Are you doing well in terms of keeping yourself afloat? Have you already racked up a bit of saving on the side? Well, if so, you should probably start thinking about investment.
Many of us know that the next best step for our finances is an investment but just can’t take the first step. If you’re one of these people, clueless about how or where to start, this guide is for you. It’ll cover micro-investing starting from the basics, to all you need to know about it. ✅
Here’s why you should start micro investing.
- It’s low-cost, low-risk.
- You’ll hardly have to put in any effort through the ways I’ll specify.
- You don’t need thousands of spare dollars to start.
- You’ll build a decent investment portfolio even without much knowledge.
- Micro-investing platforms are super easy to use and charge low-to-nothing.
Acorns app, for instance, doesn’t charge a management fee at all. It doesn’t even have a set minimum account threshold. While it charges a negligibly small fee monthly, they’ll take you back much more money too! Other micro-investing platforms like Betterment come with a management fee and stuff. But they offer investment options that are a bit more complex, and sometimes more rewarding. Such as Roth, SEP IRA, traditional, etc.
Nonetheless, investing is super important. The sooner you start considering it on a serious note, the better. It helps with retirement plans, accomplishing financial goals and wealth building. Whatever your goals are, you can be sure that micro investing could help you out a lot with them.
Who knows, maybe investment is what propels you to financial freedom? Maybe this is what enables you to start that business you’ve always thought about? So without further ado, let’s find out all about micro investing. 💯
What Is Micro Investing?
It’s a strategy of investment through which you can invest small amounts of money. The process is usually automatic. Computerized advisors follow pre-set algorithms in the app. Based on that, they proceed to make small investments in individual stocks.
The user only needs to open an investment account with one of these apps. A certain payment method, such as a bank account or credit card needs to get synched with the app. From there on, leave the rest to the micro investing app! It’ll start using Robo-advisors for effective investment advice and the process gets automated.
A number of such apps charge super low to no fees at all for opening up an investment account. Some of them don’t even charge anything for managing those accounts or trading fees. This is in contrast to traditional brokerage norms. There, you’re required to have thousands of dollars as an initial account minimum balance. Many micro-investing apps have no initial account balance requirements. The ones that do also have super low required initial balances.
Being able to invest without paying a single penny in fees and commissions could be great to start. Without any outflows in the shape of management or trading fees, you’ll make profits easily. This makes the world of investment more welcoming for newbies to step in! 😄
How Does Micro Investing Work?
Micro-investing first requires you to install a certain mobile app on your device. Some platforms also have their own desktop programs that feature more options. All you need to do is sign up with them, and fund your account to start things off. The funding part can be done in many ways, such as;
- Digital money transfers
- Automated checking account withdrawals
- ACH transfers
- Syncing your debit card with the app
Upon opening the account, you’ll need to select investments. Computerized investment advisors (called Robo-advisors) may ask you a series of questions. These questions won’t be based on stock-market knowledge. In fact, you don’t have to know much about any of that to get started with micro-investing at all.
Your answers help the platform determine how much risk you’re comfortable with. Not only that, but it also figures out your financial goals through this. Based on this information and the pre-set algorithm, the platform makes adjustments. The Robo-advisor then suggests suitable investments!
This questionnaire customization system doesn’t exist on all micro-investing apps though. Simpler platforms may just give you a few preset portfolios as options to choose from. After choosing the portfolio you relate to the most, the apps start investing small amounts. 💵
Some apps that allow credit card linking may round up your transactions to the next dollar automatically. The spare change, i.e. ranging from 0.01 to 0.99 cents, gets transferred to your investment account in the app. Acorn is an example of apps that do this!
As these small insignificant amounts get invested and add up over time, the user can see the savings grow. It takes little to no time, effort or knowledge to get this system going.
Who Uses Micro Investing Apps?
You can start it right now no matter if you’re a student or a full-time employee. Investing and saving passively has never been simpler than today!
People of all ages, having the slightest hint of interest in investment, use these apps. But, micro-investing apps are specifically more popular among students and young savers. They haven’t got a huge amount of capital, and they’d love to have more. Isn’t that what investment is all about?
These platforms best suit the people who can’t afford high minimum balances. They’re not looking to pay high monthly fees as they’re just starters. Anyone who wants a low-risk, passive way of investing money should download these apps. 🤷
What Are Micro-Investments?
The money in the investment account on these platforms gets invested in shares of ETFs. ETFs are exchange-traded funds, which are index funds that attempt to match a specific index’s performance. ETFs include shares of numerous different companies. Hence, by investing in these, you can spread and minimize the risk.
Bank of America conducted a survey that showed that about 16.67% of 23-37-year-old millennials have over $100,000 in savings. But a majority of young people aren’t doing too well in savings. A survey was also conducted by GoBankingRates on people of 18-24 years of age. It revealed that over 50% of them have no more than $1,000 in savings.
That’s a worrying statistic, and micro-investing could help change that. The simplicity and ease that these platforms introduce could be the key. Statista’s current stats already show positive results. In the past 12 months alone, 12.29% of adults of age 29 or less have used micro-investing platforms.
Best Micro-Investing Apps
Let’s now take a look at which apps are at the top of the micro investing game. I’ll describe what they are, and what makes them stand out of the lot. You can get most of them for free on your smartphone! Countless platforms are available to automate your investment activities. But here are the best ones. 👇
Robinhood is a great micro investing app that won’t charge you any commissions or trading fees. Whenever you open an account with them, you’ll be able to choose stocks or ETFs on your own. You won’t have Robo-advisors giving you investment advice.
If you have the basic know-how of investing, this could be a great choice for you. It’s because you won’t need investment advice, and neither would have to pay trading fees for it.
There’s also an option to open a premium account called ‘Robinhood Gold’. It introduces advanced investment options like borrowing. However, you can do just fine with the basic variant of Robinhood for a start.
You can expect your investment endeavors to become totally effortless with Acorns. You just need to download the app and open your account with a simple sign up procedure. Then, link your debit or credit card with the app. From there on, Acorns will take care of the rest.
The next purchase you make with your linked card, Acorns will track the amount. It’ll round it up to the nearest dollar, and the change gets invested in fractional shares. These are fragments of whole shares of companies, allowing you to play the real game with mere cents.😏
One of the few fully free micro investing services, WiseBanyan, is also a great option. You can start your brokerage account with them for only $1!
It’s a fully electronic Robo-advisor but still works in the same way as traditional advisors. It asks you questions and uses pre-set algorithms to make customized investment suggestions. Set your financial goals within the app, and it’ll recommend deposits accordingly.
The basic account is free, which is great considering that it offers 100% automation. But you can also opt for paid upgrades if you want to experience their premium services.
To get started with the Stash app, you’ll need to make a minimum deposit of $5. From there, you’ll get the option to link your bank account with the app to fund the preset amount monthly. The platform first determines the risk tolerance level of users. Based on that, it automatically creates an appropriate portfolio. Once it’s all set up, you’ll be able to choose from over 150 exchange-transfer funds and stocks! 🤑