Investing your money can seem like an intimidating process. Where do you start? How much money should you try to invest? If you’re thinking about starting your investment journey, micro-investing may be a suitable solution for you.
What is Micro-investing?
Micro-investing is a way of investing a small amount of cash. These small amounts of money can be so tiny that you don’t even notice you’re investing. It can be spare cash that you have in your bank account which you then invest and collect the returns of your investment slowly.
Micro-investing is a fairly new approach. Traditional investing has previously been thought of as only for the wealthy. However, with more people wanting to make investments, micro-investing has become extremely popular, especially with millennials.
The small sums of money you invest are used to buy parts of stocks or ETFs (exchange traded funds). For example, rather than purchasing a single share of a company, such as Tesla at $678.90 (at the time of writing), you can buy part of a share for a much smaller amount.
Is Micro-investing Worth It?
You may be wondering if micro-investing is really worth the effort, particularly as your returns are going to grow at a slow pace. Here’s the thing. Micro-investing is a great way for beginners to get started. You gain an idea of how investing your money works and there’s much less risk involved.
If you’re saving a small amount of money in a regular savings account, you’re potentially only going to be putting a couple of hundred dollars aside which won’t enable you to save for a home, retirement, or other major goal. With micro-investing, you can invest this money and start to grow it over time. Essentially, your money is going to work better for you in the long-term.
How to Get Started Micro-investing – 4 Tips to Follow
Where do you begin with making micro-investments? Here are 4 steps to get started.
Determine Your Long-Term Goal
Before you start making any small investments, it’s a good idea to think about your long-term goal. Are you planning on saving for a home, retirement, new car, vacation? Perhaps, you want to create an emergency back-up fund or a rainy-day pot of money for those spur of the moment spends. Maybe, you’re trying to pay off debt? Whatever your long-term goal may be, you’ll be able to determine the best strategy for micro-investing going forwards, such as how much you want to invest and for how long.
Decide on What You Can Afford
Next, ask yourself how much you can afford to invest. There’s no minimum amount for micro-investing so consider what you can afford. How much money can you micro-invest without it making an impact on your lifestyle? This could be $5 a week, $10 a month, or simply investing a few random amounts here and there. The most sustainable method for micro-investing is to make the most unobtrusive investments possible.
Use A Micro-Investing App
The best way to make small investments is to use a micro-investing app. A micro-investing app allows you to purchase part of an ETF or share. Plus, many apps can advise you of the best investments to make based on your personal information and preferred retirement age. Most apps will spread your money across a variety of funds to reduce the amount of risk involved, meaning you expect to gain shares in tens or hundreds of businesses.
Micro-investing apps are also known as spare change investing apps as they round up any transactions that you make. For instance, if you buy a coffee priced $4.67 with your debit card, an app will round up your purchase to $5 and invest the difference of 33 cents.
Some apps also allow you to double, treble and quadruple your round ups so you invest more money. Additionally, you can also make recurring and one-time deposits into your investment account. Depending on which app you use, you may be able to select the stocks you want to invest in, while others may automatically do that for you.
The Best Micro-Investing App
Acorns
Acorns enables you to connect your debit and credit card for rounding up purchases. In addition to regular round ups, you can also double, treble and 10X your round up to invest more money. You can also make extra deposits on your own schedule, as well as gaining the opportunity to earn money when you shop at one of the 350+ partner brands. Acorns is a completely automated app so once you’ve set it up, you can sit back and invest without hassle.
Pricing: There are 3 pricing plans available on Acorns.
Lite costs $1 per month – for personal investments.
Personal costs $3 per month – for personal investments, retirement account, and checking account.
Family costs $5 per month – for personal investments, retirement account, checking account, and early investment account for kids.
Where Next?
So, what happens next? What you decide to do with your money will depend on your long-term goals. You may wish to withdraw your money once you’ve reached your initial goal and use it towards purchasing a home, clearing off debts, or taking a vacation. Alternatively, you may feel you’ve got a good grasp on investing and decide to use your money to make a larger investment in stocks or shares etc.
The good news is that whatever you decide, you can continue to micro-invest as a way to grow additional amounts of money over time.
Begin Micro-investing Today!
Micro-investing small amounts of money is a great way to get started with investing. You can make affordable investments, grow your money over time, and gain an understanding of how investing works. Whether you’re aiming to reach a savings goal or work towards investing a larger sum of money, using micro-investing apps makes traditional investing much more accessible.
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