What Is Micro-Investing and Is It Worth It?

You don’t need a lot of money to start investing. With micro-investing, you can invest with pennies.

Micro-investing involves buying small or fractional shares of investments, often stocks or ETFs, with a few dollars at a time or less. Often, you can do this with your spare change, which is possible with the help of micro-investing apps and platforms that round up your purchases. Micro-investing is every bit as legitimate as any other form of investing, and many of the best platforms that offer bite-sized buys have low or no minimum requirements and few fees.

But is micro-investing worth it? It certainly can be if you do it right. Learn more about whether this investing style is right for you and how to get started.

How does micro-investing work?

Micro-investing is the act of investing a little at a time. This can be done by purchasing partial or fractional shares of assets, like stocks and exchange-traded funds (ETFs). Doing this lets you spread your money out across a wide range of investments to diversify your portfolio even if you aren’t flush with cash.

If you only have a little bit to invest and were only to purchase assets with high share prices, your portfolio would be thin, leaving you more vulnerable to big losses. Fractional-share investing could make it possible to buy a share of a massive technology company with a $2,000 per-share price, for example, with just $1. You would own 0.0005 shares, but you’d still be in.

Micro-investing pairs well with dollar-cost averaging, which involves investing the same amount of money on a regular cadence — like every week or month — rather than timing your decisions according to the market. It’s about buying when you can and staying the course.

But a dollar-cost averaging approach isn’t the only way to micro-invest. Some platforms automate your purchases by rounding up transactions from a linked bank account to the nearest dollar and investing your spare change. This is often called round-up or spare change investing.

Who micro-investing is best for

In general, micro-investing may be ideal for you if:

• You’re new to investing
• You don’t have very much money to invest
• You’re comfortable with at least a moderate amount of risk
• You want to invest more often

Why micro-investing is worth it

Micro-investing can add up if you stick with it. But more importantly, it can help you get over the hurdle of starting and build a habit of investing.

Here are some examples to show you how valuable micro-investing can be.

Example 1

A person decides to cancel their $14 monthly streaming subscription and invest the money in an ETF with a 10% annual return (the average stock market return, based on the S&P 500). They invest this amount every month for 40 years. At the end of 40 years, they have just shy of $79,000 without accounting for fees.

Example 2

Another person decides to use a round-up investing feature. They make about 70 transactions from the linked account per month. If each payment resulted in a 50-cent round-up, the person would invest $35 monthly. They do this every month for 10 years, and the investment has 10% annual returns. After 10 years, they have roughly $7,000 without accounting for fees.

How to start micro-investing

1. Determine your risk tolerance

Before you start investing, know how much risk you’re comfortable with. This is your risk tolerance, and it’s a measure of the loss you can handle. The higher your risk tolerance, the more you can afford to lose (but the greater the potential gains, often). Many brokerages ask about this when you sign up, but you can also take a risk tolerance quiz before choosing one.

2. Research micro-investing platforms

Before choosing any investment platform, learn about the fees it charges and micro-investment options it offers. Some great platforms to consider include:

• Acorns: Spare-change investing with round-up transfers from your debit card, credit card, or bank account.¹
• Betterment: Robo-advisor with fractional shares of ETFs.
• Public: Social investing platform with fractional shares of stocks and ETFs.²³
• Robinhood: Commission-free stock trading with fractional shares and individual stocks.⁴⁵
• Stash: Robo-advisor with fractional shares, plus a debit card that earns ETF shares.⁶⁷⁸

3. Set up transfers

Investing your spare change is a common way to micro-invest, and it’s perfect if you don’t know how much money you want to put in yet or don’t feel like you can afford to do much. However, it does mean linking a spending account or card and having less control over how often you invest. I’d suggest starting with regular investments — maybe adding a recurring transfer every time you get paid — and seeing how that feels before enrolling in automatic round-ups.

4. Choose your investments

Depending on the platform, you’ll have different assets and styles to choose from. Acorns, for instance, offers only passive investing with ETF portfolios, while Robinhood allows for more active investing with whole stocks.

5. Invest what you can afford

Whatever you do, don’t stretch your budget to invest. If you can’t afford to invest one month, it may be better not to invest than to put bills on a credit card with a high APR. If you have to sell investments to make ends meet, you may lock in losses and lose money.

Pros and cons of micro-investing OR do’s and don'ts

Here are some of the advantages and disadvantages of micro-investing compared to other forms of investing.

Pros

• Can work with any risk tolerance: Depending on your appetite for risk, you may want to invest aggressively or conservatively. Micro-investing generally accommodates both approaches, as well as those somewhere in between. Many platforms have curated ETF portfolios you can choose according to your needs and goals.
• Easy to start: It only takes a few minutes to sign up for a micro-investing account and start investing. This approach is more beginner-friendly and hands-off than advanced types of investing like day trading or purchasing whole stocks.
• Low commitment: You can adjust the amount you micro-invest whenever you want to, and you aren’t required to stay locked into round-ups.

Cons

• Limited asset classes: The asset world is not your oyster with micro-investing. You’ll typically be limited to stocks and ETFs, though some platforms may also give you access to other classes like crypto and mutual funds. Still, you won’t have as many options when you micro-invest as you might by trading in larger amounts of money.
• Fees: Although many commission-free trading platforms offer micro-investing, you may still pay subscription, brokerage, or trading fees.
• Not designed for the long term: I don’t recommend only micro-investing forever, and it shouldn’t replace saving for retirement. Investing small amounts in only stocks and ETFs isn’t likely to translate to the serious, steady returns required for a nest egg.

FAQs

Bottom line

Micro-Investing allows you to start investing in the stock market even if you have little money to set aside. The best brokerage accounts and apps often have no minimum initial investment requirements and offer fractional share and/or round-up investing to make investing less scary and more accessible. Even if it’s not much, the money you set aside can grow to a decent sum, especially if you increase the amount you invest over time and stick with it.

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FinanceBuzz writers and editors score products and companies on a number of objective features as well as our expert editorial assessment. Our partners do not influence our ratings.

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