Micro-Investing
MONEY
“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” - Albert Einstein -
A micro-investing platform is an application that simplifies the investment process by allowing users to save and invest small amounts of money. Making small and irregular investments from everyday transactions is what makes micro-investing so simple and achievable. Its just like putting your spare change in a piggybank, except those small amounts can be invested.
Most micro-investing apps allow you to set up recurring investments, invest lump sums, and even round up your purchases in order to invest your spare change. Micro-investing can function in a variety of ways. Some apps, such as Robinhood, are intended for those who prefer a more hands-on approach to investing. You can buy and sell specific stocks or ETFs at any time and invest in any amount. Other apps, such as Acorns, cater to more hands-off investors. You decide what you want to invest in, and they handle the rest. The app is linked to your debit card, which rounds up each purchase to the nearest dollar and invests the change.
You may also be able to schedule investments on a daily, weekly, biweekly, or monthly basis. Alternatively, you could choose to invest additional funds on an as-needed basis. Users of these personal finance apps can invest in a diversified portfolio of exchange-traded funds (ETFs) or fractional shares of stock. In contrast to traditional investments, there are usually no minimum deposits or fees for individual trades. Instead, most micro-investing apps charge a fixed monthly fee, which is usually determined by the size of your portfolio.
Acorns is a fintech company best known for its micro-investing platform, Round-Ups, which allows users to set up automated investments into a portfolio. Acorns rounds up a debit or credit card purchase made on a linked card to the nearest dollar and invests the difference on the member's behalf.
SoFi Invest is a stock tracking and trading app. SoFi's micro-investing app allows you to trade in fractional share investments known as "stock bits." Fractional shares are fractions of a share of stock that are worth less than the full value of a single share. This means you don't have to save a lot of money before investing in some of your favorite tech companies, such as Alphabet (Google), Amazon, or Facebook. Begin by depositing $5 today and maintaining this low account minimum, you can experience the markets upsides and downsides, even if it is in miniature.
Betterment's robo-advisor platform allows you to buy fractional shares of ETF index funds such as the S&P 500, in taxable accounts as well as individual retirement plans. It does not allow you to invest in individual stocks, but instead will automatically deposit funds into fractional bits of index fund ETFs that are aligned with your portfolio objectives. Instead of a fixed monthly fee model, Betterment charges an all-inclusive 0.25% assets under management (AUM) fee, which can be justified in taxable brokerage accounts due to its tax-loss harvesting feature. It works by selling losses to lock in short-term capital losses and reduces your taxable income while investing the proceeds in a similar investment. This reduces your taxable income or other capital gains and quickly covers the annual AUM fee of 0.25%. Furthermore, Betterment provides investment advice.
Public.com is a commission-free microinvesting app aimed at Millennials and Gen-Zers who are social media savvy. This price point is competitive other services: free is free, and Acorns is not free. While the company previously followed in the footsteps of apps like Robinhood by monetizing Payment for Order Flow (PFOF), or receiving kickbacks from clearinghouses in exchange for routing trades to them, they have recently abandoned this practice. They now rely on alternative revenue streams as well as a "tipping" system. This puts this beginner investment app firmly on the side of retail investors rather than Wall Street clearinghouses. What Public.com is really about is turning investing into a social network for investors, where members can own fractional shares of stocks and ETFs, follow popular creators, and share ideas with other investors. You can share a special link with others and give them free stocks (fractional shares). There are no account minimums or minimum balance requirements.
M1 Finance provides free stock trades. You can use fractional shares to divide your favorite investments into bite-sized additions to your brokerage account. M1 acts as a single personal finance app to help you build wealth by automating your investments into diversified portfolios, having a bank account and linked debit card that provide market-beating interest rates, and having access to valuable personal finance literature. The service automatically rebalances your portfolio in accordance with your stated asset allocation targets. It does this by shifting outperforming funds into underperforming ones, capturing a value effect as returns revert to the mean over time. M1 Plus memberships include a checking account, debit card, cash back, interest, and a $125 annual fee.
Webull entered the stock trading world in 2018 when it began competing with Robinhood for market share. This is a great stock trading app for beginners and experts alike, and provides commission-free stock trading (no trading fees), as well as commission-free trades on ETFs, options, and cryptocurrencies (no mutual funds at this time). Webull recently added the ability to trade fractional shares, making this an excellent app for micro investing. Furthermore, there are no trade commissions because Webull earns money from other actions you take, such as Payment for Order Flow (PFOF), margin loans, interest on cash, and service fees for their Nasdaq TotalView subscription. A Webull account is free and there are no account minimum requirements to meet or maintain. Webull also runs frequent promotions that award free stocks.
Stash is a mobile-friendly personal finance app that includes investing options as well as a checking account. While the app is primarily designed for hands-off investors who want to automate their investing, you can also actively choose stocks to trade. Stash provides custodial accounts for true beginners (young investors) under the age of 18. Stash charges a recurring monthly fee, but this is justified by the fact that it provides a full-service personal finance platform, including access to a checking account and debit card. You can earn Stock Back rewards by rounding up debit card purchases to the nearest dollar. It's worth noting that, while it does charge a monthly account service fee for its entire suite of products, it doesn't charge trading commissions on your investment holdings. Stash has no account minimums or ongoing minimum balance requirements.
Robinhood became the first trading app to reduce trading commissions to $0. That means you won't have to pay any trading commissions or fees if you trade stocks or invest in the stock market. Others in the industry were forced to follow if they wished to remain relevant to retail investors. Robinhood provides commission-free stock trading as well as the ability to trade index funds, options, penny stocks, and cryptocurrencies. The Robinhood app has a simple and user-friendly design, as well as the ability to trade fractional shares. Many people have found this useful for placing trades because it simplifies the process. There are no account minimums with Robinhood.
