Is Micro-Investing A Good Strategy In 2022?

Here's everything you need to know about micro-investing, including its most important benefits, limitations and downsides.

Micro-Investing Basics

In the simplest terms, micro-investing allows you to invest small amounts of money in the stock market, including in fractional shares of stocks and exchange-traded funds (ETFs).

Micro-Investing Vs. Micro-Saving

Micro-saving is the act of saving small amounts of money, but instead of buying long-term investments like stocks, you’re saving it in short-term investments like a high-yield savings account.

Why Micro-Investing “Sometimes” Works

The more important questions are: 1. Can micro-investing help you reach your financial goals? 2. Is micro-investing the best way to accomplish your financial goals? Here are three reasons why micro-investing can work.

#1. It Helps You Take Advantage Of Forced Savings

The most well-known example of forced savings is a 401(k), through which you automatically invest a portion of your paycheck. After the account is set up, the agreed percentage gets pulled out of your pay and set aside for retirement.

#2. It Helps You Gain Experience Investing

Micro-investment apps come without many of the mental hurdles often associated with investing, such as asset allocation or even deciding how much to save. 

#3. It Lets You Invest Small Sums In Individual Stocks

Some micro-investing apps offer the ability to trade stocks and ETFs for free. In addition, you can invest in fractional shares of companies.

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