Your guide to micro investing

Last updated on 13th May, 2020 at 10:35 am

Micro investing has transformed the investment landscape, allowing almost everyone to start investing. So, what’s the best way to go about it? An expert shares a few tips.

What is micro investing?

As the name suggests, micro investing is investing on a smaller scale, with smaller amounts of money. There are no brokerage account minimums, and with platforms like EasyEquities and SatrixNOW, often no minimum investment amounts. This means income bracket and accumulated assets are less likely to create a barrier to your investment journey. That said, micro investing can also be achieved through a financial planner.

“South Africans have benefited from the improved access to investments that micro investing offers,” says Jaco van Schalkwyk, a Certified Financial Planner^® at Plan-B BlueStar. “This form of investment is a trend that will continue to ‘democratise investing’.”
He also speaks to the popularity of the trend among younger people, in particular. “It is an ideal way to start, due to the lack of minimum investment amounts.”

How do you start micro investing?

“It is important to do thorough research on a platform that you’re considering using, as there are many dubious, fly-by-night websites out there,” cautions van Schalkwyk. Many of these are active on social media. “If you prefer getting advice, a more traditional relationship with a trusted financial planner may better suit your needs.” Set up a meeting to discuss your investment goals now.

When it comes to selecting funds, he says Exchange Traded Funds (ETFs) are the ideal choice for beginners. “This doesn’t require the same level of research as is required when investing in individual companies,” van Schalkwyk shares.

Some examples, to get you started:
• Satrix Top 40
• Satrix S&P 500
• Satrix Nasdaq 100

Find the stock market intimidating? Read this accessible guide to stock-market investing.

Will I get the benefits of traditional investing?

In a nutshell, yes. Compound interest interest is the ingredient that traditional investments need in order to grow, and the same principle applies to micro investments, on a smaller scale.

“Think of percentages instead of absolute rand or dollar amounts when looking at gains,” urges van Schalkwyk. R10 may not seem like a large gain on R100, but it’s the same percentage gain as R100 000 on a R1 million investment. “Our minds often trick us into thinking the gain is insignificant, yet it is related to the initial capital invested,” notes van Schalkwyk.

Want to find out how much interest you’ll earn in your chosen investment term? Use this handy tool and earn tier points.

Take the next step with your micro investment

So, you’ve built your investment to a healthy figure using ETFs and want to take the next step as an investor. “Consider diversifying your strategy by investing in individual companies,” suggests van Schalkwyk. “The research required for this will be far more time-consuming, so leave it for when you are really ready.”

Want to take your first step into micro investing, but still have questions? A qualified financial planner can help you. Set up a meeting today to start your journey to financial wellness.