Updated: Mar 29, 2021
We humans discovered technology, to change the way of life at its best, now the technology at every second is changing our lives. Earlier the world of investing was limited to those who had access to significant amount of capital. If you wanted to invest, you needed large sums of money. However, now the scenario has completely changed. The truth is you don’t need a lot of money to start investing. With micro-investing you can get started even if you have a few rupees to spare.
What is micro-investing?
Micro investing platform allows users to regularly save small sums of money. Its aim is to remove traditional barriers to investing [such as brokerage account minimums, access to huge amount of capital], to encourage people to invest even if they have limited incomes and assets. Micro-investing makes saving a few rupees here and there pretty easy. The idea is that small investments made at frequent intervals can add up without much effort. A routine investment strategy can also help you to overcome any anxiety you might get due to market volatility.
How micro-investing works?
Micro-investing apps allow you to automatically invest small amounts of money in stocks, even if you know absolutely nothing about the stock market. They put your extra cash into portfolios of stocks that they craft for you. Your investment money is typically used to buy exchange traded funds. These funds helpfully spread your risk around by buying up shares of different companies.
Who should use micro-investing?
Someone who does not want to pay investment fees
Anyone with limited amount of money to invest, especially millennials
Savers who want to create good saving and investing habits by automating their investing
Micro-investing apps allow users to save and invest money in small amounts. Usually the app makes saving easy. When you connect a debit card, the app makes automatic transfers for you. These apps aim to open up investing to everyone, no matter your budget.
Top 3 micro-investing apps to download now
Cash back at select retailers
Educational content available
Small investment portfolio
High fee on small account balances
Acorns is best for:
People who struggle to save
Simple to use
Lower fees for smaller accounts
High fees for larger accounts
Limited account options
No investment management
Stash is best for:
Investors who want guidance selecting investments
Multiple investment options
Robust global based tools
No direct indexing
Betterment is best for:
Users with low balances
Users who like global based tools
To know more about these apps, go ahead and read about it here:
Micro-investing however is not perfect, there are certain demerits as well. If you already have a diverse portfolio, it may not expose you to anything new. Though some apps have questionnaires to know about your financial position, it may be difficult to get investment advice that is perfectly tailored for you. While investing small amounts can be a great way to learn the basics of investing, don’t expect it to result in huge returns. It’s pretty unlikely you’ll build your retirement fund from micro-investing.
At the end of the day, micro-investing isn’t going to make you rich. However, it do helps in solving some of the main obstacles that are faced by beginners and young investors: lack of knowledge, lack of capital. It is a great way to learn as you grow and that is pretty cool in itself.