in USD) to arrive. This point we are marking as a fail for Stake because as blockchain continues to infiltrate Fintech companies, users will become accustomed to instantaneous settlement without the $3 fee. Crypto and DeFi on-chain transactions already achieve this for their users. Stake seems like a step back to conventional finance in this respect.

Using the app

It was simple to navigate the Stake app, search on the stocks we wanted to buy and purchase those stocks. The app is user friendly – just don’t be afraid to tap on the different icons and see what is in each part of their menu. They have a wallet dashboard where you can see all of your investments, on the one screen as well as your cash holdings. There is also a stock watch list you can build and a stock search bar. The app also has a US markets overview feature where you can see market news and top stock movers and shakers.

Stake’s next move

Stake wants to shake up super funds for its millennial users. It’s looking to give cheap and easy access to self managed super in the same way it’s led its young investors to Wall Street with zero broker commissions.

Stake claims that customers want control, lower fees, transparency, and the ability to invest in what they want in their own super. The service will aim to take care of all of the paperwork and administration for super funds so owners can focus on investing.

Sounds like a disruptive Fintech idea if they can make it work – we’ll be following with interest.

There’s also apparently ASX trading coming soon to Stake.

ASX trading coming soon to Stake

The final word – it’s time to innovate or die for financial services

Millennials are the first generation born online. They’re also entering their peak earning and disposable income years. Their preferences and habits reflect this and will change financial services as we know them, and quickly. Stake app and other disruptive digital wallet models will be the early beneficiaries. Their exploding customer numbers reflect this. We signed up because what Stake offers is more convenient, flexible, and cheaper, than many of the conventional investment houses. But we’re not putting all our investment eggs in the Stake basket.

It’s worth acknowledging that even these new and disruptive Fintech companies like Stake still require T+3 to fund your account and T + 2 or 3 to settle trades.

Blockchain transactions of cryptocurrency can already do this instantaneously.

The danger for Stake is that customers will leap frog them and jump straight onto the Blockchain once crypto services become simple and user friendly. Only time will tell.

Oh, and if you want to know what we invested in, it was the genius of Cathie Wood. But you’ll have to stick around for more on that later 🙂

Til next time, have fun, be happy, do good!

How to be financially successful in your 20s

How to be financially successful in your 20s

Millennials are coming of age and changing the world as we know it. They’re about to be the most influential generation since the boomers. But they’re also facing strong headwinds. The pandemic has hit many young millennials in their peak earning years. Encumbered with historic public debt, rising home prices, stagnant wages and less money to spend, young millennials will need more financial nous earlier in life to get ahead. If you’re a young millennial and want to know how to be financially successful in your 20s, this post is written for you.

What does financial success look like in your 20s?

Success is all about achieving a desired outcome so let’s first establish what that outcome should be for your finances in your 20s. You can’t hit a target you don’t know exists right?

What success looks like for you will be personal. But at a minimum, you want to be doing better at wealth building than your millennial peers. In some areas of finance that really matter, you’ll want to be doing A LOT better. If you’re a high achiever, then financial success in your 20s is all about setting yourself up for financial freedom in your 30s, which leaves you half a century to do work you love and enjoy a beautiful life. Sound totally fly to you? Let’s get on with it then.

Whether your aims are for total financial freedom or to simply be more financially secure, by the end of this post you’ll have tangible and concrete goals and steps to help you on your way.

The millennial financial footprint

Gross generalisations are generally unfair 🙂 so we’re going to take a look at some annual research statistics about millennial finance. Since recent stats are hard to find, we’ve had to dig back to 2015 for some of our benchmarks which are from the US.

Income – average millennial income in 2015 was a tick over $56,000. That’s gross. Take home income would be a smidge less than $50,000.

Expenditure – on average is just north of $47,000/y.

Savings – this leaves implied savings of, well, diddly squat and explains why around half of millennials report living paycheck-to-paycheck.

Debt younger millennials report having student debt of around $26,000 and credit card debt of around $4700. Of those with debt, 16 percent say they owe $50,000 or more. 

This all paints a grim picture for many millennials and it’s likely things have gotten tougher since 2020. The good news is that with different money habits, you can be different. And the pandemic just might be a great opportunity to get ahead for financially savvy twenty something millennials.

Your twenty-something financial habits

Here are the financial habits you need to set in your 20s if you want to be successful with money:

  1. Earn more than you spend
  2. Avoid bad debt
  3. Save like crazy – 30% + of your take home income
  4. Start investing those savings in assets

It sounds easy but if it were, everyone would be doing it. So let’s break it down with 5 steps that you can start today if you want to be a financial success in your 20s.

5 steps to be financially successful in your 20s

Here’s 5 steps you should be taking in your 20’s to be financially successful. None of this is financial advice my millennial money masterminds. These are the 5 things we wish we’d known when we were in our 20s to win our financial freedom earlier.

Step 1 – Put your finances first

Literally no-one does this in their 20s, so if you can pull this off you’ll be well ahead of the pack.

Putting your finances first means becoming financially literate; learning about how to build and manage wealth and then starting to apply what you learn.

The first thing to know is that school doesn’t teach you anything useful about building wealth. All it does is teach you how to get a job, which is not going to translate to financial success or freedom. The other way people learn about wealth is from their parents. So if your parents are good money managers then you have a head start. If not, you’re starting from scratch. But that’s ok! Scratch is where we started and we got ourselves financially free in about 8 years.

Our tip is to focus on these things:

Learn about assets, liabilities, good debt, bad debt, cashflow and tax effective income and investment structures.

Here’s how to start today for under $100

  1. Read our blog. We mean all of it. Start here and here And we’ve got a total bonus for you – its free!
  2. Read these books on building wealth – sign up for Audible for less than $15 a month and get to it.
  3. Watch this webinar featuring wealth educator Robert Kiyosaki about investing in assets and using good debt. It costs a buck.

We promise won’t regret the hundred dollars spent.

Investing in yourself and your financial knowledge is the one thing most likely to determine where you end up in the next few years.

The learning doesn’t end once you’ve nailed these concepts, but there’s enough information in these resources for you to start applying what you’ve learned. Steps 2 to 5 assume you have your head around these concepts and are ready to put them to work.

Step 2 – Get an internet side hustle

The problem with wage earner income

Wage earner income is generally the go to income source straight out of school for most of the population. But it’s also the most highly taxed and time consuming type of income. Having come through 2020, wage earner income is also looking a tad risky. Earning all of your income through the one source that is out of your control means you’ve got nothing to fall back on if that source is suddenly taken from you.

What we are saying is wage earner income is likely where you’ll start, but it is not where you want to put all of your effort. There are income streams that don’t trade time for money directly and you can set them up to be far more tax efficient than a job. Meaning you’ll get to keep more of what you earn. Earned income is not how the rich make their money, if you get my drift…

In your twenties, spend the extra time you’d spend at work to get a promotion on smarter ways to make your money from multiple sources.

These smarter ways take time to build up – so you need to start now!

To be financially successful in your 20s the aim is to build alternate income streams using the skills you already have as… well, a millennial.

Learn how to make money online

Millennials are the first digital native generation which is a killer advantage when it comes to making money from the internet, so go and get yourself at least one alternative internet income stream in your 20s.

Why internet income? Internet income is super powerful because it gives you leverage. Leverage is when you do something once with a fixed cost or time, and it pays you over and over. The internet is where you can use Google, algorithms, coding, bots and online marketing to make money multiple times from one piece of work.

Millennials are really the first generation in history born online. Your 20s is when you need to put this early mover advantage to work.

And the lockdowns of 2020 proved a watershed for internet commerce. More of the world moved online than ever before so its no surprise that we think that is where there’s money to be made.

If you want to know more about leveraged income options, check out this page as well as our Fat Stacks blog where we share tried and tested passive income ideas.

You will need leverage to build wealth and get to financial freedom faster because in your 20s you don’t have access to a lot of capital. Deploying capital (savings and borrowings) is the other primary way you can build wealth and get to financial freedom. If you were in your 30s, we’d look at ways to build wealth using capital.

Step 3 – Become a seriously savvy saver

We’re not talking here about curbing your avocado toast munching, latte-swilling habits (a stereotype I know but a fun one). You need to get serious about squirrelling away your disposable income to be financially successful in your 20s.

Why? Because your savings rate is inversely correlated with your working career. In other words, the more of your income you save, the less of your lifetime you’ll need to spend at work. In your 20s you should be smashing this savings gig out of the park.

Also, because if you want to leverage other peoples money to build wealth in your 30s, you’re going to need some of your own money behind you.

How much should you save?

To put this question in context, average savings rates in the US, UK and Australia are around 10 to 15% of take home income. This won’t make you financially successful in your 20s. It won’t get you to financial freedom. Ever.

You should be aiming to save at least 30% of take home income in your 20s. If you want to be financially free in your 30s, it needs to be more like 50%.

In Australia the average weekly earnings before tax for a 21 to 34 year old is $58,600 a year, or roughly $49,000/y post tax. That’s $942 income a week. If you save 30%, you’ll have $650 a week to live on. Now that’s not a lot, which is why 30% savings is already way better than most twenty somethings.

But, here’s the clincher. You’ll also be saving $14,600 a year.

And this is where compound investing and youth make magic together. $14,600 invested, with a regular investment of $280 a week (your savings) gets you to $255,000 after 10 years. That’s with an annual compound return of 8%, which is less than the long term stock market and real estate return in Australia. We’ll talk about what it means to invest and get 8% annualise returns below.

In the meantime, let me shout it from the rafters – saving is massive part of being financially successful in your 20s. If you want to start your 30s with a net worth of a quarter of a million bucks, we’ve just shown you how.

Saving tips

To master saving you need to learn how to budget and practice delayed gratification. This is tough, when it seems like your besties are out splurging all of their disposable income (because they probably are!). Saving is about trade offs. Every dollar adds up and everything you don’t buy now will get your closer to financial security and if you want it, financial freedom.

  1. If you can’t afford to buy it outright, don’t buy it.
  2. Budget your online streaming, food delivery and ride sharing expenses – young Aussie millennials are spending way more on these things than they realise.
  3. Put your savings somewhere you can’t get to them easily.
  4. If you have to use credit, pay it all off in the interest free period. No exceptions.
  5. Use your online bank app to track income and expenses and manage your money.
  6. Under no circumstances should you be tempted to upgrade your lifestyle as your income grows. Keep it humble,

If there was a silver lining to the whole damn lockdown situation it is that we’re saving a lot more of our money. If that’s you, don’t be tempted to spend up big when restrictions ease! Invest that money instead.

Step 4 – Start regular investing in real assets

If you’ve invested time in your financial education, then you should have an understanding by now about assets and liabilities and how to use them to build wealth.

Your mission, in the game of money, is to accumulate assets and avoid liabilities. The younger you start, the greater the compounding benefits you receive. Huzzah!

Investments are only assets if they put money in your pocket each month. These are not easy to find or build – if they were everyone would buy them. You have to be creative. Here’s some investment classes you might think about that can put money in your pocket each month depending on what and when you buy. Some will get you more than an 8% annualised return (with more risk), some less. The lower down the list, the more capital you’ll need to get started. You may get to property investing by the end of your 20s, if you’re super disciplined with saving and investing.

  1. Bitcoin, Ethereum or other cryptocurrency with demonstrated real world use cases
  2. Digital assets – building, buying, renovating selling them
  3. Dividend stocks
  4. Exchange Traded Funds
  5. Investment properties

Consider dollar cost averaging in to your investments if you don’t have much in the way of savings to start. A regular investment will smooth out price bumps and also help you take full advantage of compounding over time.

Our Ms Mogul blog features a bunch of posts to to help get your head around the crypto asset class as well as the best resources to get you started in cryptocurrency.

When you get the capital behind you, think about buying an investment property before buying your own home. Also, think about buying a cheap home and doing it up while you live in it. These are all strategies we’ve used to build wealth and keep more of the money we make. If you want to know about our specific investment property strategy to build wealth and rental income, you can read all about it here.

Step 5 – Crush your credit score

Once you’ve built up enough capital you’ll probably want to leverage good debt to invest and build wealth, for example by buying investment properties. To do this, you’re going to need a good credit score.

Makes sense right? You need to demonstrate that you are financially responsible before lending institutions will lend to you. So what’s a good credit score and how do you go about getting one?

If you’re in the US, you’ll probably have a FICO score. The Australian system uses similar ratings to FICO, which are:

  • 800 and above — Excellent
  • 740-799 — Very good
  • 670-739 — Good
  • 580-669 — Fair
  • Below 580 — Poor

To borrow money for investments, you’re aiming for a rating of ‘Good’ or above.

Credit score tips

  1. Open a savings or checking account – most will already have this, but if not it’s way past time
  2. Establish a steady income paid into your bank account
  3. Put some bills in your name and pay those bills in full, on time.
  4. Get a low limit, low interest credit card and pay it down each month
  5. Don’t use all of the available credit on your credit card. Stick to less than 50%.
  6. Check your credit history and credit score once a year.

The final word – here’s to your financial success twenty-somethings!

So here’s what we would do if we had our time again, to be financially successful in our 20s:

  1. Become top 5% financially literate among peers
  2. Build multiple income streams – get an internet side hustle
  3. Save at least 30% of your income and don’t spend more as you make more
  4. Dollar cost average invest your savings aiming for 8% compound returns at least
  5. Pay your bills and your credit card each month and check your credit score annually

This my millennial co-conspirators in wealth is what financial success looks like in your 20s if you want to be financially secure in your 30s. If you want financial freedom, then your mission doesn’t end here. Take a look at this post to help you free your 30-something self. Here’s the good news for you – because you started in your 20s and are ahead of the game, skip straight to step 9. It’s time to put the pedal to the metal and win back your life.

Til next time, have fun, be happy and do good!

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