What is micro-investing?


Entering the stock market is intimidating for any Australian. Even getting the funds together to save and invest is challenging. Where do you begin? How much do you invest? 

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Well, this is where micro-investing comes into play. Offering an easy way to invest in the Australian market, micro-investing is one of the best ways to build your portfolio.

Let’s get to the following commonly asked questions:

  • What is micro-investing?
  • Is micro-investing worth it? 
  • What are the downsides of micro-investing?
  • How does micro-investing work?
  • What are other investment options available?
  • How to micro invest in bitcoin?

Follow our beginner’s guide to micro-investing. We’ll unpack the benefits of micro-investing so you can make an informed decision about whether to embark on this new venture.

Q1: What is micro-investing?

Let’s begin by explaining micro-investing. Micro-investing is when you deposit minimal amounts of money into an investment portfolio over time. These are called micro-investments.

Typically, investing options are limited to investing large amounts of money in standard stock trading. 

However, investing small amounts is more accessible and more straightforward for beginners. All you need to do is download an app in Australia, create an account, and get started.

Depending on the micro-investing app in Australia, your platform might allow users to round up their spare change. For instance, if you buy a coffee for $3.50, the remaining 50 cents will be invested into your portfolio.

Or you can have a go at dollar-cost averaging. You'll quickly build up your investment by depositing the same small amount each week or fortnight. 

It’s a great way to learn investment strategies and money management with minimal risks, such as copy trading from others in the financial markets.

Q2: Is micro-investing worth it?

Micro-investing might be taking the world by storm, but is it worth it? 

Yes, it allows you to invest any amount of spare cash to create profitable returns. Yet, are there any other benefits of micro-investing?

Whether you start investing (either micro or traditional) depends on your circumstances. But, if you’re eager to begin and don’t have the lump sum needed for conventional investments, download a micro-investing stock trading app. 

You can use many apps to create a micro-investing account, and it is easy to get started.

Easy and accessible for beginners

The best benefit of micro-investing platforms is that it’s designed with novices in mind. Starting on a micro-investment app for beginners will give you the skills and confidence to make other investments elsewhere.

Many micro-investment platforms make investing for beginners straightforward. Many of us lack the understanding of funds to take advantage of traditional investment. However, micro-investment allows investors to begin, no matter how much money you have.

Adjust your investing goal as you learn more and receive more significant returns. If you’re looking to take control of your personal finance, learn investment strategies, and make money. Micro-investments could be for you.

Check out the different micro-investing apps in Australia to see where you could begin making money.

Range of diversified portfolios

As you invest a minimum sum of money each time, the risk is very low. Therefore, you can easily create a diversified portfolio without much-needed knowledge about which stocks are the most lucrative. 

While it’s advisable you still check where you’re investing, micro-investment allows more trial by error. You can create a more diverse investment portfolio rather than creating portfolios based on one thing (e.g. all in stocks).

For example, micro-investing platforms let you invest in exchange-traded funds (ETFs), index funds or a managed fund.

Better returns than a savings account

Investment returns are, generally speaking, far better than interest rates on a savings account. Even if you don’t wait until opportune times to deposit money, regular investments can lead to generous long term savings.

No matter your savings goals, micro-investment is more profitable than squirrelling your money away in a bank account. Whether you’re saving for retirement planning or paying off student loans, micro-investments allow even a tiny amount of money to ensure significant returns.

Or, micro-investing could be suitable if you want to achieve financial independence. With interest rates at a record low, savings accounts aren’t the current best option for returns.

Important: It’s worth remembering that transaction accounts, savings accounts, deposit schemes, and term deposits are risk-free — the government guarantees to protect up to $250,000 of your money per bank.

Q3: What are the downsides of micro-investing? 

However, micro-investing isn’t for everyone. The downsides largely depend on which micro-investment app you use. Here are two main aspects to watch out for: 

  • High fees.
  • Smaller returns.

1. High fees 

Robo invest platforms charge you varying amounts depending on your account balance. Your investment platform will probably charge you a monthly or annual fee. For a balance below $15,000, an investment app will charge around $3.50 a month. 

Your account balances could eat into your investment returns depending on how low your account balances are. It’s essential to compare the different investment platforms to find one with a brokerage fee that works for your investment goals.

Moreover, some platforms have a minimum investment amount, which might disrupt your plans. Understand the differences between trading platforms before committing to one. 

2. Small returns

The risk with any investment is that you will make a loss, or your returns will be minimal. If your investment amount is around $10 a month, any losses won’t be too dramatic. 

However, if you only ever make the minimum investments, you might struggle to meet investment goals. Micro-investing aims to start small. 

Once you know the ropes and feel more confident, try to make more significant investments. You don’t have to buy shares with huge sums. But, increasing your investments would help you gain better returns. 

Q4: How does micro-investing work? 

To begin micro-investing, compare the top apps, sign up for an investing account and register your debit cards. Your investing app will round up your purchase every time you use your debit card. You’re unlikely to notice 50 cents missing here and there.

However, you will notice an increased balance in your investment account over time. For example, if you buy that $3.50 coffee every day, after one month, your account balance will be $15. After a year, you will have $182.50. Even with the management fee, this is a solid amount to invest.

Of course, there are more ingenious ways to handle your finances. But for those who prefer buying our coffee out rather than making it at home. You can also make a balance transfer whenever you like to boost returns. 

Even if you are good at saving your money, micro-investment is a good side-project. You don’t need to save up $100 for individual stocks or a mutual fund share. Instead, you can invest your money in fractional shares.

Fractional share trading is in exchange-traded funds (ETFs). Therefore, you diversify your investment across many different stocks. 

Popular micro-investment platforms available in Australia include:

  • Raiz Invest: Has ethical investing options available.
  • Spaceship Voyager: Includes Spaceship Earth, Spaceship Origin, and Spaceship Universe portfolios.
  • Sharesies: Over 8,000 companies and funds to choose from, including no minimum buy-in limits.

Note: Automatic investment only links your debit or credit cards to the investment app. However, you are usually free to deposit and withdraw into your investment account. 

Q5: What are other investment options available?

If micro-investing doesn’t sound right for you, many other traditional investment options are available. For example, you can still invest in real estate or super funds. 

The issue with many of the standard investment options is that it’s not as straightforward. You usually need to apply for a credit product to buy a house, research the comparison rate and guard your credit score. In addition, there are other expenses, such as home insurance.

However, traditional investments tend to have greater returns because they involve more considerable sums of money. 

Important: If you’re considering any significant investment, seek financial advice. 

Q6: How to micro-invest in Bitcoin?

Bitcoin is another investment product in which you can use micro-investing. You might need to find specialist crypto apps that allow you to do this. Plus, you might make excellent returns on other altcoin investments.

Some crypto apps like BlockFi also pay you interest (passive income), allowing users to earn up to 9.5% APY — via peer-to-peer lending (P2P). 

Important: If you choose to micro invest in Bitcoin, then make sure to do your research and due diligence. Since the crypto industry is fraught with massive potential, scams, hacks and alike — the crypto markets are still developing. You can check Reddit for feedback, talk to other crypto investors, and check for security, for example, if a platform has an ISO 27001 Certification (an internationally recognised security audit).

In summary 

Micro-investing is worth exploring. Whether you just want to save a bit of extra on the side or thinking of starting investment seriously, it’s a profitable venture. Soon, you could be investing hundreds in managed funds or shares.

Watch out for charges, fees, and other expenses with your chosen trading app. With minimal effort or cost, you might be able to turn your financial situation around. 

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.

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