What are micro-investing apps?

Highlights

  • Micro investing apps are platforms for users who want to save a small sum of money regularly.
  • The returns usually are more than what a certificate of deposits or regular savings account in the bank would fetch.
  • With more and more people technology-driven and increasing financial literacy, such apps can be path-breakers for promoting financial inclusion.

Micro investing apps are platforms for users who want to save a small sum of money regularly. These are useful to remove the traditional barriers such as the minimum requirements of brokerage account. Such apps are an encouragement for people even with small incomes and limited assets to invest. It makes the investment process simple and painless and is a platform for any investor who otherwise may fail to accumulate significant savings for future investments. Small amounts are taken from investors and invested into exchange-traded fund based accounts. Overtime as small savings add up and provide returns. These returns are more than what a certificate of deposits for regular savings account in the bank would fetch. Also, unlike the conventional schemes, the fees in subscription or brokerage are very low.

How do such apps work?

Different providers offer different functioning, but there are two main ways-

  • Fractional investing

Investors can buy a portion of one share and not the whole. This is not allowed in the formal stock market set-up. However, apps can split a share and allocate it amongst its users who cannot afford to buy one whole share.

  • Account linking

Some apps require the investors to link their bank accounts to the app. Then, each time the investor performs a transaction, the app round off the amount into the next highest number, and this difference is diverted towards the investor's fund. Of course, this can be done with debit card linking too.

Why choose micro-investing apps?

Investors can choose micro-investing apps to inculcate a habit of saving by starting with small amounts. There is convenience at the click of a mouse without lengthy paperwork, as with traditional platforms. Investment becomes affordable even for people who do not earn too high or have a massive accumulation of assets. In addition, investors learn about the degree of their risk tolerance and goals of investing. With more and more people technology-driven and increasing financial literacy, such apps can be path-breakers for promoting financial inclusion.

Things to keep in mind before you explore a micro-investing apps

Like with any other investment avenues, it is critical to start with a strong foundation. Choose simple investing plans for starters. It is also good to have a long term perspective because of the power of compound growth. Like anything else in life, a little expert guidance can go a long way so it would be good to learn from investment professionals. Raiz Invest, Spaceship Voyager and Sharesies are some micro-investing apps.

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