Building wealth is more than just earning an income and budgeting. Adding smart investments to the mix can optimize your capital and help you create sustainable wealth over the long run.
If you have big financial goals, like retiring before 60, paying for your children’s college tuition, starting a business, or even buying a house, your surest way to reach those goals is by investing early.
Even if you don’t have massive amounts of capital to invest, you can use even your spare change to start, and there are micro-investing apps available to help you get started.
Key Points
- Micro-investing is a strategy where you consistently invest small amounts of money, often with as little as a few dollars at a time.
- This strategy makes investing accessible to all Canadians, including those on a tight budget.
- Micro-investing apps are available to help maximize your returns and minimize your investment efforts.
What Is Micro-Investing?
Micro-investing involves saving small amounts of money and using it to invest regularly. Whatever you have available can be used to consistently invest, no matter how little you may have to invest.
An increasing number of Canadians prefer to keep savings in cash. This is especially true for the younger generation, as opposed to older generations. Among the various reasons for this is the misconception that you need to have a lot of money to invest.
While larger investment amounts are ideal and usually yield larger returns, that doesn’t mean you can’t benefit from small investments. That’s where micro-investing comes into the picture. It simply involves investing in small amounts and is accessible to everyone, no matter their economic background. In fact, you can make investments as small as $1 through micro-investing.
Learn more: Investing For Beginners In Canada: A Guide
How Does Micro-Investing Work?
A common way to start micro-investing is by rounding up your transactions to the nearest dollar and investing the difference. The idea is to invest an amount that’s small enough not to impact your day-to-day budgeting.
| Micro-Investing In Action Let’s say you purchase a sandwich for $9.25. You could round that up to $10 and invest the extra 75¢. Over time, this can add up to a decent investment balance. You can also set up a recurring investment approach to help your investment grow with minimal effort. Or, you can add a few extra dollars whenever you receive extra cash. |
Here’s a real life example: An investor who started with $1 back in August 1976 and contributed $1 a day to an S&P 500 index fund would have $368,201.33 today.
Best Micro-Investing Apps In Canada
While you can do the math and put aside these micro-investment amounts yourself, you can also download an app to help you do it.
There are a couple of micro-investing platforms that do the rounding and investment work for you. These apps usually charge a small fee and help you adjust your micro-investment amounts and goals with minimal work needed from you.
| Trading Platform | Fee | Minimum Investment Required | Extra Benefits |
| Moka | $15/month | $1 | -Invest spare change |
| Wealthsimple | 0.4% – 0.5%/year | $1 | -Financial advice -Automatic rebalancing balance -Dividend reinvestment |
| KOHO | $0 – $19/month | $1 | -Virtual card -Interest earned on your balance |
Moka
Launched in 2017 originally as Mylo, Moka is an app that automatically invests your spare change by rounding up your purchases. People who invest with Moka don’t need a large investment or financial knowledge to invest. Their constant development has given rise to new products to help reduce expenses, help pay your debts and offer cashback rewards.
Features Of Moka
There are a few reasons why you may consider using Moka to help you put a few extra dollars towards investing:
- Low Fees: Moka charges a flat fee of $15 per month, no matter how much or little you invest. However, make sure you’re investing enough money to make that $15 count.
- No Minimum Investment: You can invest as little or as much as you want with Moka. You can choose to simply invest your spare change or set up a recurring deposit.
- Diverse Investment Options: You can choose to open various investments accounts, including tax-free savings accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs).
- Moka Perks: This tool will help you find savings with specific partner purchases, such as Uber Eats, Hello Fresh, and more.
- Automatic Portfolio Rebalancing: This can help you set up recurring deposits as well as rounded up transactions.
- Secure Platform: Moka is safe and has comparable security with any mutual fund you invest in with a bank. However, note that the company itself isn’t CIPF-insured.
Wealthsimple
WealthSimple is an investment platform catering to millennials and other younger generations. Their service has minimal fees and an intuitive platform that helps people invest, manage taxes, and even purchase cryptocurrency. Their Roundup feature rounds up your purchase to the next dollar and invests it for you.
Features Of Wealthsimple
Here are a few perks of using Wealthsimple to facilitate your micro-investments:
- Low Fees: WealthSimple charges a small management fee of 0.4% to 0.5% per year, which makes it an especially ideal app choice for people investing very small amounts.
- Many Investing Options: WealthSimple Trade lets users invest in the stock market. They also offer socially responsible investing, and traditional investment accounts like RRSPs, TFSAs, RESPs, RRIFs, and Business accounts.
- Secure: WealthSimple is insured by the CIPF. This means that your investments are insured if WealthSimple goes bankrupt. They also use bank-level encryption and two-factor authentication to verify accounts.
- Extra Features: WealthSimple offers financial advice, automatic rebalancing, dividend reinvestment, and access to other services like Wealthsimple Trade.
KOHO
KOHO is a Canadian fintech company that offers spending and saving accounts that are designed to make managing personal finances simple. While not necessarily an investment app, KOHO features a RoundUp feature that allows clients to accumulate small amounts to put towards saving or investing. With each purchase you make using KOHO’s prepaid card, you can round up the cost to the nearest $1, $2, $5 or $10.
For instance, if your purchase is $7.25, KOHO RoundUps will automatically save $2.75 (to make $10) for you.
KOHO RoundUp Features
Here are some benefits of using KOHO RoundUps to help you save money towards investing on a micro level:
- Boost Savings. Use the RoundUps feature for saving and investing.
- Financial Tips. KOHO’s website includes a section that provides various tips on how to optimize money management.
- Combined Saving, Spending, And Investing. KOHO can help you achieve a variety of personal financing goals, including tracking your spending and putting money aside for emergency funds or investments.
Benefits Of Micro-Investing Apps
There are several perks of micro-investing apps to help you get a head start on investing, even with little capital:
- Little Capital Required. You can literally start investing with your spare change using micro-investing apps. Even beginner investors and those with minimal income can get started.
- No Investment Experience Needed. Most of the work is done for you when you utilize a micro-investing app thanks to robo-advisors, making these platforms perfect for investment newbies.
- Convenience. Micro-investing apps need little effort from you to get started. The process is largely automated, so you can start accumulating investment earnings without having to dedicate much time or input.
- Develop A Habit For Saving. Micro-investing apps can help you establish saving habits that you can carry well into the future.
Cost Of Micro-Investing
As with any other type of investment, it’s important to weigh the costs against any potential returns to ensure you get the most bang for your buck. Micro-investing apps may charge any of the following types of fees:
- Brokerage Fees. This is the potential cost for each transaction or investment.
- Management Fees. There may be an ongoing monthly or annual fee to keep the account open. For example, Moka has a monthly fee of $15 per month, while WealthSimple takes an annual percentage rate fee of 0.4% to 0.5%.
- Additional Fees. Some apps might have charges for opening or cancelling an account, making a withdrawal, and for other actions. Make sure you check the fine print to learn about any hidden fees.
Is Micro-Investing Right For You?
Micro-investing is best suited for the following:
- Minimal Budget: Micro-investing suits Canadians who can’t invest a lot of money from their current budget and want to stay hands-off.
- Young Investors: Micro-investing is also great for younger Canadians who benefit from the extra time in building up their investment over time.
- Limited Financial Experience: Micro-investing is great for people with little financial knowledge who want to try their hand at investing without putting so much money at risk.
Final Thoughts
Micro-investing is a great way for people to start small with investing. Although lower investment amounts don’t yield returns as large as bigger investments, they still add up! Consider using micro-investing apps like WealthSimple or Moka to get your feet wet with investing in a convenient way with minimal capital.
