Investing

Everything You Need To Know About Micro-Investing

Want to watch your money grow? Many people with only a limited amount of disposable income never think to try investing – but now, with a wave of micro-investment apps sweeping over the country that looks set to change.

Doing more or less exactly what you’d expect, micro-investment apps are tools that make it investment extremely easy for anyone with a spare fiver.

How does it work?

The exact mechanisms of your investment will vary a little depending on which app you pick – more about that in just a moment – but the basic premise is the same throughout. You sign up for an account with your chosen provider, link your bank account or arrange manual payments, and start investing from as little as £1.

Then, your money will be invested: this is where micro-investing differs from simply opening a savings account. While it can help you yield greater returns in the long run, it also means that your capital will be at risk (sick of seeing that in the small print? It just means that your balance could go down as well as up).

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Why should I be interested?

Everything You Need To Know About Micro-investing

If you don’t know much about investing but you’re keen to give it a go then this is a good place to start. The small amounts spent mean that the risk isn’t that great, so it can be a good opportunity to learn the ropes. The fact that micro investment platforms tend to do most of the work on your behalf means that you don’t even necessarily need to learn that much: if you’re happy to stick to small scale investing, you can pretty much let the app just do its thing.

What do I need to watch out for?

As we already mentioned, investing means that you could lose money – while you’ll likely be given a forecast of how much your fund is likely to grow by, this is just a forecast. If the markets don’t behave as they’re expected to then you could make less than predicted, or see your investment go down.

This is why it’s important to remember one key rule before engaging in any type of investment: only put money into the fund if you can afford to lose it. Otherwise, you should use a more conventional savings account which protects your money, even if the interest isn’t as high as an investment return might be.

Finally, make sure you know what fees you’ll have to pay. Most micro-investment apps will charge a fee for facilitating your investment: that’s standard practice with investment tools in general, so just make sure you’ve factored it into your plan.

How do I choose an app?

Everything You Need To Know About Micro-investing

So, are you interested? The first step in your investment journey will be to choose an app. There are lots of options out there, so it’s important to do your own research and make sure you choose something that has positive and reputable reviews. Here are a few things to consider:

  • How much are the fees?
  • Do you want the ability to automatically ‘invest your change’ by rounding up your purchases?
  • Is the app authorised by the FSA? This is an important sign of legitimacy.
  • Is the app covered by the Financial Services Compensation Scheme? This could help you reclaim money if you ever need to make a claim against the firm.

Once you’ve done your research, the rest of the process is as simple as setting up your account and starting to invest. 

Check out our list of banking and investment apps here.

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Master of the budgets. Provider of the tips. Author and owner of DumbFunded.co.uk.
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