Perhaps you have heard this investment advice before: the path to financial independence is through investments. Saving money in your bank account is good, but money saved almost always depreciates. Even when you get interests, they are often meager. Additionally, it is hard to simply just save enough to make your retirement account full and bursting at the seams.
Understandably, investing is hard. The average household income of most people is hardly enough to cater to the needs of the family let alone leave some more for investing. This is where mico-investing and micro-investing apps come in.
Micro-investing lets you invest as little as you can save. A micro-investment app makes it easy by automating the process and even helping you choose the individual stocks to invest in. With time, the investments you’ve made will be enough to get you started on your retirement accounts. Even more so, you will be able to reap the tax benefits associated with retirement accounts.
This guide will explain what micro-investing is, how it all works, and provide you with our picks for the best micro-investing apps. Ready? Let’s get started!
What Is Micro Investing?
Micro-investing is the same as regular investing, with just some minor differences. Micro-investing hence refers to investing small sums of money over a long time. While a regular brokerage account or mutual funds have minimum deposits of up to $1000 in some cases, micro-investing platforms require little or no minimum deposits. Thus, Micro-investing makes saving money easier and stress-free. Most micro-investment apps link users’ debit cards to their investment accounts on the platforms. When you purchase something, the app rounds up your spare change to the nearest dollar and then invests it for you. A few dollars here and there eventually comes up to a substantial sum.
Furthermore, these platforms help users construct their investment portfolios. With regular investing, the investor has to choose what stocks in the stock market, the companies they most favor, and how much money to put in. However, micro-investing platforms construct investment portfolios for their users, guiding them through starting their investment journies.
A micro-investing app is an app that actively carries out micro-investing for users. Tech companies take advantage of the digital-oriented world we live in today to develop apps that can be used on phones, computers, and the likes, leading to socially responsible investing. Micro-investing apps build your portfolio and accumulate your returns over the years. This can be a painstaking process and requires a commitment to funding your account often. Also, the returns could vary from one year to the other. However, if you start on time and are consistent with it, you will contribute a large sum to your retirement savings even before you retire.
How To Choose the Best Micro Investing App
As you can see from our discussion above, you do not need to be a personal finance expert to begin your investing journey. Financial advisors are good and could help you set up your retirement account. However, they may not be entirely necessary for micro-investing. If you want to start using micro-investing apps, here are some of the chief considerations for choosing the best investment apps.
Ease of Use
The best micro-investing apps are usually the ones that are easy to use. Many people who use micro-investing apps are usually newbies to investing. Thus, they lack the investing knowledge regarding how to go about the investment process. It is thus imperative that micro-investing apps make the process as easy as possible. Setting up on the different platforms, depositing money, downloading and installing the apps, integrating one’s checking account with the apps,, and investing money should not be tedious. Hence, you may want to confirm how reliable and easy it is to use an app before you download them.
Generally, micro-investing sites have low required account minimums. They also typically do not charge account fees for maintaining an investment account for users. This ties in with the idea of micro-investing, which naturally should involve small sums. Thus, when considering which of the micro-investment apps to use, do not forget to consider the app’s minimum balance requirement. If it is too high, then you may as well just go along with a traditional brokerage. However, all of the suggestions on our list have low or non-existent account minimums.
Personal Investment Style
Your personal investment style could also inform the micro-investing app that you choose. Your personal finance investing style should factor in your financial goals, the time frame you have to meet them, and your source of funding for the investments. Micro-investing apps have their unique strengths and weaknesses. Some invest in fractional shares, and some others do not allow free trades. To ensure that your personal investing philosophy does not clash with that of the investing platform, get familiar with the micro-investing apps before committing your money.
Even when micro-investing, you should aim to diversify your portfolio. This is important for several reasons. The primary reason is that diversified accounts are less susceptible to fluctuations in the stock market. Investment platforms typically try to hedge their risks and prevent being affected by the volatility in the market by investing in many companies and stocks at the same time. Many micro-investing apps apply this same principle too. However, it is your duty to ensure that your chosen app actually keeps to this.
Top Recommended Micro Investing Apps
We have (hopefully) shown you that you need to take investing seriously for effective money management. One of the ways to do that is by using micro-investing apps. Below are the best micro-investing apps we could find.
Acorns is probably the best micro-investing app there is. It is an all-rounder that has all of the features that make investing fun.
Upon downloading the app, you get to answer some questions to gauge your risk tolerance. Then, the app designs an investment portfolio based on that. It then links your debit card and bank account when you are done.
Acorns uses the round-up system to round up your purchases to the nearest dollar and then invests the difference. The platform also implements a policy known as Found Money where it rewards users when they shop with partner companies.
Acorns operates different account levels where users can invest in an individual stock. The trading fees for the lowest, i.e. the Lite service is around $1. However, if you are willing to pay some more for the other different options, you get to enjoy certain perks like tax discounts for retirement accounts.
On Acorns, you get a $10 signup bonus when you make your first deposit.Click Here To Get Started
Stash is also another of the low minimum micro-investing apps. With the Stash Beginner, you get to pay as low as $1 to set up and run your account. This payment gives you a brokerage account, access to educational materials, and a bank account.
Stash gives users a wonderful introduction into the investing world. With the brokerage account you opened while signing up, you can invest in shares, ETFs, mutual funds, and even options on the stock market. When you make a deposit of $5 and above on Stash, you get a $5 reward. Beyond that, you are rewarded with fractional shares for shopping on a publicly-traded company’s store using Stash.Click Here To Get Started
This is also another app with a zero account minimum. It is ideal for beginner investors who may not have financial advisors to guide them through the process.
With M1 Finance, investors get to decide how much they can set aside every month. They also choose the funds or stocks that make up their investing account. Furthermore, users get the option of purchasing fractional shares and get a $30 bonus for every $1000 deposit that they make.Click Here To Get Started
Robinhood is also one of the best investment apps you can explore. It is designed for users who have some experience with investing as the investing process is self-directed. On the investing app, you will have to decide the investments you want to put your money into.
However, Robinhood is excellent because it offers a zero account minimum. You do not have to pay to sign up. Furthermore, it engages in free trade and does not require users to pay any commission when they buy or sell shares.
Finally, unlike any random brokerage account, Robinhood allows investment in fractional shares. Here, you only buy a portion of the shares with the money you have, owning a stake proportional to what you paid.Get A Free Stock When You Open Your Account
This is more of a robo-advisory service than a micro-investing platform. Betterment does not charge trading or signup fees but takes 0.25% of all assets in any given year.
When you download and sign up on the platform, you will answer some questions to determine your risk tolerance level. Thereafter, the app will determine your investment strategy and construct a diversified portfolio with that. You then get to connect your debit card at once.
Unlike Acorns, Betterment does not round up your purchases or automate your investing process. You will have to choose the individual stocks and the companies you want to invest in and stick to them.Click Here To Get Started
FAQ: Micro-Investing Apps
Who are micro-investing apps for?
Everyone who wants to save money. It is solid financial advice to attempt to save as much money as one can as early as possible. This is exactly what micro-investing helps a person achieve. However, the features of micro-investing apps make them ideal for beginner investors, hands-off investors who want to automate their investing process, and young investors who may not have access to huge sums as capital. However, this does not mean that if you have some experience with investing, you should not try using these apps, although typically, more advanced investors prefer to invest by themselves.
How do micro-investing apps work?
Popular investing apps utilize either round-ups or automatic transfer processes to invest. In the round-up method, the app rounds up each purchase to the dollar and then invests the change in your investment portfolio—many micro-investing platforms tow this route. For automatic transfers, you schedule how much goes from your bank accounts to the platform within each period. Then, the app takes it up from there and makes sure the money gets into your investment account and subsequently invested into your portfolio.
What do micro-investing apps invest in?
Typically, micro-investing apps invest in either ETFs, stocks, or bonds. You can also get to invest in fractional shares for any of these investment options. Fractional shares allow you to pay for a fraction of a given stock instead of paying for the entire thing. For instance, if a share is sold for $300 per unit. You can buy a fraction at $30 and be entitled to interest at the rate of that investment.
ETFs ( Exchange Traded Funds) on the other hand refer to a bundle of stocks that target a specific industry. This is a brilliant way to diversify your portfolio. You may want to pay attention to apps that offer this option.
Do seek professional financial advice if you are unsure of which to choose. An expert can guide you to deciding the one that works well for you.