What is micro-investing?
Micro-investing is all about investing small amounts of money, making it ideal for those new to investing or those who find traditional investing intimidating. If you think you don’t have enough money to start investing or find the whole process too complex, micro-investing can be a great way to ease into it. It allows you to buy fractional shares of stocks or ETFs, which means you can start with just a few dollars instead of needing a large sum.
Micro-investing apps, like Stash and Acorns, let you begin with minimal funds and often act as robo-advisors. You input your age, income, and retirement goals, and the app recommends investments to help you reach those goals. These apps spread your money across various funds, giving you a diversified portfolio without needing a financial planner.
How micro-investing apps work
Micro-investing is sometimes called spare change investing because many apps round up your purchases to the nearest dollar and invest the difference. For example, if you spend $5.37 on coffee, the app rounds it up to $6 and invests the $0.63 difference. Some apps offer multipliers, allowing you to increase the rounded-up amount you invest.
You can also set up recurring monthly deposits, starting as low as $5 per month, or make one-time deposits. Once your account has funds, the app automatically purchases investments that fit your portfolio. Some apps let you choose your investments, while others handle everything for you.
What you can expect from micro-investing
Investing small amounts means you’ll see small returns, but that’s okay. Micro-investing teaches you important lessons about market volatility, asset allocation, and other investment concepts without a significant financial commitment. It’s a hands-on way to learn about investing and get comfortable with how the market works.
The cost of micro-investing
Most micro-investing apps charge a subscription fee, ranging from $1 to $9 per month, depending on the services offered. While this can be expensive if you have a small amount invested, the convenience and educational value can be worth it. Some traditional brokerages are also offering micro-investing options, making it easier for new investors to get started.
4 of our favorite micro-investing apps
1. Acorns: Acorns rounds up transactions from your debit and credit cards and invests the spare change. It offers five different portfolios based on your financial goals and timeframe. Plans range from $1 to $5 per month.
2. Stash: Stash allows you to choose your investments and purchase fractional shares of ETFs and stocks. It offers two plans, with prices starting at $3 per month.
3. Betterment: A true robo-advisor, Betterment offers personalized investment strategies based on your goals. It charges a management fee based on your invested balance, starting at 0.25%.
4. Twine: Twine is designed for couples to save and invest together. It’s free to save in cash, and investing costs $0.25 per month for every $500 invested.
Is micro-investing worth it?
Micro-investing is a great way to start investing without feeling overwhelmed. It removes the intimidation factor and makes investing accessible to everyone. While you shouldn’t rely on it as your sole investment strategy, it’s a valuable tool for learning and gaining confidence in the market. If you decide to try micro-investing, use it as a stepping stone for your larger investment plans.