Are “Spare Change” Micro Investing Apps Worth It

Over the past few years, I’ve noticed a unique new trend taking hold in the investment market. Designed to transform stray dollars into modest portfolios, “spare change” micro trading and investing apps have gained serious traction around the world.

But the question many casual and experienced investors are asking is: Are they really worth it? Read on for my guide to micro investing apps and whether they could work for you.

 

The best investment apps are out there

 

Spearheaded by companies like Raiz, Robinhood and Stash, micro investing and trading apps enable you to invest small amounts in stocks that ordinarily would cost you more. For example, Raiz automatically rounds up your purchases to the nearest dollar and invests the “spare change” into six diversified ETF portfolios selected according to your risk appetite. So, with every $4.50 coffee, you’re investing .50c in your portfolio.

California-born Robinhood adopts a different business model. It offers small fry investors the chance to purchase fractional shares with no commissions. Launched by Australian bank, Commonwealth Securities, CommSec Pocket offers customers the chance to start investing with just $50. Every micro investing app has its own unique business model. So finding one that works for you takes a little research.

Person using their phone and laptop for investing apps

 

The pros and cons of micro investing apps

 

One of the biggest pros of micro investing apps is that you don’t have to be an established investor or trader to get started. They’re popular with young investors who don’t have much disposable income and can only afford to make “spare change” contributions. They’re also simple and easy to use. Finally, they can be controlled from your mobile phone and offer exceptionally low fees.

On the flipside, one of my biggest qualms with micro investing apps is the false sense of security they can give investors. Dipping your toes into the market is great, but micro investing apps simply don’t offer the same long-term return opportunities. For this reason, many traders may be better off trading CFDs. 

What I don’t like seeing or hearing about is people downloading these apps, contributing a few dollars a week and feeling content that they’ve successfully started trading the share market. There’s so much more opportunity out there. This is why I’ve launched free seminars like my seven-part Intro to Trading course designed to help kickstart trading portfolios and potentially generate some great returns. You can also unlock access to knowledge-rich documents like my Insider Stock Picking Report.

Micro investing app with piggy bank, coins, calculator and phone

 

How to use micro investing apps

 

Micro investing apps are designed to be simple and easy to use. They tend to vary in terms of how much user involvement is required. With Raiz, the rounding up and investing is automatic. Platforms like Robinhood call for a little more engagement. As such, they can be a great way to learn about the market and the concept of risk and reward.

Speaking of which, it’s also important to understand that, like all investments, micro investment apps come with some level of risk. There are no guarantees your trades will perform and you could end up losing some or all of your money. Fortunately, micro investments usually translate into smaller losses, but also smaller gains.

The final verdict on how to use micro investment apps?

Ultimately, they live up to their name. Adding 20 cents here and 65 cents there just isn’t going to generate significant wealth. 

They’re not likely to harm your bottom line too much, but will they deliver meaningful returns? Probably not.

You’re not likely going to earn financial freedom using these apps, which is why we all start investing, right? Maybe that’s just me. But they are certainly an option to get started.

One of the best ways I’ve seen micro investing apps used is by young investors trying to amass enough to enter the share market properly. They might save up $1,000 using one of these apps, They then use that money to open their first trading account. I like this idea a lot.

It pays to empower yourself with the skills and knowledge to confidently navigate the market. Once you do, you can make those big, life-changing investments with low risk on a regular basis. This is something you can learn to do with my free training courses.

To find out more about how to establish yourself as a trader and investor, check out my free stock trading training videos. My latest Trade the Turmoil webinar focuses on how to use the current volatility caused by the COVID-19 pandemic to your advantage. This is a big opportunity and I urge you to start learning today.