It’s a bit like keeping your change as an investment
Small steps can go a long way. Many banks today allow for automated savings on purchases, placing a small percentage of what is spent in a savings account. The issue with “spare saving” is that it loses value over time because of inflation being higher than interest rates. Micro-investing is different since it turns that small change into investments. This allows for the possibility of making additional money on the “spare change,” and become more involved in a brand as one becomes invested in it (quite literally).
What is micro investing?
It’s just what it sounds like. Micro-investing means investing small quantities, often automatically, in the stock market. This is done by platforms which either deposit the difference of your purchases rounded up to the nearest dollar, or “nudge” consumers to micro-invest. The revolutionary idea behind micro-investing is that it breaks down all barriers to investing: no brokerage fees, or investment minimums (although some platforms do charge $1 in monthly fees…). Another remarkable element behind micro-investing is that one invests in fractional shares. These are not regular shares, rather they are in exchange traded funds, or ETFs. This means that they are diversified into a variety of stocks rather than a single one, and are therefore resistant to the moody changes of the stock market.
It’s all about that nudge
Micro-investing works intuitively with most platforms: personal information is requested, alongside bank account numbers and questions which help determine the investor’s risk profile and the type of investments they should make. Investing starts as soon as they starts spending with that bank account. Micro-investing is based on the idea that all you need is a little push in the right direction. Nudging is what makes micro-investing work, both for investments and savings. It also lets people invest or save without changing their habits. If micro-investing was a person, it would be that inspirational teacher who reminded you that success is the sum of many small efforts.
If I were a rich (wo)man
Micro-investing is probably not going to make you rich, but it probably will earn you some nice extra cash (and that’s always welcome). Just by saving 20 cents a day, one can make 6 dollars a month, which turns out to be 72 a year in investments. And unlike savings accounts, which hold 0% interest rate and are subject to inflation, micro-investments have an annual average return of 7%. Not bad, and definitely better than nothing. When starting to invest, it’s important to invest only what one is comfortable with losing, making this “pocket-investment” the perfect excuse to start. Remember that investing is not about working harder, but working smarter - so even that small amount invested today will eventually pay off.
Why will your future self thank you?
It’s normal to feel as though one is not earning enough to properly start investing. This is exactly why micro-investing is great. Rather than focusing on how much to invest, it enables one to get comfortable with the idea in the first place, so that one can build the habit for later. Bits of Stock™ automates this process and makes it easy to start investing by linking your credit card to brands, allowing for consumers to invest their rewards rather than their own money.
- It also makes sense from a business side. Thanks to micro-investing, businesses can build a large and diversified investor base, which allows for more freedom.
- Micro-investing is a great way to start investing, especially if one doesn't have a consistent source of income (looking at you, freelancers).
- “Great things are done by a series of small things brought together” - Vincent Van Gogh.