Micro-investing: What every beginner should know
In the past, investing was reserved for those with deep pockets. Micro-investing, however, is incredibly simple. Simple enough to fit every budget.
Many think investing is a “rich person’s game.” 48% of people who don’t invest said exactly that in a recent survey from personal finance site GOBankingRates, citing not having enough money as their main reason for not investing.
Micro-investing is a method with which anyone can invest small sums of money, even if it is just spare change. By doing so, they will be able to collect returns slowly. Millennials have been especially interested. A recent survey commissioned by Wealthsimple found that money causes millennials more stress than anything else in their lives. Micro investing is the perfect way for millennials or any other generation to begin investing and possibly reap rewards that could diminish stress.
What makes this option convenient? Mobile applications eliminate high investment account minimums and typically do not have fees for individual transactions, unlike banks.
These apps sometimes come with the option to link debit or credit cards that automate recurring deposits or round up any amounts used for purchases. Some leave it entirely up to the micro-investor.
Investment money is typically used to buy exchange-traded funds or ETFs. These funds helpfully spread your risk around by buying up shares in dozens or even hundreds of different companies. Do not fret. There is no need to start religiously tracking stock markets, CNBC, or subscribe to the Wall Street Journal. These apps will automatically invest based on your risk tolerance.
So what’s the catch? It is important to remember that minimum input leads to minimum output. Basically, small investments are less likely to lead to large returns. That said, everyone has to start somewhere. Beginners should view micro-investing as a strategy to save money while getting a feel of how investing actually works. It is an ideal stepping stone –– a step many professionals recommend taking sooner rather than later.
According to Entrepreneur, while micro-investing is an opportunity for most investors, it intends to benefit young investors the most, especially millennials. A recent poll reveals that four out of 10 millennials do not invest in the stock market as they believe they do not have sufficient money to get started. Millennials are missing out on the long-term wealth generation potential of the stock market.
These tools can be extremely educational as well –– if used correctly. Investing is not perfect. Economic uncertainty associated with global affairs will be magnified in the form of market risks. Negative returns should always be expected.
In conclusion, micro-investing apps offer accessibility for beginners with limited disposable income or free time. While it will always be a good way to secure some extra funds, new micro-investors should always be conscious of how much they can afford to lose.