There are many different options to choose from when it comes to investing. You can go the route of buying stocks or mutual funds, or you could invest in real estate or other physical assets. But what if you don’t have a lot of money to spare? Or what if you want to get into investing, but you’re not sure where to start?
Micro-investing apps may be the solution for you. These applications allow you to regularly invest small amounts of money, adding up over time. And because they’re digital, they make it easy to get started without having to worry about commissions or other fees.
But before you download one of these applications, it’s essential to do your research. There are a lot of different micro-investing apps out there, and not all of them are created equal. So, to help you make an informed decision here’s what you need to know about the different types of micro-investing apps available today.
Micro-Investing – What You Need To Know Share on XWhat is a Micro-Investing
Micro-Investing Apps are applications that help an individual invest their money into a small sum of money. Mostly, these applications are used by the people who have a little amount of money to spare. In addition to that, micro-investing applications provide you with diversified options so that you can choose the best one for yourself.
Micro-investing apps allow users most often millennials to invest small amounts of money regularly without having to worry about commissions or other fees. Most offer iOS and Android mobile apps and Web-based platforms so investors can monitor their accounts wherever they go. After setting up an account, users transfer money into their account via bank transfer, debit card transfer, or credit card.
Once there, you can use the money to invest in anything from individual stocks and bonds to mutual funds and real estate investment trusts (REITs). However, because they offer different accounts, investors have to research what each one is best for before signing up.
Benefits Micro-Investing
Easy Accessibility
One of the most significant benefits of using a micro-investing app is extremely easy to use. Most offer mobile apps and Web-based platforms, so investors can monitor their accounts wherever they go. And because there is no minimum required deposits, you can start investing with as little money as you want.
Diversification
Another benefit of using these applications is that it allows you to invest in various assets, including individual stocks and bonds, mutual funds, and real estate investment trusts. This diversification can help reduce your risk if one or two investments don’t perform well.
Low Fees
Many micro-investing apps offer low fees compared to traditional brokerages, meaning more money is going into your investments instead of the brokerage. Some charge no commissions or fees when buying or selling an asset.
Educational Resources
Many micro-investing applications have educational resources to fully understand how their money is invested and what types of accounts they can open. This means investors don’t have to worry about potentially losing everything overnight if they don’t understand why specific strategies are being used with their money, which can happen with traditional brokers if investors aren’t careful.
Investing in Autopilot
Most micro-investing apps give users the option to invest automatically, which means you don’t have to monitor your portfolio constantly. They will make the necessary changes to your investments using algorithms based on market trends, allowing investors to focus on other things while their money works for them.
Low Threshold Signup
They typically have low threshold signup that doesn’t require investors to jump through hoops before starting investing. Most take less than five minutes and can be completed online or via mobile. If you already have an investment account with another brokerage, you should be able to quickly transfer your funds over so you can save time and effort by not having to open multiple accounts at once.
No Commissions or Fees
Another benefit of micro-investing applications is that many don’t charge any commissions, which means no changing fees or other charges when you buy and sell investments. This allows you to keep the bulk of your investment profits instead of giving them away to a broker who did little more than making an electronic transaction on your behalf.
Referral Programs
Many offer referral programs that allow users to earn extra cash or credit when referring their friends and family members. For example, Acorns has a program where investors can get $5 for signing up their friends. At the same time, Robinhood awards both the investor who referred the friend and the new account holder with free stock credits or cash once funds are deposited into the account.
Tax-advantaged Accounts
One of the best features of micro-investing apps is that many offer tax-advantaged accounts, which can help reduce your taxable income. For example, SEP-IRAs and Roth IRAs offered through most micro-investing apps are not subject to annual contribution limits like other retirement accounts and employees can contribute as much or as little money as they want. These tax advantages can add up over time, making it easier for investors to save for retirement.
Disadvantages of Micro-Investing
Limited Investment Options
Micro-investing applications typically offer a limited number of investment options compared to traditional brokerages. This can be a disadvantage if you’re looking to invest in a specific asset class or want more control over your investments.
Low Account Balances Can Hurt Returns
One disadvantage of these applications is that some have low account balances, which can hurt your returns in the long run. For example, suppose you have $100 in an account, and the application only offers investments that earn 5%. In that case, your total return after one year will be $5, compared to $10 if you had invested the same amount with a brokerage that offers a wider variety of investments.
Limited Customer Support
Many applications don’t offer live customer support, which can be a disadvantage if you have questions or need help with your account. Instead, they typically provide email or phone support that can take a few days to get a response.
Lack of Transparency
One potential disadvantage of using a micro-investing app is the lack of transparency into how the app works. While most applications are open about their investment strategies, others use proprietary algorithms not disclosed to investors. This means investors don’t know why their money is being invested in a certain way and may not be comfortable with the lack of control over their money.
Investing Without a Financial Advisor
Finally, many apps encourage investors to invest their money without the help of a financial advisor. While this can be advantageous for those who want complete control over their investments, investors are solely responsible for making wise investment decisions. They do not have access to objective advice.
Why You Should Use Micro-Investing
There are several reasons why you should consider using these apps, including:
You Want to Invest Small Amounts of Money
One of the best things about micro-investing apps is that they allow you to invest small amounts of money at a time. This can be helpful for people who don’t have a lot of money to invest or want to start slow and build up their investments over time.
You’re New to Investing
Another benefit of using a micro-investing application is that they’re perfect for beginners who are just starting in the world of investing. Many applications offer educational materials and help new investors get acclimated to the world of investing.
You Want Convenience and Accessibility
Some micro-investing apps are also very convenient, allowing you to make trades from your phone or computer. This can be beneficial if you want easy access to your investments 24/7.
You’re Looking for Tax Advantages
One significant advantage of micro-investing is that many apps offer tax-advantaged accounts like Roth IRAs, which can reduce your taxable income.
You Prefer Automated Investing Strategies
Another benefit of using these applications is that they can help automate your investment strategy, so you don’t have to actively manage your investments every day. If you’re busy and don’t have time to regularly monitor your account or make trades, using a Robo-advisor can be helpful.
You Want to Save for Retirement
While not all applications offer retirement accounts like IRAs, some do, which means you can save for the future and set up an automated investment strategy that will benefit from compounding interest.
You Want Access to SEC-Regulated Investments
Finally, companies regulated by the Securities and Exchange Commission (SEC) offer many micro-investing apps, which function similarly to traditional brokerage firms. It’s essential not only to consider how a particular micro-investing app is regulated but whether the companies that will be holding your investments are as well.
What to Look for in Micro-Investing
Education Materials
Many of these apps offer educational materials like tutorials and webinars to help make investing more accessible and straightforward. Others also allow you to connect with financial advisors to answer your questions about specific investments.
Security Measures
Your money must be safe when using a micro-investing app, as with any investment account. While most don’t offer bank-level security, some use multiple layers of protection like two-factor authentication, which means investors must confirm their identity by entering an additional code after logging in.
Investment Options
When choosing a micro-investing app, it’s essential to consider the available investment options. Some apps offer a limited number of investments, while others allow you to invest in a wide variety of assets.
Fees
Most micro-investing apps charge fees for their services, so it’s essential to understand those fees before signing up. The costs are relatively low in most cases, but it’s still important to know what you’re paying for.
Minimum Investment Requirements
Some apps have minimum investment requirements, which means you must invest a certain amount of money in using their services. This can be a deterrent for some investors, but others may see it as a way to ensure they’re only investing in quality companies.
Automated Investing
If you’re looking for an app that will automate your investment strategy, it’s essential to find one that offers this feature. Not all apps provide this type of service, so it’s necessary to do your research ahead of time.
Retirement Accounts
Not all micro-investing apps offer retirement accounts, but some do. If you’re interested in this, make sure the app you choose provides this type of account.
Regulation by the SEC
As mentioned earlier, it’s essential to make sure the micro-investing app you choose is regulated by the SEC. This means that they adhere to particular safety and transparency standards.
Customer Support
When something goes wrong, you want to be sure that the micro-investing app you choose has good customer support. This could mean anything from having a customer service phone line available to offering online chat support.
What Are Micro-Investing Apps Out There
There are several different micro-investing apps out there, and you can find one that works best for your individual needs.
Some of the most popular ones include:
Acorns
With a highly user-friendly app and low fees, Acorns is an excellent option if you’re new to investing or want something simple. You can use the app to invest in ETFs or stocks, set up automatic deposits from your checking account, and track your investments on their mobile app. While they don’t offer retirement accounts, the company is working on adding these features soon.
Robinhood
Offering free trades, no minimum investment requirements, and a wide variety of investment options, Robinhood is an excellent choice for more experienced investors. The only downside to using Robinhood is that they do not offer customer support beyond online chat.
Betterment
Betterment is one of the most popular micro-investing apps and offers retirement accounts, automated investing, and a wide range of investment options. Fees start at 0.25% of your account balance and decrease as you invest more money.
Wealthfront
Wealthfront is also a popular choice for micro-investing. They offer automated investing, retirement accounts, and a wide selection of investment options.
Fidelity
Fidelity is a well-known name in the investing world and offers various investment options, including individual stocks, ETFs, and mutual funds. Minimum investment requirements vary depending on the account you choose.
Stockpile
If you’re looking for an app specializing in gift cards, then Stockpile is a good choice. With no fees or minimum investment requirements, this app offers stock certificates that you can purchase with your existing gift card balance. While they don’t offer retirement accounts, they make it easy to invest money you already have through their mobile app.
How to Choose the Right Micro-Investing App
Type of account you want
The type of account you choose should be based on your current financial standing and future goals. Retirement accounts like IRAs typically require a more significant initial investment, but the money will grow tax-free. If you’re starting to invest or have a lower amount, then an ordinary brokerage account might be a better choice.
Fees
Most of these applications charge no fees for regular brokerage accounts, but you should always double-check. Retirement accounts will typically have a fee associated with them, and these can vary significantly depending on the broker.
Minimum deposit requirements
This includes both minimums to open an account and minimums to make deposits into that account. You’ll also want to consider how much it would cost you in terms of time and money if you were to make multiple small deposits each month which is often required when using some micro-investing apps.
Types of investments offered
Having a wide selection of investment options is essential since not all investments perform equally well at different times. If there isn’t an investment option that aligns with your beliefs or goals, you might want to consider a different app.
Customer service
This is an essential factor for many people, especially those new to investing. All of the apps listed here offer customer service, but not all offer phone support.
Ease of use
The app should be easy to navigate and understand, especially if you’re unfamiliar with investing terminology. The best apps will also have a mobile app so you can keep track of your investments on the go.
Gift cards
If you’re looking for an app specializing in gift cards, then Stockpile is a good choice. With no fees or minimum investment requirements, this app offers stock certificates that you can purchase with your existing gift card balance. While they don’t offer retirement accounts, they make it easy to invest money you already have through their mobile app.
Investment selection and diversification
The best apps will offer a wide selection of investments so you can choose the ones that align with your beliefs and goals. They’ll also typically include several different types of accounts, so you can diversify across these different options.
Other features and bonuses
Most people will find one or two apps stand out from the rest for their unique features and bonuses. This could be anything from higher interest rates to market news and opinions. Some apps might also integrate with other platforms like Mint or Acorns, making it easier for users to keep track of their money across multiple platforms.10. Mobile app
The best micro-investing apps will offer a mobile app that is easy to use and intuitive, but this isn’t something that all apps can offer. This might not be important if you don’t plan on using the mobile app regularly (or at all), but if you want an easy way to check your investments while you’re doing other things, then make sure the app has an excellent mobile version before signing up.11. Cost
The cost of using micro-investing apps can vary significantly depending on the type of account, minimum deposits required, and any additional features. It’s essential to understand how much it might cost you before signing up for either retirement or ordinary brokerage account.
Conclusion
Micro-investing applications are a great way to start investing, especially if you don’t have a lot of money to spare. They offer a wide selection of investment options and account types, and most of them have no minimum deposit or fee requirements. Before choosing an app, you’ll want to consider customer service, ease of use, and investment selection. And finally, be sure to understand the cost, so you don’t end up paying more than you expect.
Investing can be a great way to secure your financial future, but it typically requires a more significant initial investment than what micro-investing apps offer. If you’re starting or have a lower amount to invest in, micro-investing apps may be the best way to get started.
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