A 2016 Harris Poll revealed 3 out of 4 millennial women find investing confusing. Additionally, 60% of respondents “equate a typical investor to an old, white man.”
Investing is an essential part of growing your wealth -- millennial or not -- and we Gen Y women shouldn’t miss out. As a millennial woman who just finished college and started a career, I’m interested in learning how to save money and making it work for me.
I recently signed up for my company’s 401(k) plan, and it felt pretty darn good. So why not continue learning about how to make critical financial moves?
I’m talking about investing.
No, you don’t have to be an “old, white man” to be an investor. And yes, it can be easy.
Believe it or not, you don’t need a ton of money to start investing, either. There’s an accessible way to get started: micro-investing.
How Micro-Investing Works
Micro-investing removes the traditional barriers associated with investing, such as having a minimum account balance or paying a broker to invest for you. This kind of investment is done through online platforms, like an app or website, and allows you to invest in micro-portions of stocks.
I took my fair share of finance courses as a business major in college, but I was still a bit confused about how micro-investing works.
Basically, a micro-investing platform will invest your money in fractional shares, which are in Exchange Traded Funds (ETFs). ETFs are “a basket of investments bundled into a fund that is traded on an exchange,” according to Stash. These can be any combination of stocks and/or bonds and are chosen based on specific factors, such as low risk, low fees, and historical performance.
In short, micro-investment platforms act like brokers -- they purchase entire stocks (or bonds), then compile small portions of those into ETFs, or portfolios of assets, for users like us to invest in through their apps.
So, you might not own an entire stock using micro-investment apps, but you will own a large bundle of different types of stocks or assets.
Best Micro-Investing Apps
Micro-investing apps work similarly to savings apps, depending on which one you choose. They’re pretty beginner-friendly -- you don’t have to be rich, get a certification in financial planning or even hire a broker.
The best way to start your investment journey is to download a micro-investment app. There are quite a few out there, so I’m going to break down three of the most popular ones.
Acorns is a “set it and forget it” app. You download the app, sign up for an account, connect it to your bank, choose a few settings and then let it do the rest of the work. There’s also a $1 monthly fee.
When you use your debit card, Acorns rounds up that purchase and deposits the difference into your account. For example, say you purchase a movie ticket for $11.50. Acorns will round this up to $12, and deposit 50 cents into your investment account.
With amounts that small, you’ll barely notice it’s gone. This won’t add up to thousands of dollars in a year, but it’s an easy way to invest a few hundred dollars you otherwise wouldn’t have thought to save. With this app, you also won’t have to think about where to invest your money -- it does that for you, too!
You don’t get to choose what you invest in; rather, Acorns chooses for you based on your preferred risk level. The ETFs with this platform are a mixture of real estate, government bonds, and corporate bonds, plus large and small companies. Safe to say, these ETFs are highly diversified and secure.
Acorns is a good app to choose for anyone who wants to put in the least amount of effort and time but still wants to establish a substantial investment account.
Stash is a bit different from Acorns with regards to how you save and what you invest in. With Stash, you can either manually transfer money or set up “Auto-Stash” to withdraw a certain amount weekly or monthly. Stash also has a $1 monthly fee.
I, personally, signed up for Stash to see how this whole micro-investment thing worked and was pleasantly surprised. I use one savings app for an emergency fund and vacations, but I had yet to try my hand at an investment app.
The sign-up process was pretty simple -- I answered a few questions about which risk level I prefer, and put in my employment and salary information. After that, I linked my bank account by signing in through the online portal (I was shocked I didn’t need to track down my routing and account numbers) and transferred over my first $5.
Once your money is transferred to Stash, you get to start investing. Stash is different from Acorns in that you choose your own bundle of ETFs, based on causes you feel passionate about or industries you want to support.
For example, my first investment was $5 into the “Young Money” portfolio -- a mixture of companies that benefit from the buying power of millennials. This basket of 10 companies includes Walt Disney, Paypal, Apple, and Nike.
Stash is a solid choice for anyone who wants more of a say in the types of funds they invest in. Most of the other micro-investment apps that use ETFs don’t allow you to choose the companies or bundles where you put your money. Stash is comprehensive in this area and makes it fun to invest in brands you care about. For a more comprehensive overlook, here’s a review of Stash and how it works.
Robinhood is an investment app that’s different from the competition. Unlike Stash and Acorns where you purchase small portions of shares within ETFs, you own an entire share from a company with this app. Plus, there’s no monthly fee.
There are some positives and negatives. On the positive side, you might feel a bit more like a “real” investor since you’ll actually own shares of stock. On the negative side, this means you might need more money to invest. With other savings apps, you choose how much you want to put into certain ETFs. With Robinhood, you’re bound by the stock’s price.
Of course, the money you need depends on which company’s shares you purchase. And one share of a decent stock could cost you a pretty penny.
Robinhood is a good choice for those who want to get a bit more serious about investing. If you’ve tried your hand at micro-investment and feel ready to research the individual companies you want to invest in, Robinhood is nice option.
Is Micro-Investing Right for You?
Thanks to micro-investment apps, investing in the stock market doesn’t feel so out of reach. The money you invest could serve as a savings account now or something you can take to a financial planner in the future once you amass more wealth.
You won’t earn money super fast with this method, but the investment is a long game -- over time, you’ll see your money grow.