Investing used to be for the wealthy. High brokerage fees ($20 per trade) and minimum buy-ins ($500) locked many people out. Enter micro-investing.
What is Round-Up Investing?
Apps like Raiz connect to your bank account. When you buy a coffee for $4.50, the app "rounds up" the purchase to $5.00 and invests the 50 cent difference into a diversified portfolio of shares / ETFs. It's painless saving.
Why It Works
- Psychology: You don't "feel" the money leaving your account.
- Dollar Cost Averaging: You are buying into the market continuously, smoothing out the highs and lows.
- Habit Building: It trains you to be an investor without needing willpower.
The Fees Trap
Be careful. If an app charges $3.50/month in maintenance fees, and you only have $100 invested, that's a 42% annual fee! That destroys your returns. Micro-investing is great to get started (0 to $5,000), but once you have a lump sum, it is often cheaper to move to a low-cost ETF platform (like Vanguard or Betashares Direct) to minimize fees.