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All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE: eclipse_images/Getty Images June 13, 2022 Bankrate reporter Brian Baker covers investing and retirement. He has previous experience as an industry analyst at an investment firm. Baker is passionate about helping people make sense of complicated financial topics so that they can plan for their financial futures. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Bankrate logo

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How micro-investing works

In general, micro-investing allows you to invest your savings even when you don’t have much in savings to speak of. Skipping small purchases that have become a habit or rounding up to the nearest dollar when spending can help you get started. Personal finance apps like even offer debit cards that will automatically round up your purchases and invest the additional money in ETFs or fractional shares of stock. Stocks of well-known companies such as and Google parent company have traded for more than $2,000 per share in recent years, making it difficult for some investors to afford just one share. Many companies when the prices reach these levels to help make them more affordable. But until then, fractional shares allow you to get invested no matter how much a single share costs. This approach of consistently investing savings into the stock market over time has proven to be profitable over the long-term. Investing a fixed amount each week or month is known as , which takes the market-timing decision out of the equation. The consistent purchases mean that you’ll be buying more shares when prices are low and fewer shares when prices are high. With dollar-cost averaging, you’ll be buying over time and averaging your purchase prices.

Advantages of micro-investing

Low minimum investments: Micro-investing allows you to get started with investing even when you don’t have much money to invest. With just a few dollars you can start making investments in ETFs and fractional shares of stock, which isn’t possible with more traditional investments such as , which typically require a minimum investment of a few thousand dollars. Diversification: If you choose to invest in low-cost ETFs tied to broad market indexes such as the , you’ll be able to build a portfolio that’s diversified for just a few dollars each month. Small amounts add up: Consistently making contributions of even small amounts of money to an investment account can add up over time, potentially turning your extra change each week into tens of thousands of dollars over decades. Automatic investing: Micro-investing helps to automate the investing process, which makes it easier for people to stick with their plan through good times and bad. Makes saving a habit: It also helps create a habit of saving early on in your investing life, even if you’re only able to save a bit of extra cash.

Disadvantages of micro-investing

Won’t lead you to retirement goals: While micro-investing can be a great way to get started investing, especially if you’re young, it isn’t likely going to result in the kind of savings that will lead to an easy retirement. You’ll also need to save more to achieve that goal through retirement plans offered by your employer and contributing to tax-advantaged accounts like traditional and . Need to save more than spare change: Most experts recommend saving between 10 and 20 percent of your income for retirement planning and an emergency fund, so if you’re able to save only a few dollars each month, you might need to revisit your budget. Fees: Micro-investing platforms like Acorns and Stash do charge monthly fees to users. Fees vary across different plans, but the middle plan offered by Stash charges users $3 per month. This isn’t a lot, but if you’re only able to contribute $5 or $10 each month to your account, a $3 fee is going to eat up a hunk of your return.

Bottom line

Micro-investing can be a great way to get started with investing when you don’t have much in savings. Consistently contributing small amounts can add up over time when invested properly, but you’ll need to contribute substantially more to secure your future retirement. If you’re looking to get started, check out Bankrate’s list of the . Consider whether popular micro-investing platforms like Acorns and Stash are best for you or if a more general investment app such as or the robo-advisor is a better fit. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. SHARE: Bankrate reporter Brian Baker covers investing and retirement. He has previous experience as an industry analyst at an investment firm. Baker is passionate about helping people make sense of complicated financial topics so that they can plan for their financial futures. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money.

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