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One of the biggest myths about investing is that you need to be rich to do it. Micro-investing is turning that notion on its head by offering everyday folks an affordable and easily accessible way to start investing.

But what exactly is micro-investing, and what should you consider if you want to try it?

What is micro-investing?

Micro-investing is basically exactly what it sounds like: a way to invest using small amounts of money. Unlike traditional investing where you might need sizable capital to enter the market, with a micro-investing account you can start investing with just a few bucks.

Most micro-investing apps allow you to invest small lump sums, set up recurring investments and round up your purchases to invest the leftover spare change. 

For example, if you pay $9.50 for lunch, the total would be rounded up to $10 with the remaining 50c invested. It might not sound like much, but frequent small investments can add up to a sizable portfolio over time.

Common features of micro-investing apps

As mentioned, one of the big features of micro-investing apps is the ability to round up your purchases and invest your spare change. That aside, some of the common shared features include:

  • A robo-advisor chooses a portfolio of diversified investments tailored to your financial goals and risk tolerance
  • The option to start investing with as little as $5 or less
  • A flat monthly fee, or a fee that’s equal to a percentage of your account balance
  • Access to a range of different investment options, such as basic stock, crypto and ETFs

There are several micro-investing apps around, so it’s worthwhile researching the specific features and fees of each one before investing your hard-earned money.

Pros and cons of micro-investing

If you’re thinking about exploring micro-investing, here are some of the major pros and cons to consider.

Pros of micro-investing

  • Low minimum investment: Unlike more traditional investments such as mutual funds, micro-investing allows you to start investing with just a few dollars. 
  • Diversified portfolio: Many micro-investing platforms focus on ETFs tied to broad market indexes. This means your portfolio will be diversified from day one.
  • Automatic investing: Micro-investing apps typically are robo-advisors automating the investing process, so you can be hands-off while growing your nest egg.
  • Easy to set up: Micro-investing is designed for the average Joe, so they’re simple and convenient to use.

Cons of micro-investing

  • Fees: If you’re only making small, infrequent investments, the fees can eat away at your overall portfolio value.
  • Limited investing: Although micro-investing can be a great way to get started, very small investments might not be enough to reach your financial goals.
  • Limited options: As you learn more about investing, you might find you want more control over your portfolio or specific assets.

How does Unhedged differ from micro-investing?

Unhedged uses AI and machine learning algorithms to choose the stocks and ETFs for you. But rather than choosing static portfolios like many micro-investing apps, Unhedged’s algorithms are constantly scanning, analysing and optimising your portfolio by examining more than five million data points every day.

On top of that, Unhedged charges a small base fee of 0.49% and when you make more money than market benchmarks. No other micro-investing app in Australia aligns its interests with investors by charging a ‘success fee’ like this.

Soon Unhedged will launch the auto-invest feature: invest a modest amount every week, 2 weeks or month and see your nest egg grow!

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Products issued by Melbourne Securities Corporation (MSC). Please consider the PDS and TMD available on our website before applying. All investments carry risks and you may lose your money. Past performance is not indicative of future performance. The information in this report has been compiled from sources we believe are reliable and we make no warranty in respect of its accuracy.