Investment apps are becoming more accessible than ever as new products help investors get started sooner.
One way of helping to encourage new people to the market is micro-investing apps.
The premise is that if you frequently make small contributions over time into an investment portfolio, you have the potential to earn more than you would if you saved it up in cash in a savings account.
The terminology is a bit vague, but micro-investment apps tend to pool your money into a portfolio of stocks or exchange-traded funds (ETFs).
Micro-investing is suitable for anyone looking for a cheap and convenient way to start building an investment portfolio. However, because micro-investing requires a long time frame to build up any significant wealth, they may be more suited to a younger demographic.
What micro-investment apps are available in Australia?
Micro-investing is still a relatively new sector on the Australian financial scene. At the time of writing, there are really just 2 micro-investment platforms available here – Raiz and Spaceship Voyager. Both apps work by allowing you to invest a few dollars at a time into an investment fund on a day-to-day or monthly basis, although Raiz is the only spare-change round-up app.
However, there are a few non-traditional investment apps appearing now that allow you to invest small amounts directly into stocks or ETFs. While not exactly micro-investing, they do allow you to work on a similar premise. For the sake of interest, we've also included some of these below.
Raiz Invest
Raiz is a mobile app that rounds up the spare change from your daily purchases and invests the excess into one of several investment portfolios. There are 9 different portfolios to choose from based on your appetite for risk and it lets you set up recurring payments or make lump sum instalments.
There are no minimum account balances and deposits and withdrawals are free. All you need to do to get started is provide your bank account number, BSB number and online banking login details.
Depending on which portfolio you select, you'll need to pay a monthly maintenance fee of between $4.50 - $5.50. Balances of $20,000 and above attract a monthly fee equal to 0.275% of your balance.
Spaceship Voyager
Spaceship Voyager is a robo-advice platform that lets you transfer small amounts into an investment portfolio without the need to pay for a financial adviser.
There are 3 portfolios to choose from – Spaceship Earth, Universe and Origin – with all 3 investing your funds into a mix of Australian shares, global shares and cash.
Plus, you can set up regular top-ups each week, fortnight or month, plus there are no contribution, brokerage, withdrawal or exit fees charged for either portfolio. However, there are management costs (0.5–0.10%) taken as a percentage of your portfolio's value once it hits higher than $5,000.
CommSec Pocket
CommSec Pocket isn't a traditional micro-investment app, but it does let you invest smaller amounts into the stock market than you'd normally be allowed. When you invest in Australian ETFs or stocks, there's usually a $500 minimum initial trade requirement and brokerage fees upwards of $10–$30.
However, with the CBA's CommSec Pocket, you can invest as little as $50 at a time into an ETF of your choice with a brokerage fee of just $2.
There are 7 investment themes to choose from – each is an individual listed ETF. This means it lets you directly invest in an ETF of your picking.
Like the others, you can either set it to make regular monthly or fortnightly payments, or you can make one-off payments as you like.
Sharesies
Sharesies says it aims to democratise investing by allowing you to start from as little as 1 cent.
Through its app, you can invest in a variety of stocks and ETFs on the Australian Securities Exchanges (ASX), New Zealand Exchange (NZX), New York Stock Exchange (NYSE), the Nasdaq and Chicago Board Options Exchange (CBOE).
However, Sharesies is not like its rivals as it doesn't have pre-set portfolios and won't charge you a monthly fee. Instead, it charges brokerage fees based on your trades.
Pearler
One of the relatively new players to the market, Pearler is now going beyond traditional share trading and into micro-investing.
With the aim of "boring, long-term investing", Pearler allows you to invest in 8 pre-determined ETFs.
Pearler charges its customers $1.70 per month if they select 1 fund, or $2.30 should they have multiple funds after balances reach $100.
Bloom
Bloom says it is the simplest way to invest in clean technology. And that is kind of what it delivers.
The micro-investing app has the simple goal of helping investors directly invest in climate change solutions. You'll get the chance to invest in a fund that offers a diversified range of climate solutions, from solar farms, energy storage and green bonds to clean energy loans.
On the downside, you've only got a single option to invest in.
Super Obvious
Super Obvious is a savings and investing app that allows investors to put their money into a range of ethical investment options.
Where Super Obvious shines brightest is on its fees. Most micro-investing funds will start charging you once you've invested over $100 whereas Super Obvious won't charge you until you've passed $1,000.
The fund will invest in a number of screened companies with your money. On the downside though, you'll only have a single option to invest in.
Kwala
Kwala allows you to make green investments starting from just $10 into its ethical portfolio, which is designed to contribute towards the United Nations Sustainable Development Goals.
Like most micro-investing apps, it runs on a subscription model in which you'll pay slightly more depending on how much you have invested.
On the downside, the app is only available to iOS users.
Subscription. Balance <$5,000: $0. Spaceship Index Portfolio balance > $5,000: 0.05% per year. Spaceship Universe Portfolio balance >$5,000: 0.10% per year.
$0
Choose from 2 portfolios: The Spaceship Index Portfolio (index fund) or the Spaceship Universe Portfolio (managed fund). These invest funds into hundreds of Aussie and global shares, and cash, rather than ETFs.
Subscription. $4.50 per month for balances under $10,000 and 0.80% for over $10,000.
$500
Invest in an actively managed fund with 53 international companies, 5 green ETFs, 24 Australian listed businesses, green infrastructure and green bonds.
Subscription. $2/month for balances below $5,000; $3/month for $5,000–$15,000; $4/month for $15,001 or more.
$10
Invest in a single active fund that puts money into global companies that address environmental and social challenges.
Finder survey: What features matter most to Australians when choosing a robo-advisor or micro-investment app?
Response
Easy to use app
67.14%
Auto-investing
51.43%
Available markets (e.g. Australian or US stocks or ETFs)
34.29%
Spare change round ups
32.86%
Good range of available products or portfolios
21.43%
Risk profiling
20%
Ethical options
12.86%
Security and regulation
11.43%
Budgeting or savings tools
10%
Real advice
10%
Other
2.86%
None of the above
1.43%
Source: Finder survey by Pure Profile of 1145 Australians, December 2023
Fractional share trading apps
Fractional share trading apps don't fall under the traditional banner of "micro-investment", but they do allow you to invest as little as a few dollars at a time into stocks (depending on the platform you use).
Fractional share trading is where you invest in fractions of shares rather than whole shares. For instance, instead of buying a single Facebook stock for $260, you could buy one-tenth of a stock for $26 or even one-hundredth of a stock for $2.60.
While it's a popular trading feature in the US, only a few share trading apps offer the service in Australia.
Among online brokers that offer fractional share trading are eToro (minimum $10), Stake (minimum $10), Interactive Brokers (no minimum) and Douugh ($1 minimum).
Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
What are the fees?
Be aware that there are costs to micro-investing which may eat into what you're saving or getting back in returns. It's important to double-check fees with the performance of the app's chosen investment portfolio. For example, if you're only investing $5 per month, the total fees are $2.50 per month and the returns are less than 1% per month, you might be better off sticking to a savings account.
The fees. There is any number of fees that a micro-investment app may charge. Some of the most common include:
Brokerage fees. The cost each time you invest or make a transaction.
Subscription or management fees. An ongoing monthly or yearly fee to keep the account open.
Other fees. Additional costs may include cancellation fees, withdrawal fees, transaction fees and account opening fees.
That said, you don't need to be a millennial to take advantage of the benefits of micro-investing. Anyone who thinks they might benefit from the convenience of an automatic investment plan should consider the benefits of this approach.
Benefits of micro-investing
It's easy
It's quick and simple to set up an account with a micro-investing platform and link it to your bank accounts. It then acts like a sort of electronic piggy bank for your spare change.
It’s convenient
Micro-investing requires minimal input on your part. Because the entire process is automated, you can start building an investment balance without even realising it.
You can start a savings habit
By getting into micro-investing from a young age, you can create positive saving habits that will last a lifetime. It's an effective way for Australians who have never invested their money before to make a start.
Minimal investment required
You don't need a huge bank balance to take advantage of a micro-investing platform. You can start by investing your small change and then watch your balance grow.
Choose from diversified portfolios
The money in your investment fund can be balanced in a diversified ETF portfolio based on your financial goals and your appetite for risk. You don't need to be an investment expert or have specialised financial knowledge.
What are the risks of micro-investing?
No guarantee of returns
Like any investment strategy, there's no guarantee that the investment portfolio that you choose will perform as you hope. In fact, if the investors behind the app lose money, then your balance will fall. This is why it is important to align your goals and objectives with your risk tolerance.
Fee for service
It's worth noting that these platforms aren't free. You'll pay a management fee. This will either be a flat fee or calculated based on the percentage in your account. These fees may also differ depending on your account balance, so it's key to monitor your account regularly to make sure the fee structure continues to work in your favour.
Easy to set and forget your account
Many investors choose to micro-invest because it's easy to set and forget. This can be a good thing in a bull market as it stops you from trying to overly manage and gets rid of the temptation to overtrade. It also runs the risk that the investor doesn't regularly review the performance of the fund. As such, you could underperform your own expectations while still paying for a service that isn't living up to your expectations.
Important notice: The original article previously mentioned FirstStep. However, the app is no longer functioning as a micro-investor.
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With competitive brokerage fees, automated investment advice and seven diversified ETF portfolios, InvestSMART’s robo advice platform is well worth a look.
Kylie Purcell is the senior investments editor and analyst at Finder. She has completed a Certificate of Securities and Managed Investments (RG146) and specialises in investment products including online brokers, robo-advisors, stocks and ETFs.
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