What is micro-investing?
Starting to invest with little money. This is the basic idea behind micro-investing. Micro-investing platforms – Urbanitae is an example – allow investing with small amounts of money. This way, they reduce the entry barrier to investing and improve the financial health of people who otherwise could not make their savings profitable.
Micro-investing as systematic saving
It should be clarified that there are two ways to interpret micro-investing. On the one hand, this term refers to investing very small amounts of money. For example, the change from daily purchases. 50 cents may not seem like much, but if we manage to save 50 cents each working day, we will end the month with 10 euros in the piggy bank. In this context, micro-investing involves automating the investment of these small savings.
A popular form of micro-investing is rounding up purchases. Every time a user makes a purchase with their linked card, the application rounds the amount to the nearest euro and deposits the difference in their investment account. For example, if you spend 2.75 euros on a coffee, 0.25 euros will be automatically transferred to your investment account.
We know that investment success is largely a function of time: the longer, the better. Therefore, this practice of investing a fixed amount, no matter how small, regularly has proven effective as an investment strategy. Sound familiar? It’s the dollar-cost averaging we’ve talked about on this blog. By investing a little, for example, each month, we smooth out market volatility and eliminate market timing.
Micro-investing platforms and apps are the heart of this trend. Some of the best-known globally include Acorns, Stash, and Robinhood. In Spain, options like MyInvestor and Indexa Capital are popular. Among other things, they offer the possibility of buying fractional shares or participating in exchange-traded funds (ETFs), allowing investors to diversify and gain exposure to a wide variety of assets.
Micro-investing as collective investment
The other meaning of micro-investing is similar, but we are talking about larger amounts. Instead of 50 cents, it’s 50 euros or 500, as in the case of Urbanitae. This option has always been available, so to speak. The difference is that technology has expanded access to investment opportunities and asset classes that were previously very difficult to invest in without large amounts of capital.
A clear example is private equity. Legislative changes and the emergence of digital management companies, like Crescenta, have made micro-investing in private equity possible. It is true that the minimum ticket is not low – 10,000 euros. But that amount is within reach of many more savers than the amounts typically required to invest in private equity funds, which can demand a minimum of 10 or 20 million euros to start.
Real estate crowdfunding is another clear example. This form of collaborative micro-investing allows investing in large-scale real estate projects. It is not about investing in housing but in entire residential developments, a type of investment with much higher potential returns. The advantage of real estate crowdfunding is that it relies on the joint investment of thousands of investors. This way, each person can contribute a small amount and become a real estate investor comparable to a fund.
For all these reasons, micro-investing represents a significant evolution in the financial world, democratizing access to investment and fostering good habits among new investors. With its features of accessibility, convenience, and diversification, it is becoming an attractive option for those looking to start investing with small amounts of money. Are you ready to try it?