How a little money in the right place can go a long way.
What is Microinvesting?
It’s easy to think that playing the market is only available to those with lots of disposable income. But in actuality, you don’t need to be rich to try your hand at buying and trading stocks, thanks to microinvesting. As the name implies, microinvesting involves transferring small sums of money (you can get started for under $10!) from your bank account directly into an investment portfolio of stocks and bonds.
While you’re unlikely to strike it rich (there’s still a chance!), most people save $600 more annually with microinvestments. According to The Penny Hoarder, one in five microinvestors save more than $1,000. At the very least, it beats letting your pocket change sit in a jar on your countertop.
Microinvesting is ideal for people who don’t have a lot of money to invest each month, but want to start their own portfolio. It’s also perfect for those who are intimidated or uncertain about jumping into the financial market, as it allows you the room to start slow and learn more about investing as you go. Microinvesting doesn’t take too much time, energy or money — so there’s less risk across the board — and because it’s mobile-friendly, you can make changes or check in on your accounts with just a few clicks.
How to Microinvest
To microinvest, you simply connect a bank account with a specialized app. These apps buy fractional amounts of stocks and ETFs (exchange-traded funds), which eliminates the larger financial barrier required to purchase stocks. Most apps charge a small monthly fee — think $3 to $5 — and also don’t require large minimum amounts, unlike bigger investments.
When you set up your account, you’ll have to make a few decisions.
Deposit amount and method:
Microinvesting apps offer several ways to deposit your investments. You can opt for an automatic amount to be transferred each month, or manually transfer what you can, when you can. You can also round up on all of your purchases so that spare change goes straight to your investment account.
Risk tolerance:
When you sign up, you’ll have to answer a few questions about how much risk you’re willing to take. Factors to consider include your age (how much time until you’ll want the money), how much risk you can afford, and your comfort level in watching your money go up or down.
Goals:
Are you thinking about retirement? Looking for a secondary stash of money? Saving for a home? Your ultimate goals for the account will influence where your money is invested. Many apps also provide budgeting and saving tools to help you track your spending and stay on top of your goals.
Once you determine your deposit structure, risk willingness and goals, the app will handle buying and selling investments in your online portfolio.
Best Microinvesting Apps:
There are a range of apps available, with most including features like access to bank accounts, debit cards, fee-free ATMS, and more. Here are a few of the best options.
Acorns
Just like a squirrel, this cleverly named app allows you to stash your money away for when you need it. The app will recommend one of their pre-made portfolios for you based on your age, goals and risk tolerance, and options also include Sustainable Portfolios, which is focused on socially responsible investments. Acorns charges $3 for a personal account or $5 for a family, account, and also allows access to an IRA. As an added bonus, Acorns users can earn extra investments — or “found money” — when they shop one of Acorns 250 retail partners (think Uber, Walgreens and Nike) via the Acorns Safari and Chrome extensions.
Stash
With Stash, you can choose how involved you want to be in your investments. For $1 a month, you can craft your own portfolio from more than 3,000 funds or stocks, or for $3 a month, you can have Stash select them for you based on your goals and risk tolerance. With their highest option ($9 a month), you can also get two custodial portfolios — or kids portfolios — so you can build for their future, too. Like Acorns, Stash offers access to an IRA, and Stash also hosts occasional “stock parties,” where members can log on and claim bonus stock from notable.
Robinhood
The most hands-on option, Robinhood allows users to select from their favorite companies or opt for diversified stock bundles that invest in many companies at once. Unlike other apps, Robinhood lets users trade full stocks, and helps by providing detailed information on earnings information, stock ratings, and investor comps. Robinhood also provides a robust Crypto option, and as a welcome gift, your first stock is on them. While they don’t charge a monthly fee, or commissions, they do charge a small fee on sell orders.
Just remember that it’s highly unlikely you’ll make millions off of microinvesting. It’s simply a good way to try your hand at trading and make some extra money in the process. When it comes to long-term investments with higher yields, you’ll be better off with a 401k, a retirement account or a high-yield savings account. But saving money is rarely a bad thing, so if you can start with microinvesting — or add it into your financial mix — you’ll likely see a financial boost down the line.
