As the title says, today I stopped using the Dutch app Peaks. The app was originated by the Dutch bank Rabobank and has been marketed as ‘investing with your spare change’.
The app can (only if you are using it in combination with an account at Rabobank) round off each PIN-transaction to the whole digit and put the difference aside to invest in. So, if you buy a coffee for €2,20 Peaks will round up to €3,00 and the 80 cents difference will be set aside. At the end of each week (on Sunday) you get a notification from the app with the amount of money is going to be deducted from your account. You can then stop this transaction if you think it’s too much for that week or whatever reason you have.
On the following Monday or Tuesday, the money is then invested in some ETF’s (exchange traded funds). You can also choose for one out of four risk profiles: mild, spicy, sharp and hot.
Why did I stop using Peaks?
Sounds nice right? So why did I stop using the app after some months then? Because it is simply not worth it because of the costs. The app is free for the first 3 months, which I used it for, just to see what the fuzz was about. After three months the usage of the app costs 1 euro per month if you have less than 2500 euro invested. Above 2500 euros it costs you 0,5% of the amount you have invested. Next to that there is also the fee you must pay to the funds, usually 0,25% to 0,33%.
Let’s take the riskiest profile (hot) to calculate the costs and let’s say we put in 30 euros each month. The expected payback for this profile is 6,1% on an annual basis. If you don’t pay any fee you will receive around €11,90 in payback after a year. However, you of course do need to pay the fee, starting after 3 months, so 9 euro in total, this will only give you 2,90 after the first year. We did not even incorporate the fees you need to pay to the funds in this calculation!
Some other reasons I stopped using Peaks next to the high costs are the irritating app settings screen and the fact that’s it’s an app, nothing more, nothing less. I have no idea what happens if I break my phone or if I switch phones or numbers.
I see Peaks as a nice experiment to give young people some more insights in how they can invest their spare change, but nothing more than that. Peaks is not a serious investment for your future, near or far.