Many people think of investing and the stock market as a business for the rich. The adage “It takes money to make money” reinforces this idea, but you might be pleasantly surprised to learn that you can start investing for just a few dollars a week.
Micro investing involves saving small amounts of money, such as loose change, and constantly investing in the markets through ETFs or fractional stocks. Over the years, little amount of money can turn into huge sum of money, if you invest wisely.
Micro investment platforms allow users to deposit small amounts of money into an investment or brokerage account, often up to $ 5. This money can then be invested in various ways and hopefully generate a return for the investor.
The functioning of micro-investment platforms varies. Some require a small initial deposit, while others log into your bank account and start investing with small amounts of money rounded off to various transactions, such as shopping or buying coffee.
How does a micro-investing Platform work
Several applications provide micro-investment services, but each works differently from the others. However, they work in two general ways. Some applications allow fractional investment, i.e., the purchase of a fraction of a share.
The stock market does not allow split investing, but apps buy a whole share and split it into snippets for their users. With the money they save, people can buy fractions of shares if they cannot afford a whole share.
Benefits of Micro-investing
- Low minimum investments
Micro-investing allows you to start your investment journey with the smallest amount. With just a few dollars, you can start investing in ETFs and split stocks, which is not possible with more traditional investments like mutual funds, which typically require a minimum investment of a few thousand dollars.
- Diversification
If you choose to invest in low-cost ETFs linked to large stock indexes such as the SandP 500, you will be able to build a diversified portfolio for just a few dollars a month.
- Small sums add up
Regularly putting even small sums of money into an investment account can add up over time, potentially turning your extra change each week into tens of thousands of dollars over time. Decades.
- Automated Investment
Micro-ventures assist with mechanizing the contributing system, making it more straightforward for individuals to adhere to their arrangement in all kinds of challenges.
Makes Saving a Habit: It also helps create a habit of saving early in your life as an investor, although you may only save a little extra money.
How do people micro-invest?
Many people use micro-investment applications because they generally offer great flexibility and do not require extensive knowledge of the financial world.
A popular way to do this is by buying fractional stocks and ETFs, which you can do on Stash. Some brokers will allow you to invest $ 100 in Microsoft, which is less than the price of a single share.
By making small investments in a diverse mix of stocks and funds, you can start a portfolio with a relatively small amount of money.
Bottom Line
Micro-investments can be a great way to start investing when you don’t have a lot of savings. Contributing small amounts regularly can add up over time if invested correctly, but you will need to contribute significantly more to secure your future retirement.
