What is Micro-Investing and is it Worth Exploring?

MARISSA HAYDEN
Content Producer · 10 September 2021

Back in the day, if you were looking to save up your spare change, you’d look to the ol’ faithful piggy bank. But, nowadays, as cash is slowly becoming obsolete, some are turning to micro-investing as the modern-day answer to the piggy bank. And with micro-investing apps, not only can you save up your chump change but you can invest it.

How does micro-investing work?

Micro-investing is about making small and irregular investments from everyday transactions. Micro-investing apps round-up your purchases to invest your spare change. For example, a large cappuccino at $4.50 will be rounded-up to $5 and the 50 cents would then be invested. Depending on how frequently you transact and how the market treats you, over time you could accumulate a sizeable nest egg.

Micro-investing Apps Available in Australia

Each micro-investing provider offers different investment options so it is important to understand what you are investing in before signing up.

Australian Micro-investing Platforms September 2021

The table below displays some of our referral partners’ micro-investing platforms. The display order does not reflect any ranking or rating by Canstar. The table does not include all providers in the market. The table is sorted by provider name (alphabetical). Canstar will earn a fee for referrals from the table, such fee may vary between providers.

Provider Number of Portfolios Minimum Investment  Year established
Sponsored
go-to-site 4 – Bitcoin, Ethereum, Gold and Silver $50 2018
Sponsored

go-to-site 3 – Universe, Origin, Earth $0.01 2018

This information is not an endorsement by Canstar of any particular investment products or any specific provider. Canstar is providing factual supplied by providers. Investments are speculative, complex and involve risks. Canstar is not providing a recommendation for your individual circumstances or in relation to any particular product or provider.

Why are some investors flocking to micro-investing apps?

There are a number of reasons investors are attracted to micro-investing apps.

No deposit needed

Traditionally to get started with investing an initial deposit is required, and this can be anywhere from $500-$5000. Although, with the inception of micro-investing the playing field has been levelled, and with as little as $1 you can start investing. Some platforms don’t require a deposit at all.

Related article: 6 Best Investment Apps

Convenient and easy

Apps by their very nature are generally easy and convenient to use, and micro-investing apps are no different. Right off the bat, by rounding up your transactions you are able to invest with virtually no effort required. Additionally, with most apps, setting up takes minutes and from there you can view your investment options and track your portfolio.

Not sure what to invest in? Most micro-investing apps invest in exchange traded funds or index funds, and to get you started, most apps can pair you with an investment portfolio based on your risk tolerance.  

Micro-investing app

The downside to micro-investing

You could get better returns elsewhere

Micro-investing apps don’t suit all investors. If you are a confident investor who has been around the proverbial investment block a few times now, you may be disappointed by the returns you receive from micro-investing apps. Engaging with a fund manager, or picking your own stocks or ETFs could result in better returns. Additionally, if you have an established portfolio, micro-investing may not provide any additional diversity or exposure to any new or hard to access investment products.

What are the fees for micro-investing platforms?

Fees can make a substantial difference to your returns, so it is important to consider the costs involved in micro-investing.

At the time of writing, for a standard portfolio account with spare change micro-investing app Raiz, users will be charged $3.50 per month on a balance under $10,000 and 0.275% for balances above $10,000. In other words, for a $10,000 investment, you’d be charged $27.50 a month.  On the other hand, if you’ve got an investment of $100, you’d be charged $3.50 per month which is a 3.50% fee. The silver lining – it’s an incentive to continue to grow your investment and make regular contributions to top-up your balance.

First Step charges 0.275% on your investment balance, but there is a minimum fee of $1.25 per month.

On the other hand, at the time of writing, Spaceship Voyager does not charge any fees for balances below $5,000. For balances over $5000, however, the monthly fee will be 0.05% or 0.10%, depending on the investment portfolio you select.

When you trade through the CommeSec app, you’ll pay $2 each time you invest or sell up to $1,000 and trades over $1,000 are charged at 0.20% of the trade value. For example, a $1,100 trade will cost you $2.20 ($1,100 x 0.20%).

With Sharesies, you are charged a transaction fee when you buy and sell shares. For orders under $3,000 the fee is 0.5% for amounts above $3,000 the fee is 0.1%.

Also, bear in mind you will likely face ETF management fees which will likely be charged by the ETF or index fund provider and can vary. Make sure you read the PDS before investing.

Spare a thought

If you are looking to start small and perhaps ease yourself into investing, then micro-investing is an option. It can give you a good feel for investing without playing with large sums of money. However, before deciding on any investment product, consider the risks involved, make sure you do your research and always thoroughly read the PDS.

Cover image: Yulia Grigoryeva / Shutterstock.com


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