Micro-Investing Lets You Start Small and Build For the Future
Many people want to invest, but a significant number just don’t believe they can afford the initial capital required. If this sounds like you, one solution may be micro-investing. In this post, you’ll learn the basics of micro-investing and what you need to know to maximize your success if you choose this route.
What Is Micro-investing?
What exactly is micro-investing? Essentially, it’s taking a small amount of money and investing it a little at a time.
If you’ve never ventured into stocks, real estate or bonds before, or you don’t have a large amount of cash available, micro-investing can be more affordable and accessible as an option. Instead of risking a few hundred or several thousand dollars, you instead invest as much as you can afford and, with luck, get a decent return on your money. The goal is to build your investment slowly over time until you have more investing power.
Many companies also help you save some of the money you deposit — this is a quick way to build up your savings account, too.
How Does It Work?
If you’ve decided you want to start micro-investing, where should you start? Look no further than your phone app store.
Here are a few contenders to glance at:
- Acorns — Using the round-up method, this app takes recent transactions and rounds them up to the next dollar. That extra amount is then used to create an investment account of the user’s choice.
- Betterment — This app works as a robo-advisor and constantly scans for the best investment opportunities available. The results are sent right away and then users get to decide on one.
- Digit — Works as a savings evaluator and potential investment portal. The app studies where people save the most and takes that money and puts it into a separate account. This amount earns a small amount of interest and can then be used to micro-invest in a variety of ways.
- Stash — Allows for a small initial investment of just $5. From there, users decide what amount to invest and which exchange-traded funds (ETFs) and stocks to deposit money into.
Once you have narrowed down a company you want to work with, download the app and plug in your personal information. From there, decide how much to invest and what other services you want to utilize. Be sure to check out each company individually and read the fine print before going forward. Remember that some of these apps have specific charges and minimum balance requirements as well as annual account maintenance fees.
Should You Choose a Robo-Advisor?
Many micro-investing apps use a robo-advisor or an automated system tailored to your needs and financial goals. Most of the apps work by recommending the best ways to invest your savings or deposits so you have the best chance at good earning returns. Other apps are just a portal to simplify and organize your investment transactions.
Risks and Pitfalls
With any investment, even if it’s only a few dollars, there is a risk of loss. This could be a result of your chosen company declaring bankruptcy, failing to make a profit or even merging into another organization. With micro-investing, you only invest small amounts; this minimizes the level of potential risk but results in a smaller return.
Micro-investing is a good way to get your feet wet in the investment world without spending too much money. Even though you may start off small, you can diversify your wealth and deposit it into larger investments in the future. See how simple it is to put your hard-earned money to work for you!
~Here’s to Your Financial Health