Micro-investing is said to be the digital equivalent of saving in a piggy bank. We have written a detailed article to help you understand what micro-investing is, how it works and whether it will benefit your financial journey.
What Is Micro Investing?
Micro-investing or spare change investing is a fairly new concept in the finance industry. It involves setting aside tiny quantities and investing them in the markets on a regular basis via ETFs (Exchange Traded Funds) or fractional stock shares.
You use this technique when you invest using a small amount of money regularly. One beautiful thing about micro-investing is that it doesn’t require the investor to make any considerable lifestyle changes or learn new saving habits.
Micro-investing allows people to invest who might otherwise be not open to investing in the stock market to build an investment portfolio.
High minimum investments can be a barrier for people who don’t have a lot of money to buy stocks or any other securities. Even if you have money to invest, the learning curve associated with buying stocks can be intimidating.
Usually, you may require thousands of rupees to buy stocks. For many investors, those stock prices might be out of reach.
How Micro-Investing Works?
The idea behind micro-investing is that you can invest your savings even when you don’t have a lot of savings. In terms of how it looks like in action, there usually are two ways you do micro-investing.
The first way in which you can do micro-investing is by rounding up your daily transactions in your bank account and investing the spare change from each transaction after it reaches a minimum amount.
There are many apps that offer this service, where once you link your bank account, the app scans your transaction history and finds the money to invest.
For example, if you make a transaction for ₹720 and asked the app to round it off to the next thousand, then the ₹280 will be invested in different investment options.
The second method in which you can do micro-investing is by using a platform or an app that lets you choose small amounts to invest on a daily, weekly, or monthly basis on what you can afford.
If you choose to invest every month, the amount chosen by you will be deducted from your bank account every month on the date chosen by you.
If you are thinking, what if I don’t want to take a lot of risks, don’t worry because we’ve got you! You can enter your goals and how much risk you want to take in your Koshex account and this will ensure that your portfolio is diversified to minimize losses and increase your returns.
The investment solution where you will be putting your money will be hyper-personalized for your goals and your life.
Benefits Of Micro-Investing
There are a lot of benefits to micro-investing and here are a few of them.
Low Investment Amount
Micro-investing allows you to start investing even when you don’t have much money to invest. With just a few hundred rupees, you can start investing in ETFs and fractional shares of stock, which isn’t possible with more traditional investments.
If you want to invest in mutual funds via Koshex, all you need is just ₹100. As an investor, moving to a small or medium coffee from a large one is all you need to do to start investing with Koshex.
When you do micro-investing, you don’t have to worry about investing in high-risk investment instruments. For example, when you invest a little bit in a mutual fund scheme,
your money will be spread across different asset classes, including stocks, bonds, and other market securities. Diversification helps you minimize your losses and increase your returns.
Power Of Compounding
With micro-investing, the small amount that you invest will balloon into a sizable corpus over a period of time. Let’s say you invest ₹1000 every year, it will grow to ₹50,000 in 20 years at an annual interest rate of 8%.
When you stay invested for a longer period, your capital will earn more money you. So, at the end of the day, all the little amount that you set aside for investing will become a big amount in the future.
Micro-investing helps to automate the investing process, making it easier for people to stick with their plan through good times and bad.
When you start a mutual fund scheme via SIP, the amount will be deducted from your bank account automatically on the date set by you.
Automated investing takes your willpower out of the question, pushing you to invest periodically without fail.
Make Investing A Habit
Micro-investing helps in the formation of an investing habit early in your investment journey, even if you can only invest a small amount every week or every month.
Once it becomes a habit, it will become a part of your life and you would continue doing it. Also, when you see how your invested amount grows, you will be future motivated to invest more.
Perfect For Beginners
The world of investing can be a little bit confusing sometimes. There are several investment instruments that promise to give you higher returns.
These days, investors are open to investing in non-traditional investment options, including cryptocurrencies, crypto ETFs, Futures & Options, and so on.
However, when you are a beginner, the most important thing that you need to note here is the risks that are involved in various types of investment instruments.
If you are a beginner, the best place to start will be mutual funds as you don’t need to have a lot of money to get started.
You will be able to choose how much you want to invest, how much risk you are willing to take and how long you are planning to stay invested.
Once you decide to invest more money, you can choose those mutual funds that are suitable for helping you achieve your long-term goals, such as paying for your children’s education and helping you build a corpus for your retirement.
As we mentioned before, Koshex is a platform that will help you do all of the above, free of charge.
All you need to do is to create an account and tell us what your goals are and how much risk you are willing to take. Then, the AI will do its magic and create a hyper-personalized investment solution, just for you.
You can choose to invest how much ever you like and see your wealth grow from the comfort of your home. Head over to Koshex and sign up for free today!