Micro-investing is a modern investment strategy rapidly gaining traction among new investors. Micro-investing involves investing small amounts of money in financial instruments such as stocks, digital gold, exchange-traded funds (ETFs) and mutual funds. It is often used to build a portfolio with a limited budget gradually.
Many people consider investing and the stock market an activity for the rich. The old saying “you need money to make money” supports this idea, but with micro-investing, you can invest as little as a few rupees a week.
This blog defines micro-investments, explains how they work, and shows you how to get started.
What Exactly is Micro Investing?
It is a strategy that anyone can use to start investing in the stock market, regardless of their financial situation. The main advantage of micro-investment is that it can be invested without requiring significant initial capital.
Traditional investing typically involves investing large sums of money in stocks and mutual funds for long-term investment returns. Micro investments, on the other hand, allow investors to start investing with a minimum of Rs 1. This way, you can gradually build up your portfolio and eventually grow into a large one.
Advantages of Micro Investing
So why choose micro-investments over traditional methods? There are several good reasons to support that:-
1. No Intermediary Needed
Micro-investments incur minimal intermediary fees. Monthly fees for most micro-investment apps are low. You will never notice these charges if you keep your money. The micro-investment app offers a solution. Instead of selecting specific assets, decide your risk level, and the app automatically adjusts your portfolio to meet your financial goals.
2. Automatic Portfolio Rebalancing
Financial planning requires thoroughly understanding of how different assets perform, risk profiles, lockup periods and withdrawal techniques. Striking the right balance between asset classes can be difficult for the average investor, even more so when you must balance your portfolio to meet your long-term goals.
You can start with a minimum of Rs 50 for micro-investments, but you can donate as much as you like for most applications. If you have some extra income or can save a lot of money, you can put it in an investment account.
4. Encourages Saving Habits
Even if you can only save a small amount each day or month, it can also help you develop savings habits early in your financial career.
Difference between Micro Investing and Traditional Investing
|Feature||Micro Investing||Traditional Investing|
|Minimum investment amount||Low (from even 1 Rupee)||High (Usually from 500 Rs)|
|Investment Options||Limited (Usually up to ETF’s and stocks)||More Diverse (Stock, bonds, mutual funds etc.)|
|Investment Research||Not too much in depth knowledge required||In-depth knowledge is required|
Why micro investing is a good idea for new investors?
Micro-investments are beneficial to all investors, but they are beneficial to younger investors, especially millennials. According to various estimates, 4 out of 10 of his millennials don’t invest in the stock market because they feel they don’t have enough money to start investing.
Millennials need to take advantage of the long-term wealth-building potential of the stock market.
The Millennials and Gen Z investors can now invest in stocks through apps. These applications remove traditional investment barriers and provide a wide range of investment options.
Micro-investments offer an exciting opportunity for Indian individuals to start their investment journey with a small amount of money.
Individuals can gradually build wealth and work toward their financial goals by using the micro-investment platform and exploring different investment options such as mutual funds, ETFs and fractional shares.
Do thorough research, assess your risk tolerance, and seek professional advice if necessary. Happy Investing!