If you are under the impression that saving for the future is only for those that have huge lump sums of cash hanging around, available to invest, then let us inform you that you are incorrect. Investing really is an option available to everyone.
Does this perk your interests, knowing that you could be rolling that pocket change from your purse and into an account with growth potential in just a few clicks on your phone, tablet, or another device?
Who knew that all you need is a few pennies to join the race to financial freedom, and it’s all thanks to a growing concept through the latest app technology.
How Does Micro-Investing Work?
When you initially think of investing, what comes to mind? How about large upfront requirements and a scale of low to high-risk decisions to accompany it?
The concept of micro-investing may not be top of mind, but let’s talk about it. The term “micro” is defined as something that is small. When combined with investing, it can translate to different types, especially in the universe known as apps.
Whether you already have a strong habit of saving, or if you need to build one, micro-investing has many benefits. It is a convenient, affordable option that can help boost the value of your money today for the future.
How To Begin Micro-Investing
Ever see the concept, even in shopping, where you are given an opportunity to round up the cost of your purchase to donate towards a charity? Well, guess what? You can donate towards your future through micro-investing.
Micro investing apps, and even some financial institutions, provide the opportunity for you to invest extra cash from your purchase. It’s a great way to set aside money, temporarily forget about it, and then monitor the account's growth with little to no effort.
Financial institutions carry less risk. On the one hand, they will route those savings to a savings account. On the other hand, micro-investing apps will route it into an investment account subject to market risk. But why not take it if there is potential for your pennies to work for you now with no additional effort?
Signing Up For Micro-Investing
With any app, you are asked to sign-up and create an account. This means that you’ll be prompted to provide personal information, such as your name and address. You’ll also be required to include financial information, such as linking your credit card or debit card to the account.
Once the basics are completed, the assessment begins? Why? Because the app needs to learn about you and your risk tolerance. Only then can it begin personalizing your portfolio, matching investments aligned with your goals.
Pretty easy, huh? Within minutes, you become your own financial advisor and are on your way to building wealth. All it takes is a quick run to the gas station, a swipe of the plastic linked to your micro-investing app account, and voila.
That $45.50 fill just earned you an additional $0.50 towards your future as the app will round up the transaction automatically and deposit it into your account.
Selecting Your Micro-Investments
Remember, all apps are different. During the set-up process, you may be able to provide the app permission to invest your money for you based on the questionnaire you had completed. Or, you may be sitting in the driver’s seat.
After you accumulate a specified amount of savings in the app, you’ll be notified and allowed to begin investing in stocks, ETFs, mutual funds, and more. This could be difficult, especially if you aren’t a scholar in the field.
If you are unsure of what to invest in, let the artificial intelligence built into the app guide you, or seek a financial advisor for assistance.
What Should You Consider With a Micro Investing Account?
There’s no doubt that micro-investing is a passive technique to save towards your future. It's a good feeling for sure!
There are a variety of different apps to use, though, so just as you would a financial advisor, broker, etc., do your research before signing up. Here are some things that you should consider before investing your money.
Micro-Investing Apps Come In All Shapes and Sizes
Each micro-investing app is created differently. This means is that each will come with its own service fees, minimum balances, etc. So what do you need to do?
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Pay attention to the disclosure materials. Yes, you know that long contractual type of agreement with boring details embedded inside that most of us are guilty of scrolling through and then adding our initials? There’s important information there that may result in a headache later if you aren’t familiar with it or expecting it.
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Contact the company directly. If customer service is important to you, it may not be a bad idea to reach out to them. Or, find out that they are nearly impossible to get in touch with! Get a first impression - your money depends on it.
Is the Micro-Investing App Legit?
Investment agencies need to be registered. Take precautionary measures and protect yourself (and your money) by verifying that the app you’d like to use is registered. They must be registered by FINRA or the Securities and Exchange Commission.
What Does the Micro-Investing Fee Structure Look Like?
Businesses need to make money somewhere, even investment agencies. That’s why they charge fees. Some may call it a service fee or a trade fee, and others a monthly fee.
Regardless of the name, know what it is, what to expect, and when it is incurred. If you aren’t seeing a good return on your investment, then that particular app service or perhaps this technique may not be best suited for your financial health.
Don’t Forget About Your Digital Wallet
Micro investing is a great concept because it pulls the money from your account during the round-up process. But what happens when you don’t have the money? Hopefully, you won’t fall into this situation, but unfortunately, it can happen to the best of us.
When it does, it can lead to unwanted bank service fees, overdraft fees, etc., that can accumulate fast, leaving you in a negative position.
Micro Investing Is Not an Excuse To Change Your Spending Habits
Another item to note - don’t change your spending habits. It’s great that every transaction you make will round up and add to your passive income, but it can also get you in trouble if you are buying more for no reason at all. Use a budget and stick to it to don’t pull yourself off track.
Keep Your Investment Portfolio Diversified
That’s right - don’t let micro-investing be your only form of investment. Keep it as the conventional method while you continue to add to your other retirement plans, such as a 401(k) or IRA through your employer.
Micro investing is exactly that, small investments. You’ll see a return, but it won’t be enough on its own to fulfill all of your goals.
Don’t Invest What You Don’t Have
Before you start with any type of investment, even micro-investing, make sure you are able to commit. This means you should have a well-stocked emergency fund on hand, and your credit card debt, if any, is either wiped clean or within reason.
Otherwise, everything you are earning today is not counted towards the wealth of your future.
Is Micro Investing A Good Fit For You?
Let’s start off by saying that everyone has their investment plan and lifetime goals. There is no one-size-fits-all strategy for the growth of your money. Keep this in the back of your mind before diving into any type of investment.
Make sure that all of your boxes are checked off, and that the plan is a smart move for you and your future.
The Bottom Line - Starting With Micro-Investing Helps a Growing Investment Portfolio
“That’s one small step for man, one giant leap for mankind,” according to Neil Armstrong as he first stepped foot on the moon.
Make it one small step for you towards an enormous amount of wealth in your future by making a few small changes to your spending habits and becoming more attuned to the world of investing. Don’t throw away your pocket change; allow it to grow those legs and work on your behalf.
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Sources:
Starting Small—What Is Micro Investing? | FINRA.org
Micro-Investing Platform - Overview, How It Works, Benefits
Micro-Investing Apps: What You Need to Know | RamseySolutions.com