Understanding micro-investments and how they can benefit you
What are micro-investments?
People who engage in microinvesting save and invest money in incremental amounts. Micro-investments allow people who have little money to get started saving. Microinvesting apps are the applications used for people who want to start investing in an easy way.
Microinvesting is popular among young investors who do not have much capital. It is a good choice for inexperienced investors who do not want to invest through traditional brokerages that charge high commissions or that require high initial minimum balances. Finally, microinvestment apps are good for hands-off investors who would like to take advantage of automated savings.
What are microinvestments?
The definition of microinvestments is small investments that are invested through an automatic investing process. The money that you invest as a microinvestor is used to purchase exchange-traded funds or ETFs.
Exchange-traded funds are types of index funds that attempt to match the performance of a pre-selected indicator. ETFs help to spread your risk since you will be purchasing shares in a group or in hundreds of different companies.
Millennials and investing
The statistics on investing among millennials reveal some interesting trends. According to a survey by Bank of America, 16% of millennials between the ages of 23 and 37 have more than $100,000 in savings. However, many more young people do not have substantial savings. A survey by GoBankingRates found that most young people between the ages of 18 and 24 had less than $1,000 saved, and more than 50% had no savings at all.
Automated investing using microinvestment apps can help young people to save. According to data from Statista, 12% of young people between the ages of 18 and 29 reported that they had used online investing platforms in the past year.
What is a micro investing app?
Microinvestment apps are online investing platforms that allow you to automatically invest small sums of money in stocks. When you connect your debit or credit card to the microinvestment apps, your purchases are rounded up to the next dollar.
This allows the remaining amount to be automatically invested for you. Microinvestment apps invest the money in a portfolio of investments that have been chosen for you.
What is micro-investing, and why do people like it?
Microinvestors are loyal to micro-investments because they make saving money easy. The microinvesting apps do the work for you so that you do not have to think about investing. You do not have to have a substantial amount of money to benefit from this type of investing.
Microinvestors also do not have to be knowledgeable about the stock market. Finally, small investors love micro investing because some micro-investment apps are free.
How can you use micro-investing?
If you choose to use a micro-investing app, it can help you to save money by taking small amounts from your purchases to invest the money for you. The app rounds up the dollar amounts from your purchases that you make with a connected credit or debit card. The difference between the next dollar amount and the purchase price will be deposited into your investment or savings account.
You can sign up for a micro-investing platform through an app on your smartphone. You enter the requested information such as your credit or debit card number to link different accounts to the micro-investing accounts.
You will need to answer some questions to help to determine the types of investments that might fit your risk tolerance and your investment goals. Some apps use robo advisors to create risk profiles based on the responses that are provided. Robo advisors use computer algorithms to make recommendations about investments.
Your risk tolerance is how much variability and volatility that you are able to handle in your investments. If you have a high-risk tolerance, your portfolio can be invested more aggressively to try to secure a higher expected rate of return.
Aggressive investments carry maximum risk combined with maximum returns. If you have a higher risk tolerance, you might favor investments in real estate, stocks, international securities, and options.
If you have a moderate risk tolerance, you can tolerate some risk with a more balanced approach. This is appropriate when you have a time horizon of five to 10 years to invest.
Conservative investors can withstand little to no volatility in their investment portfolios. They choose investments that are guaranteed and that are highly liquid. Some examples of some conservative investment choices include certificates of deposit or CDs and money market funds. As you near your retirement years, choosing low-risk investments can be a wise choice. When you are younger, you can take on more risk.
You may be able to set up recurring deposits into a micro-investing account or a to make contributions to a retirement account. It is important to remember that automatic debits from a debit or credit card account can result in additional fees if your account does not have the funds available. You could be penalized with overdraft fees or other charges.
Your money will typically be used by the trading platform to purchase exchange-traded funds or ETFs. These types of funds help to spread your risk by buying shares in many different companies. Many micro-investment trading platforms for automated investors trade in fractional shares, which allows you to invest in small parts of the companies.
Benefits of micro-investing
Automated investors who are participating in the micro investing world may find that micro-investments are great for beginners. Micro-investing platforms are easy to understand and are simple to use.
People who have smaller incomes might find that micro investing helps them to save money effortlessly. If you do not currently invest, micro-investments can open the doors to your ability to make larger investments in the future.
If you are a young investor without much capital, micro-investing has a low barrier for entry. If you regularly save, micro-investing platforms can add up over time.
Limitations of micro investing
There are some limitations of micro-investments. Micro investing involves a slow process to accrue money. It is can be difficult to build wealth if you are only making this type of investment. There is also a lack of variety for account choices because many microinvesting apps only offer a few choices of the types of accounts that you can choose.
Looking for in a micro-investing app and micro investing platform
There are several things that you should look for when you are searching for microinvestment apps and platforms. You should look at the transaction fees and other fees that the apps might charge.
Some apps charge a low monthly fee for their basic fee such as $1 while others charge nothing at all. Others may charge transaction fees per trade or offer free trades as a promotion until your account reaches a certain balance. The fees that you might be charged will depend on the type of services that you are provided. Some platforms charge up to 0.5% or more for their premium services.
In addition to searching for low or no fees, check the account minimum balance requirements. You should choose a platform that has a low minimum opening balance requirement.
Next, look at the investments that are offered. You will want to choose a platform that offers a range of investments from which you can choose for your portfolio. You might also want to find a micro-investing app that offers you the ability to open a margin account or the opportunity to borrow on the margin.
When you are comparing different platforms, make certain that you read the disclosure materials. You should read about any fees that are charged as well as other important information like the products and services that are offered and how you can invest your money.
Look at the platform’s customer service. You will want to know if you can get help by phone or online. You will also want to make certain to investigate the validity of the firm. You should only choose a firm that is registered with the Financial Industry Regulatory Authority or the Securities and Exchange Commission. You can check a firm’s registration by using FINRA’s BrokerCheck tool.
When you have found a trading platform that you want to use, it will be important for you to set your financial goals. You will then want to develop your plan for investing with a long-term view.
M1 Finance features
M1 Finance is a trading and investment platform that offers the following features:
- Savings accounts
- No-fee IRAs
- Cash balance controls
- The ability to place individual orders
- Automatic portfolio rebalancing
- M1 Spend
- M1 Borrow
- M1 Perks
M1 Spend, which will be coming soon, is a checking account that is FDIC-insured. It is directly integrated into the M1 app, allowing you to enjoy direct deposits, to pay bills, and to spend money with a debit card.
M1 Borrow is a flexible line of credit from your portfolio. It allows you to borrow money on the margin. With M1 Borrow, you are allowed to borrow up to 35% of the balance of your qualifying portfolio and to repay it on your own terms.
M1 Perks include M1 Plus. this is a premium membership program for M1 account holders. Anyone who has an M1 account can join as a member of the M1 Plus program. If you choose to do so, you will receive exclusive access to a second trading window. M1 Plus members receive a 0.25% discount on borrow rates, allowing you to access your money for even less. As an M1 Plus member, you will also get a 1.5% APY and 1% cash back on all purchases that you make with your debit card. You will also receive more ATM withdrawal fee rebates at four per month as well as a premium tungsten metal card.
Micro-investments can allow you to start saving even if you do not have a substantial amount of capital or have a modest income. When you choose M1 Finance, you can enjoy many beneficial features that can help your savings to grow faster.
Why small investors trust M1 Finance
Many small investors place their trust in M1 Finance. With its trading platform, you can enjoy free investing that is simple and secure, making it ideal for self-directed investing. M1 Finance does not charge fees to manage your account or any commissions. You can start investing with M1 Finance for free and can invest without having to compromise.
M1 allows you to enjoy automated and free investing without trading fees or commissions. The platform and app empower you to potentially earn more while you learn to manage your money more effectively. M1 Finance automates the investing process to make good financial habits effortless. We put every penny to work for you so that you can enjoy better returns.
Find your investment match today with M1
When you open your account with M1 Finance, you will be able to pick investments to match your risk tolerance. You can create your own portfolio to meet your needs, or you can choose an investment portfolio that has already been created by financial experts to match different abilities to handle risk, different time frames for investing, and different financial goals.
You will find that the platform with M1 Finance makes investing accessible regardless of whether you are a new investor or someone who is more seasoned with investing. With M1, you will enjoy the ability to access its strong automatic features from anywhere.
Since M1 Finance allows all investors to invest without paying any fees for management or commissions, your money will be able to work harder for you as you grow your savings with automated investing.
When you open your M1 account, you will find that the platform is intuitive and is able to save you time by offering automatic features such as rebalancing and reinvestments. This helps to automatically align your portfolio with your financial goals at all times. M1 uses a mix of important investing principles and strong technology to make the investing process simpler. This allows your wealth to grow effortlessly.