Far too many people avoid the idea of investing, believing it’s something only rich people do. After all, most traditional stock brokerage platforms place restrictions on the minimum investment amount required to get started and charge hefty fees for each trade. If you don’t have a lump sum of money already put aside, the traditional forms of investing can seem daunting.
By comparison, micro-investing apps are designed to be entry-level investment products that allow anyone to start investing. Even if you only have a few dollars, it’s possible to start building your investment portfolio today.
There are a number of different micro-investing apps to choose from, all of which let you get started with just a few dollars.
Stash Invest (stashinvest.com)
Stash is a micro-investing app that lets you build your investment portfolio on your smartphone. Stash lets you get started investing in ETFs with as little as $5, as they allow customers to purchase fractional shares. By comparison, traditional investment into ETFs through a brokerage might set a minimum investment of $1,000, so there is the opportunity to get started with only a small amount of money.
Stash charges a fee of $1 per month for account balances under $5,000. For balances over $5,000 the fee is set at 0.25%.
The Acorns micro-investing app is designed to let you invest your small change into a share-based portfolio. The idea behind the Acorns app is that every purchase members make on their credit or debit cards is rounded up. If you buy something that costs $4.35, Acorns rounds up the purchase to $5 and puts the spare change into savings to be invested.
Each month, all of the rounded-up amounts of your small change are added up and added to your Acorns account automatically. Those small amounts of money might seem insignificant, but they have the power to compound into a much larger amount over time.
Acorns charge a fee of $1 per month for balances under $5,000. The fee changes to 0.25% when your balance goes over $5,000.
Betterment is an automated micro-investing app that allows members to invest into IRA, Roth IRA and a rollover 401(k) account, as well as providing optimized investment returns for individual investing accounts.
The goal of Betterment is to take proven investment strategies that have been around for decades and use technology to make those tactics more efficient while increasing long-term returns. Betterment charges a fee of 0.35% per year for account balances under $10,000.
Robin Hood is a zero-commission stock trading platform that allows you to make trades from your smartphone. There is no minimum investment required to start investing, so it’s possible to get started with just a few dollars. Robin Hood makes its money on cash deposited in customers’ online brokerage accounts or on margin loans provided to investors who prefer to leverage their investment efforts. As reported by The Scope Weekly, it also offers a fee-free trading app.
A Word of Caution
While there are plenty of benefits for micro-investing, there are some things to be aware of before diving in at the deep end. Micro-investors with small balances face the risk of having their accounts decimated by fees.
For example, apps such as Acorns charge $1.25 per month for account balances under $5,000. If a micro-investor’s balance is only accruing by $5 or $10 each month, the fees charged may be higher than the returns earned on the investment. A micro-investor with an account balance of $100 paying $1.25 per month in fees is essentially paying 15% per year.
The key to keeping fees and charges to a minimum is to aim at getting the account balance over $1,000. Once the account balance is high enough, the micro-investor can then withdraw the money in the micro-investing app and switch to investing in a low-cost trading platform or investing app instead.