When a new investor starts out in the stock or crypto market, the available options are a bit overwhelming. There’s over 40,000 publicly listed companies across the world, and over 11,000 cryptocurrencies available for purchase, and that’s not counting other investment vehicles like exchange traded funds (ETFs), bonds, precious metals, trusts, the list goes on.
It’s not just the choice of what to invest in, but also how much to invest and when is the best time to buy, this is why more investors are using a micro investing platform in Australia to alleviate the stressors of the market and put their portfolio on autopilot.
What is micro-investing?
Micro-investing is in the name, it’s a way to invest a very small (micro) amount of money into a financial market. An investor will make regular, small deposits into a portfolio over time, building up their position using a dollar-cost averaging method.
Depending on which platform you use, deposits can start from as little as $1, and others will round up to the nearest dollar the “spare change” from purchases made on a debit or credit card.
Typically, putting money in the market would require a large amount to get started, for example to buy a single share of Tesla right now is nearly $1,400 Australian dollars! Investing a small amount often is a much more accessible and palatable way for beginners to start their investment journey.
How does it work?
Most platforms work in a similar way, where a user connects their credit or debit card, the platform will monitor spending and round up purchases to the nearest $1 and also provide an option to make a recurring investment.
Buying that slightly overpriced, but much needed large cappuccino every morning for $4.50 will deposit 50 cents into a portfolio, compounding into $3.50 a week, and $182 over the year. Now think about that working with your other costs like fuel, groceries, pub lunches, and new clothes and it can add up to a few hundred a year invested without thinking.
Depending on the platform the money will be invested into a portfolio chosen by a team of experts or one that you decide for yourself, but they all typically invest it into a diversified portfolio of stocks or crypto.
Is it worth it for me?
That depends, only you or a professional can assess your personal financial situation, it’s important to do your own research, and even consider speaking to a financial advisor to see if these platforms are right for you.
With that said, micro-investing is great for first timers and even those who have been investing for a while.
If you’re after an easy proven way to invest in the market, believe that “time in the market beats timing the market”, and don’t want to fork out a big lump sum to get some skin in the game, then this investment style could be right for you.
What’s the catch?
Well, investing is a high-risk, high-reward activity and the more money you have in the market as it’s on the way up, the more money you have gained, although the opposite is also true.
Whilst you will make smaller returns as there is less invested, you will also not be at as much of a risk if the market takes a tumble.
The fees on some platforms can also eat into your profits if the market is in a downturn, fees are typically charged monthly, and go up with the more you have invested. Even at the top end of fees, they’re quite affordable with the most expensive not more than $4/ month.
Micro-investing apps in Australia
Some examples of popular apps and what they invest in are:
invests in the cryptocurrencies Bitcoin and Ethereum, also precious metals, gold and silver.
invests in its own ETFs, a bunch of different, diversified stocks which the Spaceship team “rebalances” i.e.: removes stocks which aren’t performing great and adds in ones that are.
An investment platform from Commonwealth Bank that features 7 different ETFs like tech companies and “Emerging Markets”, popular as most investors have a CommBank account which is required to use the platform.
Also Read: 3 Ways To Protect Your Property.