“Micro-Investing” describes small amounts of money being deposited, saved, and invested into an investment account. Micro-investment platforms aim to eliminate barriers to traditional investing. To remove the obstacles to conventional investing, trading fees and minimum account balance requirements are generally removed from micro-investing apps.
Traditional investingcan be scary for people who are new investors. With Micro-investing, there is no such fear, and investing can become easier and more accessible.
What Are Micro-investing Apps and How They Work?
Micro investing apps allow users to invest small amounts of money. The app usually makes saving easy. You can quickly round up your purchases to the nearest dollar or set up automatic transfers using a micro-investing app when you connect a debit card.
The simple way to put it is to invest with a small amount of money rather than a large amount. You do not need large money to start micro-investing; you can start as little as $1.
If you know nothing about stocks, you can still invest small amounts of money using micro-investing apps. They manage your extra cash by creating customized portfolios of stocks.
What Are Our Favorite Micro-investing Apps?
Acorns were founded in 2012 and is regarded as one of the best apps for micro-investment. Users are allowed to link transactions from credit and debit cards and round up the same. This app allows 2, 3, or 10x multipliers over roundups.
There are 5 different portfolios that investors can pick from based on timeframe and financial objectives. The portfolios can be traditional or even aggressive. Harry Markowitz, a Nobel Prize winner, introduced an investment framework known as the Modern Portfolio Theory. This specific theory is used to develop the portfolios in Acorns.
With this app, it is possible to get an entirely automated experience. One can deposit in their investment account using roundups or on a schedule. Then, micro shares of ETFs are purchased by the app for your portfolio.
A Found Money option is also available. It lets investors earn money when they use their card linked with any of the 350 partner agencies of Acorns. Investors can earn a part of what they spend, invest in their account on Acorns within 3 – 4 months after buying something.
LIte $1/month: Personal investment account
- Personal $3/month: A checking and an investment account; a retirement account; and an IRA
- Family $5/month for Family: Includes everything from Personal, plus custodial accounts for your kids.
The app lets you connect it with your bank account and then forget it. It will keep doing its work in the background.
When you cash out, you sell the assets. The whole process takes a few days to finish, and it is not a liquid emergency fund. When you sell shares, it is taxable as well. You to pay taxes in case you made income from the share sales.
How To Invest With the Acorns App?
You can invest with Acorns in two ways, of which – is unique.
- Recurring deposit or Lump sum – You can choose the amount to invest and then have it transferred from your own bank.
- Round Ups – After connecting your credit or debit card, you may set the app to “Round Up” your purchase. You can use the app for investing the difference. For instance, if you spend 3.46 USD at McDonald's, $0.54 would be invested by the app for you.
Acorns works in an easy way:
- You can open an account in less than five minutes. An initial $10 welcome bonus is given to you.
- No minimum investment is required to use the Acorns app.
- You can invest automatically.
- Automatically set aside spare change or extra cash.
- Invest in a diversified portfolio to grow your account over time.
Acorns Can Be Grown With:
- Investing spare change from daily purchases through Round-Up.
- Recurring investments – You can set it for a monthly, weekly, or daily investment, and then forget it.
- One-time investments – You can do this whenever you want.
While shopping at more than 200 major brands, you may earn money. You may grow the account with referrals to friends who begin to make investments with Acorns.
Stash was founded in 2015 and has built an investment platform for beginners that is flexible and informative. Like Acorns, you can deposit roundups or monthly recurring deposits into a Stash account as well as one-time deposits.
However, Stash also lets you pick how to invest your own money and buy fractional shares of stocks and ETFs.
You can find well-known ETFs on Stash. Combat Carbon, American Innovators, Women Who Lead are some of the popular ETF options you can find on Stash.
Stash offers investors three plans to choose from:
- Beginner – It comes with a Personal investment account and costs 1 USD per month.
- Growth – You get Traditional IRA or Tax-advantaged Roth, as well as a personal investment account. It has a monthly charge of 3 USD for you.
- Stash+ – Everything in Growth, as well as two investment accounts for your children. When you buy through any of the partner companies of Stash, you can earn 2 times stock rewards. In addition, it is possible to get life insurance coverage of 9,000 USD via Avibra. It also gives you monthly market insights.
Each of the accounts on Stash is available with bank account access, and you can also get a debit card that lets you earn stock pieces upon its use and the Stock-Back® card.
Click here to sign up for Stash.
Betterment is a Robo-advisor that lets you choose your savings or investing goals and provides a strategy to help you reach them.
With its portfolio options, pricing, and financial advice packages, Betterment is more like a traditional brokerage.
The app charges management fees based on the balance that you have invested. The fee percentage is 0.25% on retirement and investment accounts. However, the annual fee percentage of Betterment is reduced to 0.15% when your account gets to 2 million in investment.
If you invest over 100,000 USD, you may pay 0.40% to avail the Betterment Premium version. It can help you to get unlimited access to the Certified Financial Planners of Betterment. The Betterment Premium price goes down to 0.30% for the accounts having 2 million USD or higher.
The app has 403(b) and 401(k) rollovers, IRAs (SEP, Roth, and Traditional), joint accounts, and personal investment accounts.
The company also offers the following portfolio strategies in addition to conservative and aggressive ones:
- Investing socially responsible: Choose between a broad impact, a climate impact, or a social impact.
- Goldman Sachs Smart Beta: A diversified strategy built to outperform traditional market-cap techniques.
- BlackRock Target Income: 100% bond portfolio built for investors who are approaching retirement.
Betterment accepts recurring or one-time deposits. There are no roundups or multipliers.
Betterment offers financial advice packages starting at $199 – I mentioned that above. You can accomplish different goals with these packages, including saving for marriage, college, or retirement.
One of Betterment's financial advisers will review your income, goals, budget, etc., during your phone call with one of their Certified Financial Planners. Then, they develop a plan that helps you meet your long-term goals with a personalized approach.
Betterment Review: Pros and Cons
- This is among the few apps that do not need any minimum deposit.
- The “flexible portfolios” tool can be used for customization and better portfolio options.
- There are 3 excellent portfolio options to pick from, Socially Responsible Portfolio, Income Portfolio and Smart Beta Portfolio.
- Investor portfolios are rebalanced automatically during cash inflow or outflow.
- Advice packages are offered, targeted to particular life events.
- It lacks direct indexing.
- Its Tax-Coordinated Portfolio puts heavy investments taxable tax-efficient accounts, and vice versa, automatically.
- A Tax Impact Preview tool is available, which helps view possible tax disadvantages of any moves in a portfolio before making them.
- Not everyone can be comfortable in making investments into an emergency fund, although Betterment recommends it as a safety net.
Robinhood is a trading app that offers commission-free trading. The clean and simple dashboard makes it an excellent option for beginners.
Stocks can be purchased and sold on U.S. exchanges without a commission, and there are no account maintenance fees. Also, ETFs and cryptocurrencies can be bought and sold if that is your thing.
A Robinhood account allows you to invest in any amount, create a balanced portfolio, and trade in real-time. Additionally, Robinhood provides tools to help you learn more about financial markets.
Click here to sign up and to get a free stock.
You do not need any money in your account to get your free stock.
In 2017, John Hancock – a big name in the insurance sector, developed this app. This is a one-of-a-kind saving and micro-investment app that was designed to help couples make joint savings.
Savings and investments can be made with your boyfriend, girlfriend, partner, or spouse. The Twine app does not have restrictions on who you can save with, so you can technically save with a stranger!
This app for micro-investing comes with a pricing system that is direct and very simple. You can save money on it for free. It is an online savings account insured by the FDIC for as much as 250,000 USD. For each 500 USD that you invest through Twine, you will be able to make a monthly investment of 0.25USD.
Twine works quickly, and you have to open up an account with it. Then, you invite anybody to begin investing or saving with you. Then, you can set an objective: buying a new car, making a down payment on a home, going on a vacation, and the like. Next, you decide the amount you to save and how much time you want to save it.
The app poses queries regarding your style of investing, net worth, income, etc., and other similar details regarding your financial situation. Then, a suitable portfolio is matched with your information. The portfolios on the app can be aggressive, moderate, or conservative and have mutual funds and ETFs.
You can set up recurring deposits to save sufficient money to attain your objective. In addition, various amounts can be contributed by you and the investment/money-saving partner in the app.
This app keeps the contributions of you and the partner isolated in individual brokerage accounts. Thus, you can access only your contributions and not that of your partner.
Is Micro-investing Worth It?
Investing your spare change won't turn you into a millionaire or allow you to retire early, but it can help somehow.
In reality, these apps could save you a few hundred dollars per year. Within a year, you'll have $500 in your emergency fund – before your following car part breaks.
If you decide to use any of these apps, learn everything about them and pay attention to how the market works. Take advantage of this micro-investing app as a stepping stone to investing more.
The contents of this article provide general information and describe your options but are not intended to provide investment advice or personal recommendations.
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Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.