Micro-investing is making investments in tiny increments. These investments are usually made with software, through an online source, or via a phone app. You connect your bank account or your debit card to the app, and it will automatically invest money into your checking or savings account.
Some of these apps or online sources allow you to start for as little as five dollars. Most of these also automatically invest your money into diversified investments and partial shares. Many of these also will go a step further and invest your spare change. This type of investment comes from rounding your purchases to the nearest dollar and investing that amount.
Micro-investments are an excellent way for a beginner to start investing. It is also the best way for someone who doesn’t have a lot of money to get into the investment game. Most everyday people can afford five dollars buy-in and using their spare change to invest. This investment will not make you millions, but it will be a great way to start investing and learn more about it without a high risk on your savings or income.
Micro-investing is essentially the poor man’s investing. It allows everyone to become an investor. These investments are popular among millennials, those on a budget, and stay-at-home moms. Here are some reasons micro-investing should be considered.
Make Investing Effortless
Most people find investing and learning how to invest is challenging. However, micro-investing eliminates the challenge. The online tools or investment applications make investing effortless, automatic, and ultimately comfortable. If you choose the right apps, you don’t even have to do anything once you get set up, especially for those apps that do spare change investing.
Grow Savings Over Time
Most savings accounts don’t have a great deal of interest and are not the best way to save. However, if you use micro-investment apps, you can get a higher return rate than a typical savings account. While you’re not going to make sure you wads of cash micro-investing, you can build a nice little savings account without even thinking about it. You can also brag that you’re an investor.
The interest rate from your bank’s saving account is hardly brag-worthy. Your money can grow at a higher return rate with micro-investment apps.
Beginner-Friendly
Because investing can be so confusing, micro-investing is very beginner-friendly. To become an investor, you usually have to have a lot of money and have practically attended college to invest appropriately. Most people who want to invest don’t want to spend that kind of time learning how. This is why micro-investing is so appealing to the beginner. You don’t have to understand what ROI stands for or what a bull market is. You have to fill out some information and set up your bank account to receive the returns.
Because the capital needed to start is so low, the risk is minimal, but the learning experience will have the maximum impact. Think of micro-investments as a gateway investment.
Helps You Build Your Portfolio
because most micro-investment apps have built-in portfolios, you only need to choose what portfolio you want based on your risk tolerance. Your risk tolerance may change as you invest more, or maybe you want to invest less, but again because the initial investment is so low, your risks are minimal. As you build your portfolio, you will learn about investing and may want to diversify your portfolio even more.
Once you have built up a more impressive portfolio and have some extra investment capital from your micro-investing, you may want to consider going bigger. This may be when you want to hire someone to help you with your investments utilizing micro-investing returns.
Conclusion
We hear throughout our adult lives that we should be looking into investing. However, many of us are apprehensive about investing because we don’t know what we’re doing. With micro-investing, we don’t have to know what we’re doing to become an investor. Micro-investing helps us learn and grow as investors with very little capital and risk.
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