It took a lot of saving and careful planning to get into investing back in the day. You had to set aside a portion of your income and be willing to forsake your favorite activities.
But nowadays, it seems like everyone is investing, which is great news. The more people get involved, the more we stand to gain. People are getting into investing younger and younger —all thanks to micro-investing.
What Is Micro-Investing?
As the name implies, micro-investing takes the concept of investment and makes it smaller. Where buying a single stock in most companies will cost you hundreds or even thousands of dollars, micro-investing only takes dollars.
The concept of micro-investing is simple: rather than putting large amounts of money into a single stock, why not put smaller amounts into fractional shares? Using a micro-investment account, you can invest small amounts into larger stocks and still reap the benefits. It is cheaper and more accessible to a younger generation of potential investors. What’s more, micro-investing has also led to other easier ways to save for your investment goals in the form of roundups.
The beauty of this system is that the amount of money you deposit each time is negligible. You wouldn’t think much of a dime in the grand scheme of things, but if you combine that with the extra cents from your weekly grocery shopping, any meals you have out, snacks, or other purchases you make, it all quickly adds up. Before you know it, you will be saving $2 to $5 a week, $8 a month, then $96 a year!
For example, if you buy a cup of coffee that costs $1.89, your micro-investment account will round that figure up to $2.00, putting the 0.11cents away.
For a younger person who is just getting used to the confusing world of bills and taxes, putting aside $100 per month from their wages can seem like a real blow financially. However, using micro-investment accounts can make a great start on saving for the future without impacting their budget.
Tips for Micro-Investing
So how do you get started with micro-investing? It’s surprisingly simple. Many sites and accounts already exist that do all the work for you, and I will showcase a few later. But first, here is a step-by-step guide on setting one up:
- Sign up for an account that offers micro-investing – find the one that most fits your lifestyle and savings goals and connect your account with it. Some will commission charges, while others will supplement these charges with minimum buy-ins.
- Use your account to round up the costs on purchase – the additional cents added will be deposited straight to your micro-investment account for you.
- Allow your savings to accrue interest or use them for further investments. Some micro-investment accounts will allow you to put your savings to work investing in stocks or other opportunities.
It is that easy.
One thing you should keep in mind when considering micro-investment is what you intend to use it for. There are many different kinds of micro-investment accounts out there, and each offers a different experience in investment.
Saving for the future
As effective as saving small change is, it doesn’t really make a solid structure to keep you warm in the future. Instead, think of micro-investments as being more of a foundation for your future savings. If you combine a micro-investment account with a monthly savings account or IRA, you can find yourself with a solid nest egg to rely on in retirement.
Using micro-investments to invest in stocks
As I mentioned before, some micro-investment accounts also offer you the chance to use your savings to make financial investments. Most of these will require you to reach a minimum amount before making the investments, but they also have no administration fees. Couple this with some direct savings you add in yourself, and you can find yourself gradually turning fractional shares into proper investments.
Micro-Investing Accounts You Can Use
Now that you have a better idea of micro-investing, here’s an overview of the best investment accounts out there.
Robinhood – Best for Fractional Investing
Robinhood provides easy access for millennials to micro-investment requiring only $1 to start you off. It does not require any trade commissions and offers tools to teach you how investments work and find stocks to invest in.
All you need to do is deposit your roundups into your account wallet and choose which stocks you want to invest in. You determine how much you wish to invest, and the site will help you do the rest.
Wealthfront – Best for Beginner Investors
Wealthfront requires an initial investment of $500 to start you off. This is offset by their promise of free management of your first $5,000 savings.
Their platform is automated and gives you the option to choose additional options from categories such as:
- Healthcare ETFs
- Socially Responsible ETFs
- Technology ETFs
- Cannabis ETFs
All of their sources are vetted by their professional team and customized according to your level of expertise. They also allow you to allocate up to 10% of your portfolio to two different crypto trusts: Greyscale Bitcoin Trust (GBTC) and Greyscale Ethereum Trust (ETHE).
Public – Best for Investing in Alternative Assets
As its name suggests, Public is a much more social investment option. It allows you to create a public profile that keeps track of your investments and other users you can interact with.
It has no commission charges or minimums to pay and gives users the chance to invest in stocks, funds, and crypto. This is a great way for you to learn the ins and outs of the industry and get started with alternative investing.
Acorns – Best for Investing Spare Change
Acorns offers a simple, no-frills app that links everything you need into a single package. Once you have an account, Acorns will handle your roundups on any account cards that you connect to it. From here, it will deposit your money into savings IRAs for you to do as you please.
Acorns also offers a $3 and $5 monthly charge account that includes features like card management and articles and advice from industry professionals.
Micro-investment is an exciting new investing strategy to help you start building wealth. By depositing a small, frequent sum into one of the above accounts daily or weekly, you’ll have an investment that compounds over time. The best part is micro-investing doesn’t require any significant lifestyle changes, so you can keep enjoying the activities you love while making your money work for you.