Investing: It’s one of the best ways to build wealth, but it can feel out of reach for many of us. While the world of investing has changed markedly in the last several years, many people still believe you need large sums of money to begin investing.
Fortunately, this couldn’t be further from the truth.
Thanks to a batch of innovative new services, it’s possible to start making small investments that build wealth over time. A more accessible investment model, this option is an excellent one for anyone looking to dive into the investing world without making a big financial commitment right away.
Here’s what you need to know.
What Are Small Investments?
Small investments rely on the concept of micro investing. Here’s how it works:
Micro investing platforms are apps and services that allow people to save small sums of money regularly. The goal of micro investing is to remove traditional barriers to entry associated with investing, such as large account minimums and brokerage fees to encourage people to start investing, even if they only have a small sum available.
Micro investing has made a big splash in the financial world in recent years, and for a good reason. By making investing simple, accessible, and painless, micro investing platforms like MoneyLion have democratized investing for people who wouldn’t otherwise be able to accumulate savings or build wealth. Over time, small savings add up to yield returns that can beat traditional savings vehicles.
How Much Money Do You Need To Get Started?
For some micro investing platforms, there is no minimum deposit amount. Instead, these platforms take small amounts of money, sometimes from rounding up transactions, and invest them into ETF accounts.
MoneyLion, for example, offers a fully managed account with no account minimums, no trading fees, and no management fees. You can start investing with just $1 and build up from there as you see fit. MoneyLion also has Auto Invest, which lets you set up recurring transfers of any size into you investment account (such as $5/week, $10/month, or $25/month) to reach your goals faster. Plus, you’ll enjoy all the benefits of a personalized portfolio and fully managed account.
Here are a few benefits of using a MoneyLion Investment account:
- Define your investing comfort zone. There’s no one-size-fits-all investment structure here. You tell us what you’re comfortable with, and we build your portfolio from there. It’s investing customized for you. You can accept our recommendation and then adjust anytime things change for you.
- Invest any amount, any time. Maintain financial flexibility by adding or withdrawing funds whenever you want.
- Get a personalized investment plan. Invest in a diversified mix of stock and bond ETFs designed to suit your specific risk tolerance profile.
- Auto Invest. Ramp up your savings with convenient auto-invest features that pull directly from your bank account — you choose the amount and schedule. Pause it or cancel it anytime.
When Will You See A Return?
One of the significant questions everyone has when they start investing is when they can expect to see a return. The answer, of course, depends on your specific approach. By making small, consistent deposits and being patient with your account, you can potentially double your balance with compound interest and returns over time.
For reference, someone who deposits $3,000 could have about $3,153 by the end of year one. Someone who deposits $42,000 could have about $84,445 in their account by year 14. Meanwhile, someone who deposits $90,000 could have a portfolio value of $402,097 by year 30.* To see how your account could grow over time, check out the investment chart here.
Projected returns are hypothetical, do not reflect actual investment results and are not guarantees of future performance.
How Popular is Micro Investing?
Micro Investing has blown up in recent years. ETF assets, specifically, have skyrocketed in popularity, hitting a record high of $2.7 trillion in capital back at the end of 2015. Since then, experts have called for the market to grow by about 17% annually, with ETFs specifically being projected to grow to more than $15 trillion by 2026.
And what’s causing all this momentum? Easy – smart millennials.
Today, 20-35-year-olds are the largest generation in U.S. history. About 92 million people strong, this generation is mostly entering the world of investments through ETF investments. In fact, Bloomberg recently reported that 40% of all Millennials own ETFs. How’s that for popularity?
Micro Investing, as it turns out, is more than just a way to get young people to save money. It also represents one of the most efficient investment products out there and a structure that could impact the financial goals and future wealth for Americans. As Business Insider says, “Think of it this way: if Millennials could invest $0.99 every time they bought an app or played Candy Crush on their phones, we would never need to reform Social Security.”
As you can see, micro investing is more than just a passing trend – it’s a smart financial strategy that goes a long way toward democratizing wealth in this country and making it easy for people to take control of their finances.
What Can You Use Your Investment Account For?
People use their investment accounts for lots of different reasons. The most common goal, of course, is to build wealth.
Even with micro-deposits, these investment accounts can collect compound interest quickly and grow rapidly over time. Here are just a few ways people use their investment accounts:
- To build long-term wealth. Long-term returns are the traditional goal of investing. Investing your money and being patient as it experiences the highs and lows of the stock and bond markets is a tried and true path.
- To maximize returns. If you want to maximize your returns and aren’t particularly risk-averse or concerned with short-term volatility, you can weigh your portfolio to rely heavily on stock ETFs. Adding some bond ETFs could help cushion against volatility.
- To save for a big purchase. If you’d like to make a big purchase like a home or a car in the fairly near future, you can consider micro investing in a balanced ETF portfolio to help grow your savings faster than a traditional savings account would.
Unlike with an individual retirement account (IRA) or similar account, there are usually no large penalties or high fees associated with withdrawing money from an ETF account. This means that your funds remain somewhat liquid while also earning returns.
Small Investments, Big Results
Once upon a time, investing may have felt off-limits to everyone but the wealthiest and most prosperous. Thankfully, the times have changed. Today, it’s possible to start investing with just $1, or $5 a week, or a few hundred a month. Your call! Because of this, more people can be on their way to building wealth and meeting their financial goals.
If you’ve been considering beginning to invest, MoneyLion can help you get started. No matter how small your first steps might be, the sooner you get started, the better. When you invest, time is your friend. If you’d like to start investing today, head to MoneyLion.
MoneyLion is a secure, accessible program that makes your money work harder for you. Accounts are tailored to your goals and priorities and designed to help you achieve results. Ready to make your money roar? Get started by opening an account today.