Is It Ok To Focus On Micro Investing In 2024?
The investment game has reached an all-time zenith now in 2024. Everyone now knows how important it is to invest in various platforms, whether in the stock market or low duration funds. However, micro investing remains a niche and unknown investment option for many.
Most people cannot afford shares of more prominent companies like Google and Apple since their share prices typically exceed $1,000. Therefore, micro investing is the most lucrative option for getting people with lower incomes and new graduates into investing.
Therefore, if you want to invest small monthly savings and add them up years later to something big, read this post.
You will learn whether it’s ok to do micro investing. In addition, you will learn about the best micro investing apps to start with!
What Is Micro Investing?
As the term suggests, micro investing is a form of investment where you invest small sums of money. It mainly involves investing your end-of-month savings, letting them add up to a bigger amount after a few years.
However, micro investing differs from putting your savings in a savings account. Instead, you invest your money in penny stocks, cheap exchange-traded funds, and fractional shares of stocks.
How Does Micro Investing Work?
To understand how micro investing works, you must first understand its underlying objective – to help you save and earn money.
This form of investment is like opening a savings account. However, if you keep your money in your savings account, you might get tempted to spend it on impulsive purchases.
This is where micro investing comes in to help you draw that fine line. Instead of saving a percentage of your income, you can systematically invest it. Therefore, this enables you to start investing and have an additional passive source of income!
Moreover, investing your monthly savings will help you reap more significant dividends in the long term, compared to simply saving your money in your savings account!
Is It Ok To Do Micro Investing In 2024?
After reading this until now, you might wonder: Is it ok to do micro investing?
In all honesty, micro investing has its pros and cons. However, its pros outweigh its cons significantly, especially for new investors.
It’s Ok Because…
The primary benefits of micro investing are:
I. Inexpensive Investments
The most attractive reason to start micro investing would be its low prices.
You don’t have to invest thousands of dollars initially while investing in cheaper ETFs and fractional stocks. As such, you can start by investing around $50 to $100! Moreover, it allows newly graduated earners to get into the groove of investing.
II. Portfolio Diversification
Many micro investment options directly follow the performances of various indexes, like the S&P 500.
These options are the best for you since they help diversify your investment portfolio. Moreover, you can do so for only a few dollars every month!
III. Automated Investments
Many people ask: are micro investment apps worth it?
These apps have various automatic investing options. Therefore, if you enable these options, the app will automatically invest a portion of your month-end savings at the start of next month! As such, enabling automatic investments removes a lot of hassle!
It’s Not Ok Because…
Micro investing does have some drawbacks, like:
I. Unsuitable For Retirement Planning
Most people start investing to create a monetary backup after you stop earning after retiring. Many people invest in Roth IRAs to financially secure their life post-retirement.
However, since you invest small amounts in micro investing, more than the interest you get in them is needed post-retirement. Therefore, it only helps you to get into the habit of investing before you move on to more considerable investments like high growth mutual funds.
II. Investment Fees
Most micro investment apps charge a monthly investment fee of around $3 to $5. Therefore, if you start by investing $10 monthly (a common practice), the investment fees will start weighing down your returns.
Moreover, many apps charge transaction fees, along with many charging management fees.
How To Start Micro Investing?
Now that you know whether it’s ok to do micro investing, how do you start investing?
Before you start micro investing, remember these points:
1. Consider Investment Goals
Before you start investing in any form, you must first do your research on all available options.
Starting investing with micro investing is a viable option., However, with lower returns, you will eventually want to move up to more expensive (and risky) options in the future.
Therefore, it’s best to create an investment roadmap. This will detail what type of investments you must make to meet your investment goals – for family planning, retirement planning, or simply to earn more.
As such, it’s best to start micro investing with an objective.
2. Choose Your Micro Investment App Carefully
After you create an investment roadmap, it’s time for you to choose a suitable micro investing platform or app.
Therefore, you must first look at the features of all these apps. While all these apps will have similar features, you can select the one with the better UI (user interface). After all, apps with better UI will always provide a better user experience!
Next, check the investment fees of each app. This is where your primary differentiating factors lie. While many apps charge monthly investment fees, others charge transaction fees. Moreover, EFT trading platforms will charge investment management fees.
As such, check all these factors before choosing your micro investing app. In addition, you must create an account in the app and link your bank account.
3. Set Your Investment Preferences
After selecting an app, it’s time to set it up according to your preferences.
Again, the app and investment settings will differ from app to app. While most micro investing apps have automatic payments, some apps have extra features like roundups.
The latter allows your subsequent digital purchases to be rounded up to fund your previous micro-investments successfully.
These are some of the settings you can enable through your chosen app.
4. Constantly Monitor And Adjust
Finally, once you start micro investing, you must monitor your investments and expected returns. You can adjust your investments with new investment opportunities for higher returns if your investments provide lower returns.
The Best Micro Investing Apps In 2024 To Get Started!
Now that you know how micro investing works, here are the five best apps you can use in 2024!
1. Acorns
Investment apps like Acorns will be among the most popular micro investing apps 2024. It combines two essential features of micro investment apps – automatic investments and roundups – into automated roundups.
Moreover, its automatic roundups allow it to invest on your behalf in the best ETFs – in increments of $5!
2. Betterment
Betterment is a robo-advisor and your virtual investment guru. This app has many great features, like automatic investing, which automatically invests your money in the best stocks possible. It does so using predictive AI and machine learning.
Moreover, unlike the other four apps on this list, you do not need to keep a minimum balance. You can open a micro-investment account for just $10!
3. Charles Schwab
Charles Schwab is a famous financial and investment institution in the USA.
A few years back, they launched their online micro investing platform, allowing you to invest in fractional stocks known as Schwab Stock Slices. Here, each stock “slice” costs $5.
4. Fidelity Investments
Fidelity is another popular micro investing website that many have used for some time. However, it’s Fidelity’s Fidelity Go app that will get the spotlight here.
This app allows you to micro-invest on fractional shares as low as a dollar. Moreover, the Fidelity Go app also has an AI robo-advisor that invests your money in the most profitable micro stocks!
5. Robinhood
The final entry on this list is Robinhood, a popular retail brokerage app that has existed for many years.
This app initially made its name by helping investors trade commission-free. However, it started delving into micro investing in the last few years. You can begin micro investing in Robinhood starting from $1!
Bottom Line: It’s Ok To Start Micro Investing, But…
Yes – it’s ok to start micro investing in 2024.
But,
since it provides the lowest returns out of all investment choices, this must be your last resort if you wish to invest with a tight budget.
If you have the funds, other investment options will provide better returns for a higher minimum investment amount.
Thanks for reading this post! Please comment below if you need help with micro investing!
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