Micro-investing is when you invest small amounts of money on a regular basis so that it adds up to a larger investment over time. Micro-investment apps have grown more and more popular among the next generation of investors. Learn how it works and your options for getting started in Canada.
What is micro-investing?
Micro-investing allows you to invest small amounts of money to contribute to building up a profitable fund. The premise is simple: If you make small, frequent contributions over time into an investment portfolio, you have the potential to earn more than you’d saved it up as cash in a savings account.
Not every micro-investment platform works the same way. Some apps let you invest smaller amounts than is normally allowed into the stock market, also called fractional investing. Others work by investing spare change from everyday purchases when you link your bank account.
Example of spare change micro-investing.
Let’s say you purchase a coffee for $4.60 with your debit card. Your app may round up the total purchase to $5, with the excess 40 cents automatically diverted into your investment fund. The small amount doesn’t sound like a lot on its own, but it can add up over time into a more sizable investment balance than you might realize. If you wish, you can also set up a regular recurring investment or deposit lump sums into your investment fund whenever you receive extra cash.
The funds are then invested into low-cost exchange-traded funds (ETFs) or a portfolio of stocks. In this way, even people who may not think they have enough disposable income to invest can start building an investment portfolio. You can then monitor your account balance through a smartphone app or by logging in to your account online.
Micro-investing is a suitable option if you’re looking for a cheap, convenient way to start building an investment portfolio. However, because micro-investing requires a long time frame in order to build up significant wealth, it’s well suited for younger investors.
Keep an eye on costs that can eat into what you’re saving or getting back in returns. Double-check fees with the performance of the app’s chosen investment portfolio. For example, if you’re investing only $5 per month, the total fees are $2.50 a month and the returns are less than 1% a month, you’re likely better off sticking to a savings account.
The fees
Common fees your micro-investment app may charge include:
Brokerage fees. The cost each time you make a transaction or invest.
Subscription or management fees. Ongoing monthly or annual fee to keep the account open.
Other fees. Look out for cancellation, withdrawal, transaction and account opening fees.
That said, you don’t need to be a millennial to take advantage of the benefits of micro-investing. In short, anyone who thinks they might benefit from the convenience of an automatic investment plan should consider the benefits of this approach.
Finder survey: Are men or women more likely to use micro-investment apps?
Response
Male
Female
Micro-investment app
11.94%
4.34%
Source: Finder survey by Pollfish of 1001 Canadians, January 2024
Which providers offer micro-investing?
Micro-investing is a relatively new sector on the Canadian financial scene. Of the few micro-investing platforms up and running, Moka is probably the best known of the roundup-style bunch.
Robo-advisors are also getting into some of the same micro-investing features. Wealthsimple also offers to round up your purchases and invest the spare change, while Interactive Brokers offers the ability to purchase fractional shares of stock with no minimum trade amount (however, you need a minimum amount to open an investment account with Interactive Brokers).
Keep an eye out for other fintech startups looking to break into the market in the coming months and years.
Moka rounds up the value of your debit or credit card purchases to the nearest dollar and invests the difference. As a robo-advisor, Moka lets you set your investments on auto-pilot with a portfolio manager that invests in low-cost ETFs for you.
The minimum amount needed to open an account is $0, and you only pay $20 per in access fees plus a low MER of . Enjoy free withdrawals in as little as one day with a TFSA, RRSP or SRI investment account.
Choose between a variety of account types including TFSAs, RRSPs, non-registered accounts and accounts with socially responsible investment (SRI) options. More than one account type and portfolio Personalized investments Access your earnings with free, next-day withdrawals
Wealthsimple, another popular Canadian robo advisor, places your money in ETFs that contain a diverse mixture of stocks, bonds and commodities. You can choose hold your investments in RRSPs, TFSAs, RESPs, RRIFs, LIRAs, personal, joint or business savings accounts.
Besides letting you round up your accounts and invest your spare change, Wealthsimple also offers halal and socially responsible investment options.
Pay low management fees of just 0.40%–0.50%, and enjoy a low minimum deposit of $1. Get a $50 bonus when you open and deposit $500 in your account within 3 months – Trade and Cash accounts are not eligible.
Benefits of micro-investing
Many micro-investing platforms offer a quick and simple way to link your bank account, acting like an electronic piggy bank for your spare change.
It’s convenient. Micro-investing requires minimal input on your part. In some cases, the entire process is automated and you can start building an investment balance without much realizing it. In other cases, you can access investments you otherwise wouldn’t have been able to afford.
Establish a savings habit. Micro-investing can help create positive saving habits that last a lifetime. It’s an effective way for Canadians who have never invested their money before to make a start.
Minimal investment required. You don’t need a huge bank balance to take advantage of a micro-investing platform. Start by investing your small change, and watch your balance grow over time.
No need for investment expertise. The money in your investment fund can be balanced in a diversified ETF portfolio based on your financial goals and your appetite for risk.
Like any other investment option, there’s no guarantee that the investment portfolio you choose through your micro-investing platform will perform as you hope, and you could end up losing money. The investment portfolio recommended for you is chosen based on your risk tolerance, so depending on your financial goals, you have the option to minimize your risk exposure.
Potential fees.You may need to pay an account management fee that’s either a flat fee or calculated based on a percentage of your account balance, while brokerage and ETF management fees may also apply when you purchase ETFs through your account.
Easy to forget.Because the investing takes place in the background, you might not remember it’s there. While this can be a good thing for investors who tend to “overmanage” their savings, make sure to regularly review the performance of your investments to ensure they are meeting your expectations.
Are there any similar alternative savings options?
If you’re not ready to break into investments or need quick, on-demand access to your money, check out similar options offered by banks to boost your savings. Examples include:
Scotiabank’s Bank the Rest program. Your purchases are rounded up to the nearest dollar, and the difference is transferred to a designated bank account.
TD’s Simply Save program. Arrange to have a small, pre-determined amount transferred to your savings account every time you make a debit purchase or an ATM withdrawal.
Bottom line
It doesn’t always take a large amount of money to invest for the future. Through micro-investing features like roundups and fractional shares, you can begin investing without altering your lifestyle and access the investments you want easily and affordably.
Each platform invests a little differently, so compare your options to find the right fit for your budget and spending habits. And if you’re not sure what all’s available, check out our guide to the world of investments.
Frequently asked questions
No. Like the majority of bank and brokerage accounts, micro-investing with a Canadian-based company requires government-issued ID to open and is often limited to Canadian citizens.
Yes. Several micro-investing platforms like Wealthsimple offer retirement account options so that your roundups or fractional shares can grow over time inside an RRSP account.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio
Stacie Hurst is an editor at Finder, specializing in loans, banking, investing and money transfers. She has a Bachelor of Arts in Psychology and Writing, and she has completed FP Canada Institute's Financial Management Course. Before working in the publishing industry, Stacie completed one year of law school in the United States. When not working, she can usually be found watching K-dramas or playing games with her friends and family. See full bio
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