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What is micro-investing?

Round up your spare change into big bucks with automatic investing.

Micro-investing is when you regularly invest small amounts of money to add up to a larger investment over time. Today, there are dozens of micro-investment apps in the global market, a clear indication that it’s a popular option among the next generation of investors. Learn how it works and your options for getting started in the US.

Who is micro-investing best for?

Micro-investing is a suitable option if you’re looking for a cheap, convenient way to start building an investment portfolio. However, because micro-investing requires a long time frame to build up significant wealth, it’s well-suited for younger investors.

Keep an eye on costs that can eat into what you’re saving or getting back in returns. Double-check fees with the performance of the app’s chosen investment portfolio. For example, if you’re investing only $5 per month, but the total fees are $2.50 a month and the returns are less than 1% a month, you’re likely better off sticking to a savings account.

Micro investing fees

Investments of any kind are typically accompanied by fees, and micro-investing is no exception. Be on the lookout for the following:

  • Commission fees. Some brokerages charge a small fee per investment transaction — like each time you buy a stock. Most platforms have done away with commissions, but keep your eyes peeled for any mention of commissions or transaction fees in the fine print.
  • Subscription or management fees. You may need to pay an ongoing monthly or annual fee to keep your account open — like the $1 monthly fee charged by platforms like Ellevest and Stash.
  • Advisory fee. If you opt for a robo-advisor, be prepared to pay an ongoing advisory fee, which typically ranges from 0.25% to 0.50% of the account balance.
  • Account fees. Be prepared for account opening, withdrawal and transfer fees. Most brokerages let you open an account for free but charge between $50 to $75 to transfer your assets to another broker.

Which providers offer micro-investing?

Micro-investing is a relatively new sector on the American financial scene. Of the few micro-investing platforms out there, Acorns is probably the best-known of the round-up bunch.

Robo-advisors are also getting into some of the same micro-investing features. Stash and Clink also offer to round up your purchases and invest the spare change, while Robinhood, Fidelity, SoFi Invest, Stockpile, Betterment and others offer the ability to purchase fractional shares of stock with as little as $1.

Keep an eye out for other fintech startups looking to break into the market in the coming months and years.

Acorns: For no-maintenance investing

Acorns rounds up your daily purchases to the next dollar and invests the excess into your choice of five diversified portfolios managed by the company. The portfolios vary in their goals and target investor profiles.

There are no minimum account balances, and deposits and withdrawals are free. All you need to do to get started is link a bank account and provide ID, income information and your financial goals.

Rather than charge a percentage-based management fee like other robo-advisors, Acorns assesses a flat $1 fee each month.

Stash: For value-based investors

Instead of rounding up your spending, Stash uses a feature called Smart-Stash to analyze your income and spending patterns and automatically pull money into your investment account. From there, you can invest in individual stocks or choose theme-based portfolios.

The minimum deposit to open is only $5, and Stash charges a flat $1 monthly fee for its service.

Robinhood: For beginner-friendly active trading

Robinhood offers a no-cost take on the traditional brokerage account, and its micro-investing features enable you to invest any amount in any US-listed stock or ETF, plus major cryptocurrencies. It does that through fractional shares.

Once linked to your bank account, you can take advantage of a limited number of instant deposits, and there are no commissions on stocks, ETFs, options or cryptocurrencies.

SoFi Invest: For free automated investing

SoFi Invest brings together a wide array of options into a single combination that offers everything except rounding up your purchases. Like Robinhood, it features a fractional share feature called Stock Bits as well as no fees or commissions on stocks, ETFs and cryptocurrencies.

In addition, SoFi provides the automated goal-based investing of a robo-advisor. And it comes from a company that offers a much wider array of products, including loans, insurance and cash management.

How do I start micro-investing?

Ready to put your pennies to work? Here’s how to get started:

  1. Compare brokerages. Not all investment platforms offer micro-investing, and the ones that do have varying account options and features. Before you open an account, explore your brokerage options by comparing features, fees and customer feedback.
  2. Open an account. Once you’ve found a brokerage you like, open an account. Most platforms offer online applications, but be prepared to supply your personal information, including your Social Security number or government-issued ID.
  3. Fund your account. To fund your new account, you’ll need to link an existing bank account and indicate how much you’d like to transfer.
  4. Set automated investments. Most micro-investing platforms rely on automated transfers or spare change round-ups. Indicate how often you’d like to transfer funds or what limits you’d like to impose on how your transactions are handled.
  5. Monitor your investments. Log in to your brokerage account to track your investment performance.

Benefits of micro-investing

Many micro-investing platforms offer a quick and simple way to link your bank account, acting like an electronic piggy bank for your spare change.

  • It’s convenient. Micro-investing requires minimal input on your part. In some cases, the entire process is automated, and you can start building an investment balance without realizing it. In other cases, you can access investments you otherwise wouldn’t have been able to afford.
  • Establish a savings habit. Micro-investing can help create positive, life-long saving habits. It’s an effective way for Americans to start investing their money.
  • Minimal investment required. You don’t need a huge bank balance to take advantage of a micro-investing platform. Start by investing your small change and watch your balance grow over time.
  • No need for investment expertise. The money in your investment fund can be balanced in a diversified ETF portfolio based on your financial goals and risk appetite.

What are the risks of micro-investing?

Like any other investment option, there’s no guarantee that the investment portfolio you choose through your micro-investing platform will perform as you hope, and you could end up losing money. The investment portfolio recommended for you is chosen based on your risk tolerance, so depending on your financial goals, you have the option to minimize your risk exposure.

  • Potential fees. You may need to pay an account management fee that’s either a flat fee or calculated based on a percentage of your account balance, while brokerage and ETF management fees may also apply when you purchase ETFs through your account.
  • Easy to forget. Because the investing takes place in the background, you might not remember it’s there. While this can be a good thing for investors who tend to “over-manage” their savings, make sure to regularly review your investment performance to ensure they’re meeting your expectations.

Bottom line

It doesn’t always take a large amount of money to invest for the future. Through micro-investing features like round-ups and fractional shares, you can access the investments you want more easily and affordably than with traditional investment methods.

Each platform invests a little differently, so compare your options to find the right fit for your budget and spending habits. And if you’re not sure what’s available, check out our guide to the world of investments.

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