My Micro Investing Experiment: Three Real Life Examples

Micro Investing

Trending right now among financial apps is the concept of micro saving or “round-up” savings apps. Open an account and the app’s robo-saver will add a few dollars a week into your savings account. Or you can have the app round-up the change on purchases you make with pre-designated credit cards. It’s the millennial equivalent of the old change jar you keep on your kitchen counter. I don’t want to say its the lazy way of saving money, but it’s the lazy way of saving money…have a savings robot take it away so you can’t spend it.

Take the micro-savings idea one step further and you get micro investing. Aside from employer plans like the TSP or a 401(k), many traditional investment options require investors to open accounts with large minimum investments or a whole share of a security. What constitutes a “large” minimum investment for a person depends. However, for investors with smaller budgets, $1,000 or even $50 minimums can seem large and become a barrier to investing. Micro investing apps make it possible for investors to start investing right away, even with just a buck. New investors can invest in the market with direct transfers, set recurring transfers, or utilize a round-up feature from credit card purchases.

Three Real Life Micro Investing Examples

Acorns

As an experiment, I’ve been investing with Acorns for about three months. For a flat fee of $1 per month, I can invest in the market through a portfolio of Exchange Traded Funds (ETFs). I fund my investments by making a one-time transfer, set up a recurring transfer, or round-up my credit card purchases. Choose the level of risk you’re comfortable with from a few different risk profiles. Then Acorns will invest your money in ETFs based on your risk tolerance. Easy-peasy. The best feature with Acorns is “Found Money”. Designated companies will contribute a percentage of your purchases directly into your Acorns account. For example, book through Hilton and receive 4.5% of your purchase into your Acorns account. Contributions by Found Money participating companies vary.

I’m obviously not going to become a millionaire by investing my spare change with Acorns. However, it’s been an interesting way to do a little bit more with my “spare change” from purchases. Below you can see my account’s performance over the last three months. This is net of the monthly $1 fee. I’m invested with a moderately aggressive portfolio.

Use my referral link and get $5, when you open a new account!

Stash

Also for your learning pleasure, I’ve been experimenting with Stash. Similar to Acorns, it’s also $1 a month for accounts under $5,000 and your first month is free. After you accumulate $5,000, its .25% per year. You can auto-invest or make on the go transfers to your Stash account whenever you want. If you want to try Stash, use this link and they’ll give you $10 for free to get started!

I liked Stash over Acorns because it focuses a litter bit more on teaching new investors investing 101 basics. They have a nice little section on their site with easy to read articles on investment basics and even a little bit of current events thrown in too. Stash helps investors learn more about ETFs, individual stocks, and market sectors by allowing you to choose differently themed portfolios. Portfolio themes might be based on risk tolerance, sector or type of security. See some of the ones I chose below.

In the last 3 months, I actually lost 87 cents as you can see on the snip below. I really lost $2.87 since it cost me $1 per month to use Stash (the first month was free). I think new investors would learn more through using Stash over Acorns. However, Stash gives their investors more freedom too, which can sometimes be bad. For example, with Acorns, I chose a moderately aggressive mix and left it up to the folks at Acorns to invest for me. At Stash, I picked portfolios that I found the most interesting and didn’t think much about creating a balanced portfolio.

Thanks to my friends at The Skimm, when you open a new account you get $10 to add to your new stash!

Sharebuilder

I’ve had my Sharebuilder account since I was a junior in high school. Sharebuilder’s claim to fame is that you don’t have to buy a whole share of a stock or security. For example, maybe you want to own some Google stock, but you don’t have $1,042 to buy one share at the current price. You can buy a portion of a share of a stock with the funds you do have.

It’s perspective if you consider discount brokers like Sharebuilder micro investing or not. Since each transaction has a fee and not a flat monthly rate, it just doesn’t make sense to go too low in your minimum investment.  Yes, you can buy $5 worth of Google, but at $6.95 per trade, that doesn’t make much sense. They have a couple of different pricing plans, read about them here.

When I first started buying with Sharebuilder in high school I would purchase stocks $100 at a time. So, not the best returns with an almost $7 commission, but I was learning and investing. I was also learning to save since I was investing my money and not throwing it away on shopping at American Eagle or Abercrombie & Fitch (the 2 coolest places to shop in 1999). When I started to have more money to invest, I made larger purchases and often elected to use the recurring monthly plan, so I could enjoy lower priced transaction fees.

Final Thoughts

You’re not going to get rich investing your spare change or even $20 a month with a micro-investing app. In the past three months of my micro investing app research, I invested about $200 with two different apps. I basically broke even. I was better diversified with Acorns, and my portfolio performed better. With Stash, I chose some portfolios that sounded interesting to me and I had taken about a .75% loss.

Below is snip from Morningstar’s 13-week performance from the time I was running my little experiment.

For me, Sharebuilder is proof of what can happen with steady and consistent investing over a long period of time. I’ve used Sharebuilder for my investment portfolio, IRA, and 401(K) rollovers for over 15 years. However, I’ve recently decided to hand over my investment assets to an adviser (stay tuned to find out more). I’ve weathered the ups and downs of the market over the past 15 years. I invested somewhat aggressively because I know time is still on my side. I’m pulling my investments out this week with a 45.2% return on my investments portfolio and 32.1% return on my IRA. I’m pretty pumped about these returns. I’d like to credit my investment ninja skills, but the credit really goes to stupid luck, consistent investing, and riding out the market.

Although my $200 investment and a barely there return over three months isn’t that impressive, think about when those 3 months turns into 1 year, and then 3 years and so on. For a new investor who doesn’t have a lot of money to work with or who is nervous about first time investing or trying to understand how things work, I like the idea of micro-investing. It’s pushing people to make positive changes. I think it helps new investors get into a habit of investing on their own and it also helps teach them the basics. It’s better to start with $20 a month, for example, than to never start at all.