 If you’re new to investing, you may have looked into a variety of investment types and platforms. In your search you may have stumbled across platforms such as Raiz, Sharsies, or Spaceship and wondered how these compare to other investments. Simply put, these platforms allow you to 'micro-invest', with minimum investments as low as $5. The Benefits of Micro-Investing
Learning Experience The small minimum deposit required to start an account with most micro-investment platforms means that you can start with less risk. This allows you to experience how market fluctuations impact investments without risking a large investment balance. Lower Barrier to Entry Platforms like Sharsies have no minimum investment amount, allowing you to invest as little as $0.05 at a time. Passive Investing Sharsies, Raiz, and Spaceship each allow you to round up your purchases and automatically pay the difference into your investment account. This can be beneficial if you know you won’t remember to put money aside for your investment, as it merely skims a bit from each transaction. Ease of Use Their apps allow you to change investments, sell, and buy with the touch of a button, making it straightforward for anyone to use. The Negatives of Micro-Investing High Management Fees Raiz charges monthly account fees which may eat at your balance if you aren’t putting large amounts into your investment. If you’re exclusively using the rounding feature, you may find that your balance gets eaten through and ultimately isn’t beneficial for you. No Transfers Most micro-investing platforms do not offer the option of transferring out your investment (excluding Raiz, who has some terms and conditions). This means that if in 10 years you’ve decided to move to another broker or platform, you may trigger a capital gains event. Limited Growth Potential The nature of micro-investing platforms can limit the potential growth of your investment. Whether these investments will have a long-term benefit on your financial situation will depend on how much you invest and for how long. Limited Investment Options The small amount of investment options can lead to an undiversified portfolio, which can increase risk. Easy Investing The ease of use may contribute to a simplified attitude toward investing, leading to more frequent trading and an oversimplified view on investment decisions which could impact your approach to larger investments later on. So, Is Micro-Investing Right for Me? If you’re just starting out with investing, then platforms such as Raiz can be a great tool for you to learn and understand how the market operates without investing a large amount of money. Long term, you may find that their higher fees and limited options restrict your growth. If you’d like to discuss if micro-investing is right for you, or if other investment options may be more beneficial, feel free to reach out to our office. You can also check out our podcast episode on the topic. Comments are closed.
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