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    What is micro-investing, and is it worthwhile?

    Does the sound of investing intimidate you? To buy shares, you need starting funds, which very few young people have. But that is not to say that the world of investing is closed to you.

    Micro-investment deposit schemes allow investors to invest as little as $1 a month. This beginner’s guide will highlight the benefits of micro-investing, the available micro-investing apps in Australia, and help you get started.

    Is micro-investment worth exploring? Read on to find out and discover which investment app in Australia is right for you.

    What is micro-investing?

    Micro-investing is like any full-scale investment product, except users deposit a small amount of money into micro-investing accounts rather than large sums.

    Users could deposit $1 a week and any spare change. For instance, say if you choose an investment app that allows you to round up your purchase. When you buy a $3.50 coffee, the remaining 50 cents go into your investment account. It’s an easier and more accessible way for beginners to meet their investment goals.

    Investment often yields better returns than a savings account or other traditional means, mainly because interest rates are currently low. However, micro-investments ease beginners into investing in the Australian market. Most micro-investing platforms guide users through the investment steps and offer recommendations or ‘plans’ to follow.

    Millennials and Gen Z

    The micro-investment market is worth $1.8 trillion globally, suggesting the population has embraced it. Micro-investment strategies are popular for young adults between 18 and 30. However, anyone over 18 can open an account and start investing a small amount of money.

    Micro investing is an excellent way for beginners to save and invest. However, it’s also suitable for anyone who wants to put their money to work. For instance, it’s becoming increasingly harder for young Australian to invest in real estate with property prices at record highs.

    Micro-investment platforms also allow users to begin retirement planning at a young age when their financial situation would not otherwise allow it.

    Why are some investors flocking to micro-investing apps?

    Micro-investing is an attractive prospect for experienced investors and beginners. Here are some reasons why:

    • No deposit needed: Traditional investments require a deposit, which could be anything from $500 to $5,000. Micro-investment platforms available in Australia can allow investors to begin with as little as $1, while some might not require a deposit.
    • Convenient and straightforward: The benefit of micro-investing platforms is they use apps to manage, deposit and round up your investments. Virtually no effort is required to set up, invest, and track your portfolio.

    How do micro-investment platforms work?

    Every micro-investment platform is a bit different, but, on the whole, they work the same. Most of the platforms gear themselves towards beginners and will guide you through setting up your account. To begin, choose a reputable investing app in Australia.

    Once started, you will deposit an automatic investment each week, month, or fortnight depending on your preferences. Some apps allow you to connect with your transaction accounts to round up payments and invest spare change. On a smaller scale, they may also allow investors to dollar-cost average.

    You can deposit and withdraw as much or little as you would like from your investment account. Most platforms charge fees based on the portfolio size; therefore, costs are pretty low.
    Popular micro-investment apps in Australia

    The top apps in Australia include:

    • Raiz Invest.
    • Spaceship Voyager.
    • Sharesies.
    • CommSec Pocket.

    There are also crypto apps available to begin micro-investing in cryptocurrencies such as Bamboo.

    How do micro-investing apps invest money?

    The app will automatically collect money from your account and invest it in a two-week cycle, depending on the platform. You can manage your deposits and track your portfolio within the investing app.

    Some platforms also allow you to choose where your money goes and invest in specific themes like socially responsible investing, technology, or the metaverse and Web 3.0.

    Here are some examples of where micro-investing apps might invest your money:

    • Australian Securities Exchange (ASX).
    • Shares, index funds, ETFs, bonds, and sometimes even property via REITs.

    Unlike traditionally investing in the stock market, micro-investing apps allow investors to buy fractional shares.

    The pros of micro-investing

    • Allows investors to create a diversified portfolio with a small amount of money. Whereas buying into a traditional mutual fund requires a few hundred dollars (at least).
    • Easy and accessible to set up an investment portfolio. Investors can start investing within minutes.
    • Automated features allow investors to set up an investment plan that automatically withdraws from their savings account.
    • Creates good financial habits that make it easier for investors to meet their savings goals.
    • Offer investors the potential to get better returns than a term deposit and savings accounts.

    The cons of micro-investing

    • Some micro-investing apps may offer limited options. For instance, you may want to invest in individual stocks, but the platform only lets you invest in a portfolio.
    • Risk. As with all investment options, there is a level of risk that you lose your money.
    • Management fees or annual fees.

    Micro-investing fees

    As previously mentioned, fees can make a significant difference to your returns. Here are the costs for the most popular micro-investing apps:

    • Raiz: Standard portfolios cost $3.50 a month for accounts under $15,000. Accounts over $15,000 cost 0.275% per year.
    • First Step: Accounts under $5,500 charge $1.25 per month. They charge 0.275% per year for accounts of $5,500.
    • Spaceship Voyager: $2.50 a month when you have a $100 or more account balance.
    • Sharesies: A 0.5% transaction fee for amounts up to $3,000 and 0.1% for amounts above $3,000.

    Other beginner investment options

    Micro-investing isn’t for everyone. Other investment strategies available for beginners might better suit your financial situation.

    • Traditional investments, e.g. buying into a managed fund or using a stock trading app.
    • Copy-trading is a way of learning how to invest effectively by following experienced investor movements.

    How to begin micro-investing?

    It’s very straightforward to begin micro-investing. Firstly, conduct research and due diligence. Then once you have found a suitable platform, create an investment account, and connect your bank account to automate weekly, monthly, or fortnightly payments.

    Some platforms allow you to round up spare change to invest in your account. Rounding up is an excellent way to reach your investing goal with minimal effort and choose your risk management level.

    Some platforms might allow you to adjust your allocation preferences between different shares, ETFs, and bonds. It’s an excellent way to learn the ins and outs of investing with relatively little risk.

    Is micro-investing right for you?

    As with any investment decision, seek financial advice. Micro-investing might be suitable if you’d like to begin investing with little capital fast. Even if you can only spare $1 a week or month, it’s an excellent way to begin investing and learn good financial habits.

    Disclaimer: Please note that these are the views of the author Jodi Pettersen, Investor Relations at eInvest, and are not necessarily the views of eInvest. This article does not take into account your investment objectives, particular needs or financial situation and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. You should read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. Please visit www.einvest.com.au to see our relevant product disclosure statements, target market determinations and additional information on how to invest in our active ETFs. Past performance is not a reliable indicator of future performance.