Micro-investing is essentially investing with small amounts of money, sometimes called spare change investing. And that’s why the best micro-investing apps are breaking down the barriers to traditional investing.
Because micro-investing lets you buy fractional shares of stocks and ETFs, you don’t need large chunks of money to start investing. And beginners can learn valuable lessons about investing without as much money on the line, like the importance of education, setting long-term goals, market volatility, and much more.
The best part is that micro-investing will give you tangible results that show how investing makes your money work for you. Seriously, nothing feels better than earning passive income, even if it’s a few cents here and there.
But with so many new micro-investing apps on the market, how do investors decide which is the right one? This guide will introduce you to the best micro-investing apps and cover everything you need to know about micro-investing.
5 Best Micro-Investment Apps of 2021 & What Beginners Need to Know
Acorns launched in 2012 as one of the first micro-investing apps, but it’s also part robo-advisor, making it a good fit for hands-off investors. Acorns invests your money in micro shares of ETFs, and they automate most of the investment process for you, from recommending the ideal portfolio for your financial goals to a feature called Round-Ups that automatically pulls money from your bank account to invest.
Round-Ups is Acorns’ most popular feature by far, and is built on the idea that spare change adds up over time if you do something with it. Here’s how Round-Ups works:
- You link a debit or credit card to your Acorns account.
- When you purchase with your linked card, Acorns will round that amount up to the next dollar.
- Acorns pulls the difference from your funding source and invests it for you.
For example, if you spent $4.37 on a latte, Acorns will round that transaction up to $5, meaning that’s $0.63 to invest. Once you hit $5 in Round-Ups, Acorns transfers money from your linked bank account to your Acorns account and invesst it.
It can take a while to hit $5 in Round-Ups depending on how you use your debit or credit card, so you can turn on Multipliers to get to $5 faster. There are 2x, 3x, or 10x Multipliers, which would turn that $0.63 into $1.26, $1.89, or $6.30.
If you ever need to turn off your Multipliers or Round-Ups for any reason, you can do that with a click of a button in the app, then turn them back on when you’re ready.
Acorns also has a Found Money feature, which is a Google Chrome extension that earns you extra cash for investing when you shop at any one of over 350 different partner companies, including Hulu, Nike, Apple, etc.
When you sign up for Acorns, this app will recommend one of five different portfolios based on your current age, projected age of retirement, and the level of risk you’re comfortable with. Acorns portfolios were developed using Nobel Prize-winning research. Each portfolio includes a diverse set of ETFs (exchanged-traded funds).
New from Acorns
Because more and more investors are focusing on companies and investments that represent their value and belief, Acorns now offers four sustainable ESG (environmental, social, and governance) portfolios. Each of these portfolios meets MSCI criteria for companies that focus on sustainable companies, meaning they are ideally better positioned for long-term growth.
- Acorns Core: $1/month. This is a personal taxable investment account.
- Acorns Core + Acorns Later: $2/month. You can also invest in an IRA, which is a tax-advantaged retirement fund.
- Acorns Core + Acorns Later + Acorns Spend: $3/month. This adds on a checking account that has zero account fees and reimbursed ATM fees.
Acorns pros and cons:
The Robinhood app was created in 2013 with the intent to “democratize finance for all.” To do that, Robinhood trades stocks, ETF, and options with $0 commissions or trading fees. There are also no monthly management fees or fees for signing up. Robinhood’s radical pricing structure was so revolutionary that many other online brokerages, like Charles Schwab and Fidelity, followed suit and eliminated commissions.
Robinhood introduced fractional shares of stocks and ETFs in their lineup in 2019 — until then you could only purchase full shares — making one of the best micro-investment apps for free trades. Offering fractional shares can automatically reinvest your dividends through a feature called a dividend reinvestment program (DRIP). It’s entirely optional, but it’s an excellent way to grow your portfolio.
Besides the low costs, one of the main benefits of using Robinhood is that this micro-investment app is simple and designed with new investors in mind. It’s stripped down with an intuitive design that provides a no-frills experience, which is ideal when you’re learning how to invest.
Additionally, Robinhood has a cash management account that earns you 0.30% on uninvested cash, and you can trade cryptocurrency on the app. Plus, they have a subscription-based Gold account, which gives investors access to margin lending (a risky option for new inventors, but worth mentioning), bigger deposit, and faster access to funds.
Robinhood is a great choice if you want to learn how to start trading stocks, but would rather learn on a smaller scale. The major downside is that you can only open individual taxable accounts — there are no retirement account options, custodial accounts, etc.
Robinhood pros and cons:
Stash is one of the best micro-investment apps for beginners who want to be hands-on and learn the ins and outs of investing. They have flat monthly fees at three different account levels with no additional trading fees or commissions.
Once you’ve signed up for your Stash account, Stash takes you through a series of questions about your current financial situation and goals to determine your investment risk level. They use this to make investment recommendations that will help you reach your short and long-term financial goals.
Stash can automate a lot of the investment process for you, if you want, but you’re in control of your investments. Stash organizes stocks and ETF based on theme, so you can choose to invest your money in causes that are important to you, specific interests or company, etc. They’ve also re-named ETFs in the app so they are easier for investors to find.
You can view all of the essential data about each stock or ETF before you buy, including performance, position, and expense ratio. The goal is to get to know each of your investments so you can make educated investing decisions.
Once you’ve decided what stock or ETF you want to invest in, you click the “Buy” button and Stash will ask if you want to set a recurring investment schedule for that asset. You can schedule weekly investments for as little as $0.01.
Stash’s Smart Portfolio is a newer feature that Stash recommends for accounts with at least $20. It gives you the option to invest in one of three different portfolios instead of self-directing your funds, and comes with standard automated features like automatic rebalancing.
Additionally, Stash has in-app educational content in the form of short blog posts. They also have an integrated bank account that comes with a Stock-Back debit card. This card earns you matching pieces of stock on your purchases.
Stash has three different account options, and it takes $5 to start investing in any of them.
- Beginner $1/month: Includes a personal investment account, unlimited trades, Stock-Back card, $1,000 life insurance policy from Avibra.
- Growth $3/month: Everything in Beginner plus access to Smart Portfolio, retirement accounts, and personalized retirement advice.
- Stash+ $9/month: Includes everything in Growth plus custodial accounts for up to two children, 2x stock with the Stock-Back card, and a $10,000 life surance policy through Avibra.
Stash pros and cons:
Betterment is known as the OG robo-advisor, which means it was one of the first investment apps to leverage technology to simplify the investment process. It’s incredibly hands-off and gives you access to real financial dollars if you want more support.
When you sign up for an account with Betterment, they’ll help you identify your financial goals, and then make a portfolio recommendation for each of your goals. Yes, that means you can set up and invest for more than one goal at a time. Each goal’s portfolio has a different asset allocation, depending on the goal and timeline. Betterment uses low-cost ETFs in each of their portfolios, and they’re transparent about how they’ve built their portfolios.
Betterment feels a little more like a traditional investment brokerage because it gives you lots of different account options, including individual taxable accounts, joint accounts, IRAs (traditional, Roth, and SEP), and 401(k) and 403(b) rollovers.
Because Betterment offers micro shares of ETFs, multiple retirement account options, and low fees, Betterment is one of the best micro-investing apps for retirement investors.
There are two options when you sign up:
- Betterment Digital: 0.25% annually with $0 account minimums. Once your account hits $2 million invested, your fees drop to 0.15% annually.
- Betterment Premium: 0.40% annually with a $100,000 account minimum, which drops to 0.30% when your account hits $2 million. You receive unlimited access to Betterment’s Certified Financial Planners. These CFPs are fiduciaries who can help you with accounts both in and out of Betterment.
Betterment also has financial advice packages starting at $299. All accounts have access to Cash Reserve, Betterment’s no-fee, high-yield cash account. It offers 0.30% APY and has a two-way sweep feature that automatically moves extra cash between your linked bank account to and from your Cash Reserve account as needed.
New from Betterment
Betterment Checking is a mobile-first checking account and Visa debit card for daily spending. This account has $0 feels, and you can earn cash back rewards and thousands of brands.
Betterment pros and cons:
5. M1 Finance
M1 Finance is a kind of hybrid micro-investing app that company the robo-advisory service you get with Betterment and Acorns with the hands-on control you get from Stash and Acorns. For that reason, it’s one of the best micro-investment apps for investors who want a little of everything.
Besides a unique approach to micro-investing, M1 Finance also charges $0 monthly management fees and $0 commissions or trading fees. When you combine the low cost, and hybrid approach, M1 Finance is millennial-friendly.
The way M1 Finance works is that once you sign up and create your free account, you can start building your “pie.” That’s what they call your personal investment portfolio. You can invest in individual company stocks or funds. You can also invest in one of their over 80 Expert Pies, which are professionally curated portfolios made up of ETFs and stocks that you can customize.
Another option is Community Pies, which allows you to invest in companies that share your value and ideals, similar to the basis for socially responsible investing. For example, if investing in minority-owned businesses is one of your priorities, you can invest in Community Pie for Black-led businesses or the one companies led by AAPI executives.
M1 Finance also has a checking account feature called M1 Spent, which comes with a debit card, there is a $0 account minimum, and you’re reimbursed one ATM fee per month.
There’s also M1 Borrow — M1 Finance’s margin loan feature, which is available if you have a portfolio value of at least $10,000, and you can borrow up to 35% of your account’s equity balance. Margin is traditionally used as portfolio leverage, but M1 Finance advertises Borrow as a line of credit that can be used in place of a HELOC, personal loan, auto loan, etc. When you think about it in those terms, M1 Borrow has highly competitive rates at 3.5% or 2% if you’re an M1 Plus subscriber.
M1 Finance is free to use for Basic accounts, or you can upgrade to M1 Plus for $125/year. Plus adds a high-interest rate checking account, cash back rewards, more ATM reimbursements, lower Borrow rates, and more.
M1 Finance pros and cons:
More to know about micro-investing apps
How to choose a micro-investing app
The way to pick the best micro-investment app for you is to start by thinking about how hands-on you want to be with your investments. Apps like Acorns and Betterment do the hard work for you, setting you up with the right portfolio, while Stash and Robinhood give you more control over your investments.
I would also consider what types of accounts you want to invest in. Betterment has the biggest variety of account options, where Robinhood has limited choices.
Low starting deposits
When you ask people why they aren’t investing yet, the number one reason is because they think they can’t afford it.
However, these micro-investing app blow up the myth that you need a lot of money to start investing:
- It takes just $5 to invest with Acorns
- Stash takes $5 to start investing
- Betterment has $0 account minimum
Investing has suddenly become accessible for everyone.
What the returns are like
Micro-investing is all about investing with small amounts of money, which is super accessible. But if you only invest with a little cash here and there, you’re going to see micro results.
You’re not going to get rich on spare change, and micro-investing alone shouldn’t be your retirement plan.
Seriously, not even the power of compound interest will turn that spare change into enough money to fund your golden years, especially if you want to retire early.
But, that doesn’t mean you still can’t earn money from micro-investing. It’s a great way to passively save money for vacation, a downpayment, etc.
You’ll still experience market volatility
The first time you see your portfolio value drop is a feeling you will not forget. You worked hard to save that money, and then suddenly you’ve lost a chunk of it. Well… that’s the stock market.
But, the point of investing is to let your money sit somewhere and build over time. The market recovers, you earn back what you lost, and then earn some more. Micro-investing apps will help you get comfortable with how the market moves up and down over time.
The cost of micro-investing
Non-investors aren’t just turned off by the perceived high cost of the actual investment, they’re also bummed out by all the fees — brokerage fees, commissions, advisory fees, inactivity fees, and more.
The best micro-investing apps have simplified fee structures that ultimately let you invest more of your cash. Acorns and Stash all charge flat monthly fees. These are better for accounts with higher balances, but the percentage model that Betterment charges is better for smaller balances.
Free micro-investing apps like Robinhood and M1 Finance make investing even more affordable, but they’re still making money from investors. Read How Does Robinhood Make Money to learn how Robinhood and other free investment apps get paid.
Micro investing is still investing real money
You don’t need to know a lot about the stock market to start micro investing, but I strongly believe that taking the educational aspect of investing into your own hands can turn you into a smarter investor overall.
Those small amounts of money are still money… real money… so if you’re going to choose any of these micro-investing apps, work on growing your overall knowledge of the market.
The final word on the best micro-investment apps
I am a big fan of anything that encourages people to build good financial habits, and learning how to invest is a great habit to start.
The five apps I’ve covered are all great place to start, and here’s a tl;dr rundown of each:
- Acorns: Best for investing small amounts of money
- Stash: Best for beginners
- Robinhood: Best if you want to learn how to start trading stocks
- Betterment: Best for retirement investors
- M1 Finance: Best millennial investing app
Micro-investing isn’t going to make you rich. It’s not even going to give you enough cushion for retirement. But, what it does well is to introduce newbie investors to the market. It makes investing an approachable option for people who don’t feel like they have much money to put towards investing in the first place, and that’s pretty cool in itself.