The Best Micro-Investing Apps in 2020
Micro-investing has grown in popularity in recent years. So what is micro-investing? How do you do it? And is it even worth micro-investing it in the first place?
Maybe you're not ready to take the deep dive into your employer's 401(k) plan.
Maybe investing in an IRA is more than you can afford right now.
Baby steps, my friend. It's all about the baby steps.
Randy, the micro-investing baby
Well, the babiest of steps that you can take into the world of investing is micro-investing.
What is Micro-Investing?
Micro-investing is pretty much what it sounds like: investing in the smallest way possible. Micro-investing aims to allow investors to get started with, literally, spare change in some cases.
When you make micro-investments, you're not buying shares in a company, you're buying a portion of a share. If a company's stock price is $20, and you invest $1, you get 1/20th of a share. That explanation is an oversimplification in some ways, but that's essentially how it works.
Most micro-investing apps trade in ETFs (Exchange-Traded Funds), which is a fund that invests in stocks. So you don't actually buy the stock, you buy a part ownership in the fund, then the fund buys stocks. The value of the fund is, obviously, based on how well that fund's particular stock portfolio is doing.
How Does Micro-Investing Work?
It's simple, but each app/company handles it a little differently.
Some, like Acorns, allow you to invest small amounts of money at a time. Others are more like traditional trading accounts, but with smaller minimums.
Basically, all you need to do is sign up, link a funding source to your account (like a bank account or a credit card) and get started investing.
What is a Micro-Investing App?
A Micro-Investing app is basically just a piece of software that you install on your phone (or your computer) that gives you access to your account. You can use the app to sign up for an account, to manage your investment choices, or to change the amount that you have chosen to invest.
These apps, and there are several of them on the market, allow you to easily get started with Micro-Investing. All from the comfort of your smartphone.
Here's a rundown of your Micro-Investing options.
Acorns is all about harnessing the power of spare change. For a small fee of $1 per month, Acorns will round up all of your credit card or debit card purchases to the nearest whole dollar and invest the excess in your Acorns account (which is run by the Acorns investing robot -- also known as a computer-managed investment portfolio, or robo-advisor).
So, if you buy a coffee for $2.15 (a cheap coffee these days!), Acorns will invest $0.85. So you end up spending $3 even, with $0.85 getting invested by the robot and the rest going toward caffeine goodness. Not a bad deal.
Acorns doesn't accept actual loose change, by the way. We tried mailing them a box of pennies once and they were not pleased.
If you don't want to round up all of your purchases, you can manually go into the app and choose which purchased you want rounded up. You can also add funds to your account manually, or elect to have a set amount funded into your account on a daily, weekly or monthly basis. There is a minimum transaction amount of $5, so it's pretty low (but, again, don't send actual coins to these guys).
Acorns also allows you to invest in a tax-advantaged Individual Retirement Account, known as Acorns Later. The fee for Acorns Later is $2 per month.
Acorns also offers a checking account, known as Acorns Spend. It's an online-only checking account that comes with a debit card. When you use the Acorns Spend debit card, guess what happens? You guessed it! Your purchase gets rounded up and invested by the robot.
Milo, the Acorns investing robot (not really)
The Acorns checking account also offers mobile deposits, no ATM fees (they'll even reimburse you if you're charged a fee at a third-party ATM) and has no minimum balance.
One of the cooler options available through Acorns is their Found Money program. Acorns partners with several companies, including Walmart and Nike, that will pay you a cash-back bonus when you use an Acorns-linked payment method for a purchase. These bonuses go directly to your Acorns account. That's a nice little feature right there.
Stash is very much like a typical online investment house, except with very low minimums, perfect for the beginning or hesitant investor.
They only charge you $1 per month and the minimum account balance is $0 (which will not generate a great return, we're thinking).
For you're $1 per month, you can get the Stash Beginner account. You not only get a brokerage account, but also an online bank account (with debit card).
The bank account also has a rewards program, known as the Stock-Back Rewards program. Similar to the Acorns Found Money program, when you buy something at an approved Stock-Back merchant, you automatically get stock in that merchant purchased through your investment account (kinda cool!). Some of the Stock-Back-approved stores include Amazon, Dominos Pizza and Netflix. So, if you eat too much Domino's pizza, you can at least make a little profit off of that.
Like Acorns, Stash offers tax-advantaged accounts (either a traditional IRA or a Roth IRA), known as the Stash Growth account. These accounts carry a $3 monthly fee.
For $9 a month, Stash will give you a bank account (with debit card), tax-advantaged retirement accounts (IRA or Roth IRA), two accounts for your kids, a metal debit card (not sure why this is a thing), a more generous rewards program (2x the normal rewards) and a monthly market insights report.
One of the cooler things about Stash is they not only offer access to fractional shares in individual companies, they offer a wide variety of ETFs. So, you can invest in individual stocks, stocks indexes, bonds, TIPS.
You can even pick ETFs that are geared toward certain sectors, markets or investment styles (like ETFs that are geared toward green technologies or are focused on women-led businesses).
If you're the type of person that doesn't like to go it alone, then Twine, created by the financial services company John Hancock, might be the micro-investing app for you.
Unlike other apps, which cater to the individual investor, Twine is a saving and investing app designed to be used by a couple (or, rather, by two people -- the app does not limit you to just your spouse or significant other, you could choose to invest with a friend or a casual acquaintance...which would be weird, but I'm not judging).
Twine offers two types of accounts: a standard savings account and an investment account.
The savings account has no monthly fee and a low minimum deposit of $5. Unlike many online savings accounts, it does not earn interest, but it is protected by FDIC insurance (like a normal bank account). To deposit money in the account, you can set up recurring deposits through app. You can also make manual deposits.
The investment account, which allows you to invest in stocks, bonds and Exchange-Traded Funds. It has a monthly fee of 25 cents per month for each $500 that you have in the account. This breaks out to 0.6% per year. When you sign up for the service, there are several settings (like risk tolerance) that allow you to have a more personalized investment style through Twine.
As we stated, THE thing that sets the Twine app apart from other micro-investing apps is the ability to invest with another person. Whether you are using the savings account or the investment account, you (and your co-investor) can set goals for your account (these can be set as individual goals or joint goals).
So if you think investing with somebody else will enhance your micro-investing experience, then Twine might just be the app for you.
Robinhood is a bit of a trailblazer. When they first hit the scene, they were the only brokerage that allowed you to trade several investment vehicles (stocks, ETFs and even options and cryptocurrency) without any fees. It took awhile for the other brokerages to follow suit, but Robinhood is no longer the only online brokerage that allows free trading.
In addition to having no fees, Robinhood also has a $0 minimum balance (again, not sure why you would open an account and not put money in it, but I digress). If you want to open a margin account (i.e. an account that allows you to buy securities with borrowed funds), there is a $2,000 minimum deposit (in accordance with federal law). Like some other micro-investing apps, Robinhood lets you buy fractions of shares.
In addition, Robinhood also offers a cash management account that can be linked to your brokerage account. Cash in the account is protected by FDIC insurance. You also get a Mastercard debit card which can be used at over 75,000 fee-free ATMs.
In addition to the standard brokerage account, Robinhood offers a Robinhood Gold account. This account, which carries a fee of $5 per month, give you access to professional research reports. It also allows you to trade on margin (i.e. with borrowed money).
Unlike some of the other micro-investing apps, Robinhood does not allow you to invest in mutual funds or bonds. It also does not have a retirement account option.
How to Start Micro-Investing?
If micro-investing sounds like something that you would like to do, it is very simple. Simply choose the app that you would like to invest through and go to their website:
Then just download the app, link if your bank account, and get started micro-investing!
Should You Use Micro-Investing Apps?
You may be asking yourself, "Does Micro-Investing Work." Well, the answer is a solid It Depends.
If you're looking to turn spare change into a comfortable retirement, then micro-investing is probably not for you. In order to invest for retirement, you should be looking into your employer's 401(k) options (hopefully, with an employer match) or at either a regular IRA or a Roth IRA. The small investments that are the bread-and-butter of these micro-investment apps will not fund a comfortable retirement.
However, if you are new to investing, or even if you are already saving for retirement, but want to invest a little extra cash in the market, then maybe micro-investing is a good fit for you. It can be a way to get started with what will hopefully be a lifetime of fruitful (and profitable) investing.