Micro Investing is the process of investing with small sums of money, regularly. Micro Investing platforms enable users to put away small amounts of money towards shorter or longer term investment goals.
These platforms operate in various ways - some require a small initial deposit, while others link to your bank account and invest small sums of money rounded off from transactions.
A study by Adjust, says that micro-investment is booming in the UK, with a 60% increase in the number of people downloading micro-investing apps in 2021 compared to the prior year.
Some of the reasons for the growing popularity of micro-investing is that it allows you to start investing from as little as £1, they’re simple and easy to use, and are useful for younger investors and people with low incomes who are often excluded from investment products.
Micro investing apps have minimal brokerage fees and enable users to automate their contributions, making them more convenient than traditional investing instruments.
Many apps offer automatic portfolio rebalancing by making you pick up a risk level, such as conservative, moderately conservative, moderate, or aggressive, and then automatically adjusting your portfolio accordingly.
Micro-investing apps can play a critical role in cultivating savings and investing habits, with the ability to offer spare-change investments and round-off features encouraging us to save without even thinking about it!
Micro investing is not an ideal solution for most of us, as the process of earning returns through it is relatively slow as compared to traditional investments. Right now, there’s also a lack of variety of account options.
Micro investors often suffer from a lack of control over their purchased shares, and apps using automatic portfolio allocations often take away investment discretion by investing in funds it considers appropriate.
Micro-investing helps solve some of the main barriers for beginners and young investors: lack of knowledge or understanding and lack of capital. It’s specially targeted at technology-driven younger people who wish to accumulate steady savings but lack the funds to do so.
Micro-investing should be considered an additional form of saving money, not a replacement for other investment opportunities. But no matter where you see yourself financially, micro investing can be a good start!