In this episode of the Get Rich Slow Club podcast, Tash and Ana dive into a highly anticipated topic – micro-investing. This episode is packed with insights for beginner investors, especially those wondering how they can start investing with as little as $5.

Investing can seem overwhelming, especially when you’re just starting out and don’t have much money to spare. Many people think they need thousands of dollars to begin, but the truth is, you can start with just a few dollars.

Join Tash and Ana break down the basics of micro-investing , a strategy that lets you dip your toes into the market with minimal funds. They discuss how micro-investing works, its pros and cons, and why it could be a good option for those looking to learn while they grow their wealth gradually.

How it works: Small contributions, big potential

Micro-investing is a strategy that allows you to invest very small amounts of money into the stock market. Instead of buying individual shares directly, you invest in a managed fund that pools together multiple investors' money to purchase a diversified portfolio of assets.

As Tash explains, micro-investing is ideal for beginner investors because of its accessibility: "You can start with small amounts. Many micro-investing platforms begin at $5 or less."

These platforms typically offer pre-selected portfolios, making it easier to get started without picking individual stocks or worrying about where to put your money.

How it works: Small contributions, big potential

One of the advantages of micro-investing is that small, consistent contributions can add up over time. Tash shares an example of how investing $5 a day could lead to substantial returns in the future. "Investing $5 a day can result in $364,000 in 40 years, assuming an average of 7% return each year," she says.

While these kinds of results require time and patience, Ana and Tash stress that the beauty of micro-investing lies in its simplicity. With features like round-ups, where spare change from everyday purchases is automatically invested, it’s possible to build wealth gradually without even noticing the money leaving your account.

Ana explains how this feature works: "You buy a coffee that's $4.50. The 50 cents can go straight into your investment without even thinking about it."

This hands-off approach makes it easy for people to form the habit of investing regularly, which is key to long-term success.

The potential pros of micro-investing

Tash and Ana highlight several benefits of micro-investing, particularly for beginners. Here are some of the potential pros:

• Accessibility : Micro-investing platforms typically have low minimum investment amounts, making them accessible to people who don’t have large sums of money to invest upfront
• Automation : Many platforms offer automation features like recurring investments or round-ups, which help you invest consistently without having to manually manage your portfolio
• Diversification : Most micro-investing platforms offer pre-diversified portfolios, meaning your money is spread across different assets, sectors, and regions. This can potentially help reduce risk by ensuring you’re not putting all your eggs in one basket
• Educational tools : Many platforms also provide educational resources and community forums, making it easy for beginners to learn as they go. Tash notes: "A lot of them have really good educational resources and some also have community platforms or forums. You can ask your questions and other investors in the community can share their thoughts."

Micro-investing can also be a useful tool for parents looking to teach their children about money. Ana points out that it’s a great way to help kids learn the basics of investing .

"If they get allowances or if they're getting birthday money, they’re putting money aside and they can actually see that grow."

The drawbacks of micro-investing

While micro-investing has plenty of potential benefits, Tash and Ana also discuss some of the downsides that users should be aware of:

• Fees : Micro-investing platforms often charge a monthly fee for managing your portfolio. Tash warns that these fees can add up over time, particularly if you only have a small amount invested
• Limited control : With micro-investing, you're typically investing in a managed fund, which means you don’t have direct ownership of individual shares. Ana says: "If you want to have a more complicated portfolio or there are specific shares or ETFs you want to invest in, micro-investing might not be ideal”
• Simplification : While the simplicity of micro-investing is an advantage for beginners, it can also be a limitation. You don’t have much control over when you buy or sell assets, and the pre-selected portfolios might not align perfectly with your specific goals or risk tolerance

Additionally, many micro-investing platforms are not " CHESS-sponsored ," meaning you don’t directly own the shares in your portfolio. This can impact the level of control you have over your investments. You can learn more in our guide to CHESS-sponsored vs custodial vs micro-investing .

Is micro-investing right for you?

Tash and Ana agree that micro-investing can be a fantastic entry point for beginners. It can be accessible for those who want to start small and learn the ropes of investing because it helps reduce the feeling of being overwhelmed. However, they also caution that it might not be the best long-term strategy for everyone.

As you gain more experience and your portfolio grows, you may want to transition to a more traditional brokerage platform. This allows you to have more control over your investments and avoid some of the ongoing fees associated with micro-investing. For those looking to build a larger, more complex portfolio, or for those wanting direct ownership of shares, a traditional investing approach might eventually make more sense.

Final thoughts: A tool for learning and growth

Ultimately, micro-investing could be a great tool for those who are just starting out on their investment journey. It offers a low-risk way to learn about investing, build good habits, and gain exposure to the stock market. As Ana puts it: "It’s slightly lower risk because you are diversified as opposed to investing in just one company, in one sector, in one country."

While micro-investing may not be a perfect solution for everyone, it provides a simple and accessible way to get started. It can also be a solid stepping stone toward more sophisticated investing strategies down the line.

If you ever need support, consider reaching out to a licensed financial adviser to ensure your investment choices align with your financial goals and personal circumstances.

If this episode sparked something in you, give it a five-star rating, drop a review, or better yet, share it with a friend. And if you're just starting out, the first ten episodes will get the financial gears turning. Follow us at @getrichslowclub and catch our personal updates at @tashinvest or @anakresina.

Happy investing!