One of the biggest obstacles keeping people from investing – especially Millennials – is just getting started.
More specifically, it’s the inability to save money to invest that keeps them from getting started.
But there’s a trend developing called micro-investing that can help you to overcome that hurdle.
Micro-investing not only handles investing for you – with very small amounts of money – but it also enables you to save money just by doing the things you normally do with your money. They do that by allocating a very small part of each of your spending events into savings and investments.
If you haven’t signed up for one of these apps yet, you need to start checking them out. With most you can get started just by adding an app to your smartphone. And it really is that simple!
Micro-Investing Apps – The Real Deal
Below are five micro-investing apps, though actually only three of them invest money. But all will enable you to at least accumulate the cash you need to invest, which for most new investors is exactly what they need.
Acorns – Invest Spare Change
That motto is exactly what Acorns does for you, and it might very well be the gold standard in micro-investing. That’s because it gives you the ability to accumulate savings and begin investing while you’re spending money.
It works through a process called Round Ups. You link a checking account to the Acorns app, and it then rounds up every purchase to an even dollar amount. After that, the difference between the actual purchase amount, and the even dollar amount of the payment, is transferred to your Acorns investment account once it reaches at least $5.
There is no minimum in order to open up and Acorns account, but investing begins once you reach the $5 level. The money will be invested in your choice of funds that invest in stocks, bonds and real estate. Since each payment from the designated spending account moves at least some money into your account, you can literally save more money the more you spend. That also makes it a totally passive way to not only invest your money, but also to save it up.
Acorns charges a management fee of $1 per month on account balances below $5,000, and 0.25% or higher balances. And if you’re a college student, you can use the app for free. The app is available for iPhone and Android devices, and can be downloaded at Amazon, Google Play and iTunes.
Stash allows you to invest with as little as $5! It actually operates very similar to the way robo advisors do, in when you open your account, you complete a questionnaire which determines your investment goals and risk tolerance. Stash then makes investment recommendations for you, choosing among thousands of exchange traded funds (ETFs) and individual stocks.
But unlike robo advisors, it’s up to you to decide to actually follow those investment suggestions. You can fund your Stash account by linking a bank account, and then transferring money directly.
The app is available for Apple iOS and Google Android. The fee structure for the app is similar to Acorns, in you pay $1 per month on account balances below $5,000, and 0.25% on higher balances.
Qapital – Save Small, Live Large
Qapital is free app. It doesn’t serve as an investment app, but it does work as a savings app that will enable you to accumulate the money to invest – which is a major hurdle for many who are new to investing.
Qapital works much like Acorns with its Round Up feature. You can link credit cards and even your PayPal account to the app, and then choose a small amount of money that will be moved into a bank account anytime you make a purchase. You could add anywhere from $1 to $5 for each purchase. That will enable you to save money through your normal purchasing activity, without actually having to directly allocate money for savings.
They also have features that make saving money fun, referred to as Triggers. One is Guilty Pleasures. That’s when you save money by buying something you’re trying not to buy. For example, you can set a trigger in which $10 is saved each time you eat at McDonald’s. Then there’s the IFTTT trigger, which helps you to save money each time you accomplish certain desirable outcomes, like turning on a automation light switch in your home.
There’s no minimum deposit required to start using the app, and there are no account fees required. The app works with Apple iOS and Google Android. The savings deposits don’t come from your credit cards or your PayPal account, but from your checking account. That means you will have to have sufficient cash in that account at all times in order to cover the deposits that will be transferred.
Digit – Save Money, Without Thinking About It
Digit works similar to Qapital by enabling you to save small amounts of money based on certain activity. The app studies your income and spending histories, and then looks for daily savings opportunities. When they find savings, they transfer them to a Digit savings account. The transfers happen every two or three days.
They do this by analyzing your checking account balance, expected income, expected bills, as well as your recent spending patterns. The purpose is to determine available funds for savings within the budget that passes through your checking account. Also, the app guarantees it will never transfer more money than you will have available in your checking account.
Just as is the case with Qapital, Digit is designed to be a savings accumulation app, and not an investment account. However it does pay a small amount of interest on your savings. There’s no minimum account balance required for Digit and it’s available for Apple iOS, Android and SMS.
The downside, however, is the app does have an account fee of $2.99 per month.
Motif – Create Your Own Investment Portfolios
Motif allows you to create your own little investment portfolios – called motifs, based around any investment theme you choose.
For example, you can create a motif that’s centered on clean energy, beachfront hotels, or investments in Costa Rica – it’s strictly up to you. You can also choose to invest in motifs that have been created by other people, and there are hundreds of them available.
A motif is a miniature investment portfolio that includes a mix of up to 30 stocks and ETF’s. You can create a motif for just $9.95. As the motif creator, you also manage the portfolio and adjust it when necessary. There is no minimum account balance required, and no annual account maintenance fee charged. This is one of the most interesting and enjoyable ways to invest anywhere.
Moving Up to Robo-Advisors with Zero or Very Low Investment Minimums
An alternative to micro-investing is to invest through a full-blown robo advisor. These are automated investment platforms that handle every aspect of the investment process for you. Your only job is to fund the account. And since all of them enable you to get started with very little or no money, you may also want to consider using one to get your investment start.
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Betterment is probably the best-known of all robo advisors, not the least of which because it’s the largest independent platform. But you can open up an account with Betterment with no money at all, and fund the account with payroll savings. You can even use the account to begin saving for retirement with an IRA.
As is typically the case with robo-advisors, you complete a questionnaire that determines your risk tolerance. The portfolio is then created for you, and comprised of slices of several ETF’s. This enables you to effectively invest in literally thousands of different investment securities, with very little money. Betterment then handles all of the investment details for you, including periodic reinvesting and tax-loss harvesting.
Betterment’s account management fee is 0.25% on account balances of up to $100,000. That means a $1,000 account can be managed for only $2.50 per year. It’s available on Apple iOS and Android.
Wealthsimple – Investing on Auto Pilot
Wealthsimple works very similar to Betterment, in that once your risk tolerance is determined, a portfolio of ETF’s is created for you and fully managed by the platform. But Wealthsimple puts a spin on their investment options. You can choose to invest in a socially responsible portfolio that reflects your own values.
There’s no minimum deposit required to get started, and you can begin building your account with automatic deposits. The first $5,000 in your account is managed for free. After that, the annual fee is 0.50%. The app is available for Apple iOS and Google Android.
WiseBanyan – The world’s first free financial advisor
WiseBanyan is a robo advisor that allows you to open up an account with his little as $1, but you are required to have at least $10 in order to begin investing. From there, you can build your account through regular automatic deposits. Your account is invested in a mix of ETF’s, which includes periodic rebalancing, dividend reinvesting and even tax-loss harvesting. The app is available for Apple iOS and Google Android.
WiseBanyan also offers IRA accounts in addition to regular taxable accounts. One interesting strategy is their Milestones feature. It enables you to set goals including Rainy Day, Retirement and Build Wealth categories, which enables you to segregate your portfolio for very specific purposes.
Investment Brokerages with No- or Very Low-Account Minimums
It may be a surprise to a lot of new investors there are actually full-service discount investment brokers that will welcome your business, even if you have no money to start out with. You can open a self-directed investment account with one of these brokers, and fund it with automatic deposits, until you have enough in the account to begin investing in either stocks or funds.
Ally Invest operated as TradeKing up until last year, when it was acquired by Ally Bank. That can be a big advantage in itself, since Ally Bank is one of the best-known online banks, and one that provides some of the highest interest rates available on savings. Ally Invest specializes in self-directed investing and options trading. The trading app is available for Apple iOS and Google Android.
As a full service discount brokerage, Ally Invest enables you to invest in virtually any type of investment available, and you can set up an IRA account as well as a regular taxable investment account. You can open a self-directed account with no money at all, and have funds automatically deposited into the account. There is no annual fee to maintain the account, and trades can be executed for $4.95 per transaction. That’s one of the lowest trading fees in the industry.
OptionsHouse is one of the best known full-service discount brokerage firms available. Like Ally Invest, the platform enables you to trade just about any type of investment security that exists. One of the best features about this broker is it offers an excellent suite of educational resources for new investors to learn with.
You can open up an account with OptionsHouse with no money at all, although they do recommend you have at least $1,000 in your account before you begin investing. There is no annual account management fee, and you can execute trades for $4.95 per transaction. Available accounts include IRAs and regular taxable brokerage accounts.
Firstrade is another full-service discount investment broker that enables you to open up an account with no money whatsoever. You can open up both retirement accounts or regular taxable investment accounts, and the platform allows you virtually unlimited investment selection.
Firstrade’s mobile app is available for both Android and iPhone. There is no annual management fee to maintain your account, and you can execute trades for as little as $6.95 per transaction.
Investing in Peer-to-Peer (P2P) Lending
Finally, no discussion of micro-investing would be complete without at least mentioning investing in P2P lending. These are websites that bring both lenders (investors) and borrowers together on the same website to create loans. Because there is no banker involved, the investor gets a (much) higher rate of return on their money than they can with bank investments, and borrowers often pay lower rates. It’s your chance to get the kinds of fixed income investment returns that big investors get.
Lending Club is one of those investment platforms you might want to invest on once you have accumulated at least $1,000 – which you can do using one or more of the micro investing apps listed above. But once you have the money to start an account, you can invest in individual loan “notes” for as little as $25 each. This means your $1,000 account can be diversified across as many as 40 individual loan notes.
Lending Club isn’t a general investing platform, and your investments are limited to the loans that are provided on the website. But that’s one of the best reasons to use this platform. Since the investments are in fixed rate loans, they can be a good diversification to a stock portfolio. In addition, rates of return you will earn on Lending Club investments will be much higher than what you can get at a bank. It’s possible to earn double digits interest rate returns on your investments, although you will be taking on higher risk loans to reach that level.
There are no annual account fees to maintain a Lending Club account, but the platform does charge a fee of 1% on each loan. But you’ll hardly notice it, since it’s deducted from your interest payments.
Prosper works virtually identical to Lending Club. It’s the longest established P2P lending platform. It enables you to invest in the platform for IRA accounts as well as regular taxable accounts. You can also purchase loan notes for as little as $25. Prosper also has no annual fee, and also charges a 1% fee per loan, deducted from the interest rate return.
If you haven’t been able to begin investing, maybe because you haven’t been able to save money to do it, check out any of these investment apps and platforms to get started. When you can make the saving and investment process automatic, you’ll be able to build wealth without even trying.
That’s passive investing at its best!