Micro-Investing: A Guide to Saving Small

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Micro-investing involves consistently investing small amounts of money into the financial markets, typically via exchange-traded funds (ETFs) or fractional shares of stocks. Micro-investing apps make this process simple and easy. If you’re at the start of your investing journey, micro-investing could be an easy first step. Learn how micro-investing works and which apps to consider.

How Does Micro-Investing Work?

Micro-investing allows you to invest small amounts of money, like spare change, without jumping through the hoops that investing large sums of money via brokerage firms may entail. This is done through user-friendly, affordable micro-investing apps.

Each micro-investing app functions differently, but they generally have two main investment options. You can purchase a fraction of a share, or round up every purchase you make and invest the spare change in an investment portfolio of select ETFs.

Two Common Micro-Investing Features

Purchase a fraction of a share
- The stock market itself does not allow fractional investing. Micro-investing apps — like many traditional brokerage firms — offer a loophole. These apps purchase an entire share and divide it into fractions for users to purchase.
Round-up feature
- Micro-investing apps round up each of your purchases to the next dollar and send the spare change to your investment portfolio. For example, say you’re purchasing a coffee for $3.50. The app will automatically send 50 cents to your investment fund to round out your purchase to a dollar. You need a debit card to use this feature.

Micro-investing has become increasingly popular for Gen Z and millennials. The micro-investing platform is expected to reach around $3.187 billion by 2032, according to Future Markets Insights.

However, this doesn’t mean micro-investing is best suited for everyone. If anything, it should be considered a stepping stone to larger investment opportunities or a simple way to diversify your portfolio.

Carefully compare the pros and cons of micro-investing to determine if it fits your current needs.

Micro-Investing Pros and Cons

The most appealing aspect of micro-investing is that the apps are user-friendly and make saving easy. You don’t need to learn about volatile market trends or break down complicated acronyms.

Most features are automated, meaning you can go about your day-to-day life building noticeable savings with minimal effort.

However, noticeable doesn’t mean substantial. You won’t be able to book a cruise or pay for a downpayment on a home anytime soon.

Most micro-investing apps also charge a small fee, which can eat into returns. If you’re going to micro-invest, you’ll want to make regular contributions to make the fee worthwhile.

Pros	Cons
Easily accessible Not a huge commitment Helps build consistent investing habits Low fees Automated investing options	Low returns Not substantial for long-term goals Limited account options

Popular Micro-Investing Apps

Three well-known micro-investing apps are Acorns, Stash and Robinhood. While all offer round-up and fractional shares, each has additional bonus features and costs to consider.

Micro-Investing Apps

Acorns	Three plans available Fees of $3 to $9 a month, depending on which plan you choose Round-up feature Fractional shares IRA retirement account option Debit card available Browser extension offers bonus investments if you shop with their partners Free financial education videos and tips	Best For: Novice investors Looking for small saving opportunities
Stash	Two plans available Fees of $3 to $9 a month, depending on which plan you choose Round-up feature Fractional shares Retirement accounts and custodial accounts for children available Debit card available Life insurance options offered Free financial advice for investments and family finances	Best For: Families looking to start saving small
Robinhood	Two plans available Fees of $0 or $5, depending on which plan you choose Cryptocurrency investments Non-fungible tokens (NFTs) Round-up feature Fractional shares IRA retirement account option Debit card available	Best For:Experienced investors wanting a wide range of options

Who Should Consider Micro-Investing?

Anyone who wants to start their saving journey by making small contributions may benefit from micro-investing.

While not everyone has $100 to squirrel away each month, many people may be able to round up their purchases or set aside a few dollars. This can make micro-investing a great first step in a novice investor’s journey.

After understanding the basics, micro-investors may feel comfortable looking into other saving and investing options, such as certificates of deposits or government bonds.

But if you’re looking for an investment option with high returns that can help you meet long-term goals like funding your retirement, you likely want to consider investing with larger sums of money.

Sources:

Future Market Insights. (2022, October). Micro-Investing Platform Market. Retrieved from https://www.futuremarketinsights.com/reports/micro-investing-platform-market

Corporate Financial Institute. (n.d.). Micro-Investing Platform. Retrieved from https://corporatefinanceinstitute.com/resources/wealth-management/micro-investing-platform/