Online Share Trading Platform VS Micro-Investing

19 November 2021
Investing can take many forms but regardless of how you choose to invest, there is one common variable – and that’s strategy.  Developing a strategy is crucial to any goal in life, including investments and for many people, putting in place a strategy may be easy – but not so for others. We look at micro-investing VS Online Share trading and how to choose which is right for your investment strategy.

Micro-Investing is a financial product that comes ready-made with a built-in strategy to help savers reach certain financial goals, while an Online Share Trading Platform allows investors to execute and manage their own trading strategy.

Is Micro-investing right for me?

The actual concept behind Micro-investing has been around since the dawn of time. Before the apps existed, starting gout small to invest meant physically saving loose change, small notes – or a specific amount set aside as a regular instalment. This involved opening a savings account with a bank and depositing the loose change you had collected over a period of time.

Typically, households would be provided with a piggy bank or use an old jar that would be filled and eventually, when full,  taken to a  local bank to deposit. The bank would pay you an amount of interest each month and that would be added to your savings balance. This process would repeat until you reached the goal you set. So, what’s changed?

Micro-investing strategy

Today, using cash as a means of paying for items has pretty much been taken over by electronic means. You simply wave your phone at a terminal, tap a credit card or may even use a Buy Now Pay Later Scheme. Receiving small amounts of change after a purchase is for many people, a thing of the past, much like video stores, manual gearboxes and wet film cameras.  Even buskers and Big Issue sellers have moved to cashless transactions because so few people carry loose change these days.

More importantly, the returns received on your bank savings can be called ‘lazy money’. The current low-interest rates mean it’s no longer working hard enough to provide a decent level of return.  These developments have forced the hand of innovation to provide an increasingly popular means of regular savings, hopefully, with better returns.

Enter Micro-investing. As mentioned earlier, this is a product designed to save and invest that comes with an in-built strategy. The product issuer typically does the thinking for you and monitors your daily spend, rounds up to the nearest dollar and debits that amount on a regular basis to invest in a financial product with the potential for capital growth and returns above what you would get from a regular savings account with a bank.

Australian Micro-investing Platforms October 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
go-to-site 4 – Bitcoin, Ethereum, Gold and Silver $50 2018
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.

In this case, the financial product that your regular savings go into is usually an Exchange Traded Fund or ETF. Think of an ETF as a type of ‘mega-share’ that invests in a wide range of other shares with just one transaction. ETFs provide diversification, growth and income with minimal savings needed to get started – and minimum effort from you.  The strategy is already taken care of without the need to make any further decisions, so in this case, you’re the lazy party – not your money.

→ Related story: Canstar’s Ultimate Guide to ETFs

The downside to this approach is that you have limited control over the strategy and what you can invest in. Your investment choices are made by someone else and your interest in any shareholdings are usually registered alongside other investors in a pooled account.

So if control is more your kind of thing, read on…

How does Micro-investing compare to Online Share Trading Platforms?

To be clear here, share trading platforms are not ‘financial products’ as such, but rather offer you the tools and services to acquire and deal in financial products such as direct shares, Exchange Traded Funds and Listed Investment Companies – to name a few. You choose what to invest in and when to invest. Your investments are usually held with the broker in your name and you will receive all correspondence from the company or financial product you have invested in, including any dividends, and voting rights at annual general meetings.

So immediately you can see how much more involved you are with this investment approach.  It requires more regular monitoring and requires you to have a strategy not just to make investments – but also an exit strategy if you fall out of love with a particular stock.  To get started with an Online Share Trading Platform, your starting amount is $500 to buy the share, then additional funds to cover any upfront brokerage fees, so this may not be ideal for someone who doesn’t have this amount up front or is too time poor to manage their own strategy.

The below table will help to better explain the differences in investing using Online Share Trading Platforms or Micro Investing.

Feature Online Share Trading Platform Micro Investing
Minimum Investment $500 From $1
Built-in strategy No Yes
Brokerage per transaction Yes No
Fee on amount invested No Yes
Pick your own shares/fund Yes No
Registration in your name Yes No
Investment Tax Reporting Yes Yes

Only you can determine which strategy is best for you and your choice will ultimately depend on the amount you are willing to invest, the controls you prefer and features that make regular investing in the modern era relevant and exciting enough for you to stay the course.

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