Truth is, many people are not ready to invest. Financial planning can be compared to building a home because you’ve got to lay a strong foundation – an emergency fund, insurance coverage to mitigate risk, and very low to zero high interest debt in your financial profile before you introduce investing. But if you’ve got a grip on the basics and have a steady foundation, it’s not a bad idea to consider entering the investment world. If you have the urge to get an early start in investing, fin techs are making it extremely easy to enter the stock market.
Fin techs like Stash and Acorns are disrupting the industry by eliminating the barriers to entry. Traditionally, you would have needed a substantial amount of cash to invest with brokerages and financial advisory firms. However, the rich man’s game is now available to the masses and you can begin investing with as little as $5 bucks. That’s why the low dollar entry and simplified method to invest in low dollar volumes is considered to be micro-investing.
Micro-investing allows you to invest in such small amounts that you barely feel the day to day impact on your cash flow. Also, depending on the investment app you’re utilizing, they craft portfolios and funds that you can select to invest in based on your preferences and it makes the experience super simple and painless. Not to forget, this completely eliminates the need to conduct your own research!
What are some other benefits?
In addition to the low cash entry to begin investing and eliminating research, micro-investing platforms have no trading fees, no account minimums, and have low monthly costs such as $1 or an extremely small percentage of the balances you maintain (typically above $5,000). This simple business model eliminates so many concerns young investors have and now encourages folks to start investing. As you may have read from one of my previous posts, not taking advantage of investment returns and compounding interest is a huge mistake and micro-investing gives us the opportunity to take advantage of this formula!
Why should I begin now?
Micro-investing is literally effortless and if you’re investing your change with Acorns, the likely hood that this will disrupt your financial plans and goals are pretty low. You should begin to invest, even your spare pennies and dollars because your time spent in the market plus compounding interest will grow your portfolio tremendously! Now, I doubt you’ll be a millionaire by micro-investing but the opportunity cost of not beginning to invest will be substantial.
Don’t be that guy or gal that is banging their heads 5 or 10 years later because you realized you missed out on so much growth! Think of it this way, $30 a month with 7% annual returns for 10 years will get you $5,032.94 and you only had to contribute $3,600 in total! This is obviously making the assumption of 7% annual returns but it should put it into perspective and make you wonder whether or not you should cancel 1 or 2 monthly subscriptions or start brewing coffee at home to take advantage of compounding interest.
Do I have to change my spending behaviors?
This is case by case and I would have to learn more about your circumstance before I say yay or nay. However, I believe that even for the frugal and conservative spenders (like myself) adjustments in our spending behaviors is always a good thing (this goes both ways, being more frugal or spending a bit more of your cash to enjoy life). So if you’re someone who does not want to research information on stocks, ETFs, funds, etc, you want to put as little thought as possible to your investing efforts, and you don’t want to change your spending behaviors, then micro-investing was literally made just for you!
The bottom line is to take advantage of the opportunity these fin techs have created for the mass population. I’m sure we all share similar goal and that’s to increase our wealth any way possible. So if this resonates with you, micro-investing is a great way to put your plans into action.