Micro-investment apps have been on the up and up for the past couple of years, and are known for being the 'millenial's way to invest.' But how exactly do these apps work? Are the secure? Are they worth your time? Read on for the skinny on micro-investing apps.
Micro-investment apps were designed to make investing more accessible for people who have little knowledge of the stock market, or don't have enough cash to invest. The apps work by connecting the user to an existing exchange-traded fund (EFT) fund, a fund that, if you were to invest on your own, would cost you a few hundred dollars. With the app, the user if essentially able to by a portion of one unit of an EFT fund, instead of the whole thing.
It is important to remember that these apps are a business, so they must be profitable. Most micro-investment apps make their money off membership fees. Some will charge fees upon setting up your account, but many will deduct fees from your account every month, so keep this in mind when keeping an eye on your portfolio, and regularly check if using the app is worth it.
Most professionals will advise that you only invest (even on apps) if you are in decent shape financially. That is, if you can stick to a budget, rely on a fairly steady income, and pay your bills on time. Even if you are only micro-investing, the best course of action is not to touch that money for a long period of time, at least five years. If you are constantly withdrawing cash from your investments, you will not have the chance to make a good amount of money.
Additionally, if you invest too little, you may find that you're only putting in enough money to cover the membership fees (or not even). On most micro-investment apps, your fees will increase depending on the amount in your account, so the longer you have cash invested, the higher your fees will rise.
Micro-investing can be a great way to try out investing and begin learning about funds and stocks. If you want to give investing a go in a low-risk way, micro-investing apps could be a good fit for you, but be wary of fees and know the risks before downloading the app.
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