What is micro-investing?
Some people think that investing is expensive and costs a lot of money.
They think you need a big round number, let’s say, hypothetically, $1,000 or $2,000, before they can even think about investing it.
And then because they’re spending it all at once, they get analysis paralysis and second guess themselves and their decisions.
This is fair enough: if you think you’ve only got one shot, how can you decide when to take it?
But staying on the sidelines and never jumping in may not be the best choice either.
Luckily, there’s another option.
Instead of investing a huge chunk of money all at once, you could invest small amounts over time.
These micro-investments could still add up to a big amount of money, and they could still pay off down the track.
How do you start micro-investing?
You can start micro-investing in five steps.
- Decide what to invest in
- Pick an amount to invest, and whether you want to invest it regularly
- Consider round ups and Boosts
- Find an app or broker that has the features you need
- Remember the risks
At Spaceship we make it super easy with our Spaceship micro-investing app.
1. Decide what to invest in
Professional investors spend most of their time choosing what to invest in.
Micro-investing into ETFs or managed funds means you can leverage their research for your own gain.
For example, at Spaceship, our in-house Spaceship Voyager Investment Team researches the long-term trends we think will be profitable, and the companies that we think fulfil our ‘Where the World is Going’ criteria therein, to include in our Spaceship Universe and Spaceship Earth managed funds.
Rules-based portfolios, such as the Spaceship Origin Portfolio or Vanguard MSCI Index, instead follow rules such as ‘include the biggest stocks on the stock market’, or ‘include the biggest stocks in a particular industry or country’.
You can also do your own research.
2. Pick an amount to regularly invest
If you want to become a regular investor, you have to invest regularly.
At Spaceship our investments have long-term time horizons, which means we recommend customers plan to hold them for at least 7 years.
It may not be the best idea to invest your house deposit if you’re buying a house next year. But if you’re building long-term wealth, it could be a good opt.
And it doesn’t have to be big bucks – because the point is that it adds up.
At the time of writing, the average active Spaceship Voyager portfolio micro-investor invests the equivalent of around $45 weekly: by the end of the year this represents around $2,300 before market movements.
3. Boost your micro-investments
Another way to become a micro-investor is to use tech to boost your investments.
Micro-investing apps, including the Spaceship app, can offer features to boost your investment depending on your behaviour.
For example, there are Spaceship Boosts you can set up that invest an amount of your choosing every time it rains; each time you catch an Uber; or whenever you buy a coffee.
You can even choose to round up your purchase to the nearest dollar and invest the spare change.
These can be good alternatives if you’re not yet ready to set up a weekly plan, but still want to become a regular investor – and Boosts and round ups can still add up quickly.
4. Find an app or broker that has the micro-investing features you need
Look for features such as whether there are minimum investment amounts, holding periods, the range of assets on offer, and whether it’s a reputable company.
You should be able to easily understand what you’re investing in, what it will cost you, and what you should expect as a customer.
5. Remember the risks
If you already have a diverse portfolio, micro-investing may not expose you to anything new.
With some micro-investing apps, you may feel you have limited account options.
For instance, you may want to invest in a few individual stocks, but you may only have the option of investing in a portfolio of stocks.
You also need to compare brokerage costs and fees: these aren’t always straightforward.
As always, we recommend accessing independent financial advice if you’re unsure.
At the end of the day, micro-investing helps solve some of the main blocks for beginner and young investors: lack of knowledge or understanding and lack of capital.
Depending on your financial needs and goals, you may decide to move from micro-investing into something more traditional down the track.
No matter where you are or see yourself financially, something is generally better than nothing, and micro-investing can be a great start.
You can get started micro-investing with Spaceship by downloading the Spaceship app.
