An introduction to micro investing

Think investing is just for high earners? Think again. Micro investing is changing the way we invest. It’s making it possible for people to invest with just a few pennies, and you can start right away.

What is micro investing?

Any time you invest small amounts of money, you are micro investing. For a small fee, you can micro invest using an easy-to-use app, like Nutmeg, Moneybox or Wealthsimple.

Some traditional investment platforms have huge minimum investments (£250,000 or even more) but micro investing platforms let you get started with pennies.

If you can afford to buy a coffee, pay for a streaming service or a gym membership, you can afford to start micro investing.

Why is micro investing so popular?

Micro investment is booming in the UK, with a more than 60% increase in the number of people downloading microinvesting apps compared to last year.

The last few years have seen a boom in apps and services that make investing accessible to people with less cash. There’s even a platform that lets you micro invest in gold bullion!

Where will my micro investments go?

Micro investing platforms tend to invest your money into exchange traded funds (ETFs), which are diversified funds consisting of several different types of stocks, bonds and real estate. These diversified funds help to protect against extreme swings in the market, because your money is spread across different funds.

Can micro investing make me rich?

Micro investments are more likely to yield micro rewards than millions – at least in the short term - but don’t let that put you off.

Micro investing is an accessible way to get started in investment. That matters more than you might think, since the key to investment is to start investing as early as possible. You could gain more by investing a small, regular amount now than by investing thousands of pounds in future decades.

It’s low commitment, low risk and you might not even notice the money leaving your account. If you take advantage of an app that rounds up your daily expenses like coffee, transport or groceries, you can invest a decent amount each year without feeling skint.

Micro-investing helps you make investing part of your everyday life

Says a spokesperson for Moneybox, an app used by tens of thousands of people each week. By rounding up their daily expenses, the average Moneybox user invests about £500 a year. Investing £500 each year for decades could add up to an impressive nest egg!

Be warned – your investments aren’t guaranteed to increase. You could even lose money. Be sure to pick a risk profile that suits your needs, and make sure you have enough easily accessible money to live on for several months, before you start locking up cash in investments.

What kinds of micro investment platforms are there?

Round-up apps

Some platforms let you invest the change left over from your regular credit or debit card transactions. If you buy a coffee for £2.50, the app rounds up to the nearest pound and puts 50p into your investment account.

Trigger-based apps

Other apps allow you to invest based on triggers and rules, such as investing a set amount whenever you spend more than £100.

Should I use a micro investment platform long term?

Micro investing apps are a great place to start, but they may not be the most efficient place to leave your money in the long term.

Apps will charge you a fee for each investment. As a percentage, these fees are relatively modest, but they’re not necessarily the most affordable. Once you’ve built up hundreds or thousands in savings, it’s likely that you can find a more cost-effective platform to invest through.

Which platforms can I try?

Nutmeg is a great all-round platform with low fees and the option to invest in a range of ISAs, general investment, or to transfer or create a pension pot.

Moneybox is an excellent round-up app, letting you invest your spare change through a wide range of accounts and investment classes.

Wealthify takes the effort out of investing with a range of portfolios to choose from, and solid support services to help you choose the right option for you.

Moneyfarm is another simple platform with a refreshingly clear interface and a strong range of tailored options.

Wealthsimple promises to ‘put your money on autopilot’, taking all the tricky decisions for you.

Trading 212 is a great choice if you want to trade stocks in the UK, US and European markets, starting with pocket change.

Is micro-investing safe?

I'm a fan of investing and micro-investing apps to get new users into the habit of creating wealth through investing

Says Barbara A. Friedberg, financial expert and owner of Robo-Advisor Pros. But Friedberg advises investors to go in with their eyes open.

When using these apps to build wealth for the long term it's best to educate yourself about investing first. Robinhood and M1 [apps not currently available in the UK] both have excellent libraries of educational articles. Additionally, "The Elements of Investing" by Malkiel and Ellis is a quick read and great investing primer for newbies. It's important to understand that investing isn't a "get rich quick scheme" but a long term path to diverting current income into more money for future goals.

Financial advice note: The information contained in this article is provided for informational purposes only and should not be construed as financial advice on any matter. You should not rely on the information published in this article. The information in this article does not take account of individual circumstances and may not reflect recent changes in the law. Do not act or refrain from acting upon this information without seeking professional financial advice.