A recent survey discovered that nearly 8 out of 10 Americans live paycheck to paycheck, even those who earn over $100,000 a year. Managing personal finance successfully has never been more important.
One of the hottest breakthroughs for those serious about personal finance is micro-investing. In this blog post, we’ll talk about what micro-investing is, and what the best micro-investing apps are for beginners.
What is micro-investing?
Micro-investing is a revolutionary new method of investing. It allows investors of any means to invest small amounts of money instead of the traditionally large amounts previously required.
Back in the “good ole days” (pre-1975), only the extremely wealthy could invest in anything. Startup capital needed to be massive, and the fees charged by fund managers could run up to hundreds of thousands of dollars a year.
The situation improved slightly after an investor called John Bogle introduced a more accessible investment option (“Index Funds” for those of you who want to get into the technicalities of it). Investing became more accessible again in the early nineties when Exchange-Traded Funds (or “ETFs”) were introduced—an extremely popular investment tool that offers lower risks and can be traded with much lower capital.
But the world of investing only truly opened up to everyone when micro-investing apps such as Acorns, Robinhood, and Betterment hit the market.
Here are the best micro-investing apps for beginners
Micro investing should be part of any personal finance strategy, both for those beginning their personal finance journey and those already well on their way in it.
Because investing can be a complicated subject, we compared the best micro-investing apps for beginners, to help you get started on your micro-investing journey.
Here are our top picks.
Not only is Acorns awesomely simple to use for beginners, but the company also made headlines recently when it announced its plans to go public, thereby adding an extra layer of trust to the company.
Acorns allows you to invest as little as $5 and deals solely in ETFs.
- “Round-Ups” – Acorns rounds up to the nearest dollar any purchases made from your Acorns Visa card or any other linked card. It then deposits this spare change into your investment account. This is an easy way to passively invest and save, and Acorns reports that the average user invests $30 a month using this feature.
- “Found Money” – Acorns calls its Found Money program a “cash forward” instead of a “cash back” program. By shopping at participating retailers (including Barnes & Noble, Expedia, Airbnb, Groupon, Walmart, and others) with your Acorns card or linked card, Acorns gives you a “cash forward” amount directly into your Acorns investment account.
If you get serious about investing, you’ll eventually need to invest more than round-ups and Found Money “cash forwards.” But for absolute beginners, or people truly strapped for cash, these options are perfect for building your confidence in managing your personal finance through investment.
When you’re ready to invest more regularly, you can set up an automatic monthly deposit directly in the Acorns app.
Although not for complete beginners, the Robinhood app is still an amazing choice for those just getting started on their personal finance investment journey.
Robinhood furnishes multiple options when creating your investment portfolio—stocks, ETFs, cryptocurrencies, etc. But you have to buy an entire share at a time, which means the initial personal investment will usually be higher than with other apps.
Some knowledge of investment is necessary because Robinhood has no robo-trading option and you must pick all stocks and shares yourself to build your portfolio.
If you’ve already gotten your feet wet in investment, Robinhood might be the option for you.
- Free Trades – This is Robinhood’s most awesome feature. Trading has traditionally always included a fee, which can slowly eat away at your little nest egg. But Robinhood completely obliterates these fees.
- Free to use – In addition to not charging trade fees, the app is also completely free to use. (Instead, the company uses a unique approach to make its money.)
Betterment is an excellent micro-investing app for beginners. The service epitomizes the word micro-investing by letting you start your investment journey with as little as a penny! There is no minimum amount required to get started with Betterment.
Like Acorns, Betterment invests in fractional shares of only ETFs.
The app uses a robo-advisor to recommend investment choices for you. These investment choices are based on a number of questions the app asks you when you first sign up.
By choosing their premium version, you can also gain direct access to financial advisors, but the premium offering is only available to people who have more than $100,000 to invest.
- “Goals-Based Investing” – One really cool feature of Betterment is that you can set up “Life Goals” in the app, and assign a target amount of money to achieve each goal. This is an entirely new approach to investing and turns investing into something more human, not an esoteric activity that has no relation to the real world.
- Automated Tax Loss Harvesting. This is an advanced method of potentially reducing your tax bill by selling off losing shares to offset investment gains. Doing it incorrectly can trigger alerts at the IRS, so Betterment has developed an automated solution that manages the harvest while staying strictly within the IRS’s rules.
Stash caters to both total beginners and people who already know a bit about investing. It has a wide range of stocks and ETFs for people to choose from when building their portfolios. But it can also automatically build that portfolio for you.
Stash goes the extra mile to help newcomers understand which stocks or funds to invest in by using simple English instead of “Wall Street Lingo” to explain the different choices available. You can scroll through the investment choices in the app and immediately understand what each one has to offer.
- “Round-up” – By connecting your bank account to Stash, the app can round up purchases to the nearest dollar and reinvest the amount for you in your portfolio. (This is the same feature Acorns has.)
- “Smart Portfolio” – Stash’s Smart Portfolio is an advanced feature that lets you “Invest and forget” with as little as $5. The portfolio is built by Stash’s team of “investment experts” and tailored automatically according to your risk profile.
A key rule of investment is to have a diversified portfolio. But building that portfolio previously required enormous capital and knowledge just to get started. It also opened people up to tremendous financial risk.
By using the best micro investing apps out there, you can now build a diversified investment portfolio and keep it all low-risk.
Our advice is to have a look at each of the micro investing apps above, use them, test them, and then choose the one you’re most comfortable with to improve your personal finance strategy.