#IM.06 MICRO INVESTING : The new way to Invest

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.

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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?

  1. New investors

  2. Someone who does not want to pay investment fees

  3. Anyone with limited amount of money to invest, especially millennials

  4. Savers who want to create good saving and investing habits by automating their investing

Micro-investing apps

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

  1. Acorns

Pros:

  1. Cash back at select retailers

  2. Educational content available

Cons:

  1. Small investment portfolio

  2. High fee on small account balances

Acorns is best for:

  1. Hands-off investors

  2. People who struggle to save

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  1. Stash

Pros:

  1. Simple to use

  2. Lower fees for smaller accounts

Cons:

  1. High fees for larger accounts

  2. Limited account options

  3. No investment management

Stash is best for:

  1. Investors who want guidance selecting investments

  2. New investors

  1. Betterment

Pros:

  1. Multiple investment options

  2. Robust global based tools

Cons:

  1. No direct indexing

Betterment is best for:

  1. Retirement investors

  2. Users with low balances

  3. Users who like global based tools

To know more about these apps, go ahead and read about it here:

https://www.nerdwallet.com/reviews/investing/advisors/acorns

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.


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