How to start micro-investing

Here at Bounce, we are big believers that everyone should be investing. This may not be right now, but we think everyone should be working towards building an investment portfolio at some point in their financial journey.

Whilst your ability to earn an income may be your most important asset, you only have a limited number of hours each week that you can exchange for money. If you ever want to be ‘rich’ or even ‘well-off’ you need to start investing.

But where do you start? Particularly when you don’t really have a lot of money, how do you learn? If you’re a bit like me and learn by doing, then you might want to look into micro-investing.

What is micro-investing?

Micro-investing is a relatively new concept and it simply means investing by starting with very small sums of money. The rise of technology has made the process of starting to invest easier than ever before and now you can start investing with nothing but your smartphone and a few spare dollars.

The most popular apps at the moment for micro-investing in Australia would have to be Raiz (formerly Acorns) and Spaceship Voyager. Both are available on the app store and you can sign up in only a few minutes.

The apps give you the option of investing small amounts regularly or alternatively, setting a ‘round-up’ feature. This means that when you purchase something, the amount is ‘rounded-up’ and the remainder invested. This can be a useful way of saving without really noticing you are doing it.

How is my money invested?

Once you’ve contributed to the app, your money is invested in line with your investment profile you select. I downloaded Raiz to give it a go and saw that they have investments ranging from Conservative all the way to Aggressive, with an ethical option included as well.

So is it worth micro-investing?

Like all things money, the devil is in the detail. Before you buy a financial product it is always worth reading the Product Disclosure Statement (or PDS for short). This sets out things such as the fees you pay, the risks you take and other important information.

If you are investing really small amounts, the fees are quite high proportionally. Further, generally when it comes to investing, it is important to have a long time-frame to allow for the returns to grow and compound. I imagine a lot of users of these apps are attempting to access their savings in the short term which might mean they are suffering losses.

Despite this, I really love these apps as a gateway to investing. They can help you to understand key investment concepts such as that the level of risk you take will influence the overall returns and the timeframe of investment. Further, the easy to use nature of the app and the reporting of the value of your investment can help you to get comfortable with the daily fluctuations of the share market before you start really committing to investing.

The best investors are the one who are happy to contribute regularly to their portfolio, are comfortable that the value of their investments are going to go up and down and won’t sell once markets have a down day. This can be a great low-cost introduction to make sure you understand the world of investing.

If you haven’t already, check out micro-investing and whether it would suit you. As always, if you have any questions, please feel free to reach out.

This post is from our resident Financial Planner Ben Brett, check out his details in the About Us section.

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Posted in: Ben Brett, Investments