Micro Investing 101: What You Need To Know + 4 Best Apps To Start (2019)

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This article has been reviewed and deemed factual by our content auditor with 8 years of banking experience.

Article Approved By Banking Expert

This article has been reviewed and deemed factual by our content auditor with 8 years of banking experience.

If you want to start investing, but don’t know where or how to get started, this guide on micro-investing is for you. Why?

Because it’s a low-cost, low-effort way for you to save money and build an investment portfolio, even if you don’t have much money.

Micro-investing platforms are easy to use, and charge low-to-no fees.

Here are two examples:

Acorns has no account minimum and no management fee. But, they do charge a small monthly fee for rounding up bank account transactions to the nearest dollar.

While other platforms like Betterment have an account minimum and management fee, but offer more complex investment options (e.g., traditional, Roth, and SEP IRA, etc.)

Note: not all micro-investing products are FDIC insured.

Investing can help you to save more for your retirement, accomplish your short- and long-term financial goals, and build your wealth. So, regardless of your goals, micro-investing can help you get there.

By learning how to invest, you may be able to attain financial independence by becoming a saver. However, the fee for entry can be high if you open an investment account at a traditional brokerage.

What Is Micro-Investing?

micro investing

Micro-investing is an investment strategy through which investors invest small amounts of money automatically in the stock market. Many times, these are robo advisors making small investments in individual stocks.

People simply open investment accounts using micro-investing apps and fund them. The platforms use robo-advisors to give investment advice and to automate the process.

Many micro-investing platforms charge very low or no fees for opening accounts. Some also do not charge fees to manage the investment accounts or fees for trading. While traditional brokerages may require you to have thousands of dollars available for your initial account balance, micro-investing apps may not have any minimum account balance requirements or have minimums that are low.

The ability to invest without paying commissions or other fees can help your earnings to grow faster. Fees can eat into the total amount that you are able to save quickly and can reduce your earnings significantly over time.

How Does Micro-Investing Work?

micro investing

Micro-investing requires you to download a mobile app on your smartphone or tablet. Some companies also have desktop platforms that have more robust features. You simply open a free account and fund it. You can fund your investment account in a number of ways, including the following:

  • Automatic withdrawals from your checking account
  • Linking your debit card so your purchases are rounded up
  • ACH transfers
  • Checks
  • Sending money digitally

Once you open your account, you will then need to choose your investments. The best robo-advisor will ask you a number of questions. The answers that you provide will help the apps to understand your level of risk tolerance, the duration that you have to invest, and your financial goals. They will then suggest investments and target asset allocations to fit your needs. Others may have a number of pre-set portfolios to choose from.

It is not necessary for you to have a depth of knowledge about the stock market to get started with micro-investments. After you have chosen your portfolio or picked your investments and allocation percentages, the apps will automatically invest your money as it is deposited into your investment account.

Apps that allow you to link your debit card or credit card may round up your purchases to the next dollar automatically. The spare change is then transferred to your investment account and invested in the securities according to the percentages that you have assigned to them.

Micro investing allows you to invest a small amount of money and to watch your savings grow. It takes little effort or knowledge and can be a good way for college students to start building their savings and working towards their futures. Micro investing apps provide a simple way to get started investing easily.

Who Uses Micro Investing Apps?

micro investing

Investors of all ages use micro-investing apps. However, they are particularly popular with younger investors and college students who do not have a substantial amount of capital. This investment strategy is a good fit for new or inexperienced investors who want to avoid the high initial minimum account balances that are required by traditional brokerages and to avoid paying high fees. These apps are also great for people who want a do-it-yourself or hands-off approach to investing through automation.

What Are Micro-Investments?

When you open a brokerage account with a micro-investment app and make a minimum deposit, the money will be used to buy shares of exchange-traded funds or ETFs. These are index funds that try to match the performance of a specific index. Investing in ETFs allows you to spread the risk and to minimize it because ETFs include shares of hundreds of companies.

Investing Statistics

A survey that was conducted by Bank of America revealed that 16.67% of millennials from age 23 to 37 have amassed savings of more than $100,000. However, many young people do not have anything saved. GoBankingRates conducted a survey that found that a majority of people who are from age 18 to 24 have less than $1,000 in their savings accounts. More than half of the people in this age group have nothing saved.

Micro investment apps might help to reverse that trend, however. Because of their simple approach and their ease of access, they are becoming more popular. According to Statista, 12.29% of adults who are age 29 or younger have used micro-investing platforms in the past 12 months.

Best Micro-Investing Apps

You can find micro-investing apps for free on your android phone or your iPhone. There are many available that help you to set your investment plan and gather your spare change to grow your savings. The following apps are some of the best ones available.

Robinhood

robinhood

This application made our list of the best investing apps for new investors.

Robinhood is a micro-investing app that does not charge trading fees or commissions. When you open your account, you will select your own stocks or ETFs. It does not provide you with any investment advice.

However, it is a good choice for investors who know what they would like to invest in and who want to avoid paying fees when they make frequent trades. You can also open a premium account on the Robinhood platform called Robinhood Gold.

It is a margin account that allows you to borrow against your margin account. However, you must have a minimum of $2,000 in your investment account to buy on the margin.

Acorns

acorns

Get $5 from Acorns by signing up through us today.

The Acorns app makes investing effortless. When you open your Acorns account, you link your debit card or credit card. Each time that you make purchases with your card, the purchase price is rounded up to the next dollar.

This makes it simple for you to invest your spare change without thinking about it. Your change will be invested in fractional shares instead of whole shares, which allows you to stay fully invested.

There are portfolios available that range in risk tolerance levels from aggressive to conservative. By opening an Acorns account, it is possible for you to save hundreds of dollars per year without thinking about it. If you have a balance of less than $5,000, you will have to pay $1 per month for your account.

WiseBanyan

WiseBanyan

This is one of the few free micro-investing platforms.

WiseBanyan offers a free way for you to invest even if you do not have a substantial amount of money available to you.

You are able to open your brokerage account for as little as $1. This robo-advisor is completely electronic, but it offers the same types of services that are offered by traditional financial advisors.

The app will ask you some questions and then use algorithms to make suggestions and recommendations to you. You can set your goals, and the app will recommend deposits to make to reach them.

WiseBanyan also automates portfolio rebalancing to maintain your target asset allocation. The basic account is free, but there are premium services that are available for a price. You are able to create your own personalized selection of premium services if you want.

Stash

stash

Read our comprehensive Stash review for more information.

With Stash, you can get started with a minimum deposit of $5. This app allows you to link your checking account so that a set amount is automatically transferred each month. Stash helps to determine your risk tolerance level and then creates a portfolio to match it.

You can choose from more than 150 ETFs and stocks. If your investment account balance is less than $5,000, you will have to pay $1 per month. If your account balance is $5,000 or more, you will have to pay 0.25% per month.

Should You Start Micro-Investing?

Looking for a low-risk way to get started with investing? Try micro-investing. An investment account or a retirement account offers you the ability to earn more than you can by stashing your money in a traditional savings account.

Curious about other micro-investing options? Check out our M1 Finance review or our Motif Investing review.

These and other apps can help you to grow your wealth even when you don’t have a lot of money to get started. Through automating your savings and investments, you can work towards financial independence without having to think about it.

Brian Roberts

Brian Roberts

Editor at CarefulCents
Featured in The Washington Post and published in Entrepreneur, Forbes, Business Insider, Time, Inc., CNBC and others.