Financials

Beginner’s Guide To The Best Micro-Investing Apps

Amanda SchillerTuesday 10 August 2021

Investing your money has never been easier than it is today. This is mainly due to the introduction of many different useful apps that can help you get started investing almost instantly. There are apps out there that can help you with almost every aspect of your finances. However, if you’ve never invested your money before then it can be difficult to know where exactly you should get started.

This is where micro-investing can be a useful strategy. Micro-investing is a great way to get introduced to investing in the stock market and start building long-term wealth.

This is our beginner’s guide to the best micro-investing apps.

What is micro-investing?

            If you are not familiar, micro-investing is the process of saving very small amounts of money and investing them in the stock market (usually in a low-cost index fund that tracks the return of the entire stock market). In simpler terms, micro-investing is the investing equivalent to saving your spare change in a jar. Except, instead of a jar, your change is invested in the stock market.

Micro-investing is a very useful strategy that only recently became available to average investors. Before new technology allowed for fractional shares of stock, no account minimums, and commission-free trading, micro-investing was just a lofty idea. However, now it’s a legitimate practice that many investors use to help financially prepare for their future.

            Here is how the process of micro-investing works:

  1. Download an app that offers micro-investing and connect your bank account.
  • Fund your account either by transferring money or allowing for “round-ups”. Round-Ups will round up each purchase that you make up to the nearest dollar and invest the difference.
  • Your money is then automatically invested in a low-cost index fund that tracks the overall return of the market.

We will look at some of the different apps you can get started on in a second. First, let’s examine the pros and cons of micro-investing.

Pros of micro-investing

            If you have never invested money before then micro-investing is a great place to get started. This is because micro-invested is usually an automated process that has a minimal disruption on your daily life. It’s very unlikely that rounding up your transactions and investing the difference will have a huge impact on your spending or budgeting. What this will have a huge impact on, however, is your financial future.

            Due to the power of compound interest, investing just a little bit of spare change can turn into a very hefty investment account several years down the road.

            Here are the main pros of using a micro-investing strategy:

  1. It’s done automatically by connecting to your bank account.
  2. It requires minimal investing knowledge.
  3. Since it is done slowly and safely, there is very little risk of losing money.
  4. It helps you get used to the process of investing money

            Now let’s examine some of the cons.

Cons of micro-investing

            Although micro-investing is a great introduction to investing, it is also doing the bare minimum. It’s a little bit like deciding you want to workout so you start walking a quarter mile on the treadmill each day. Sure, this is a great start and something is better than nothing, but walking a quarter-mile probably isn’t really pushing yourself to the limit.

In that same sense, using the Round-Up feature may make you feel like you’re making big progress towards your investments because you constantly see money being pulled from your account. However, in reality, only a few cents each day is going towards your investments. The total amount that you invest will depend on how much you swipe your card, but there’s a good chance that it only ends up being a hundred dollars or so at the end of the month.

            Here are the main cons of using a micro-investing strategy:

  1. It is a good starting point but also sets the bar low
  2. There is minimal personalization
  3. It only allows for stock market investing
  4. You have minimal control over your investments.

If micro-investing seems like something that you’re interested in getting started with, here are a few of the best places that you can get started.

Different apps that you can use

            The two main apps that people use for micro-investing are Acorns and Stash. These apps are little bit like Nike/Adidas, Walmart/Target, or Uber/Lyft. By this, we mean that they largely offer the same service but with mild differences. Your preference will likely come down to your own personal opinions.

  • Acorns
    • Micro investing for as little as $1, $3, or $5 per month.
    • Offers investment plans for retirement, kids, or ESG companies
    • Connects to your bank and allows Round Ups
  • Stash
    • Micro investing for as little as $1, $3, or $9
    • Heralded as the best investing app for beginners.
    • Allows you to invest in more than just stocks (bonds, commodities, different industries, etc.)

In summary, if you’ve never invested money before then micro-investing is one of the best places to start. However, if you are looking for a service that’s above the bare minimum then you are probably better off using a different investing service.

            We hope that you’ve found this valuable when it comes to learning how you can start investing your money using micro-investing apps. If you are interested in learning more, please subscribe below to get alerted of new articles as we write them!

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