Investing apps are a rage. Micro-investing apps are catching the fancy of masses too.
We have micro-investing startups like Jar and Roundups cater to this segment in India. It’s no wonder that Jar app has seen record number of downloads in the last few months.
WHAT EXACTLY IS MICRO-INVESTING?
Some of you may recall your mother stacking up small change in coins or currency notes of Re.1/ – to Rs.5/- returned by vendors, in a glass bowl. And lo and behold, it added up to a good amount sufficient to buy a toy or book for you or Cadbury chocolates for a month.
Don’t you wish she had earned some interest for her effort? Sure enough, you would have got your extra benefits too 🙂
The Daily Deposit Scheme or Pygmy Deposit Scheme launched by some banks was popular with homemakers and small traders. A collecting agent appointed by the bank would visit them every day. They would contribute small amounts in the range of Rs.10/- to Rs.200/- per day to a savings account. But frauds committed by collecting agents led to closure of the schemes. These miscreant agents collected money, issued receipts but did not deposit the money with the bank.
Apps are micro-investing platforms, a digital version of the same schemes.
HOW DO MICRO-INVESTING APPS OPERATE?
Most of the apps ask for access to your SMS messages.
When you receive a transaction alert for money spent, the app reads the message. It then rounds up the balance amount to the nearest 100, and debits your account with the difference amount.
Say you spend Rs. 176/- on something, Rs. 24/- (rounding up to Rs.200/-) is taken away from your account and invested.
Some apps allow addition of extra amounts, other than the small change debited.
CAN I BUY 99.9% GOLD WITH SMALL CHANGE?
Jar is a new app launched in India, which invests in 99.9% digital gold. SafeGold provides the gold, and it is backed by the RBI regulated trustee, IDBI.
To open an account, you need a valid phone number and a UPI account with PhonePe, PayTM, GooglePay or other providers. They do not ask for KYC documents.
You can withdraw money by selling the gold you own and having money transferred to your bank account. There is no prescribed minimum lock-in period.
CAN I BUY CRYPTO OR VIRTUAL DIGITAL ASSETS WITH SMALL SAVINGS?
At one stage, the middleclass saw Bitcoin as an asset beyond their reach, since the price of a single coin was Rs.37 lakhs upwards. Gradually, they learnt that it is possible to buy fractions of a coin.
Cryptocurrency exchanges like CoinDCX and WazirX replicated mutual fund ads, by emphasizing that one can start with a minimum amount of Rs.500/-.
Then, cryptocurrency exchanges introduced schemes like crypto SIP and micro-investing. Also, they have crypto fixed deposits for seven days.
MICRO-INVESTING IN MUTUAL FUNDS
This is the commonest form of investing in this category.
Most of the apps do not allow the investor to choose stocks. The platforms invest your money in fractions of Exchange-Traded Funds.
They assess your risk profile based on a questionnaire, and make investments in debt or equity funds based on it.
They charge a fee for investing. The bank account needs to be linked after downloading the app.
Roundups is an Indian app in this space. They offer added services for goal-setting and budgeting other than investing.
HOW TO START MICRO-INVESTING?
Download the app.
- Create an account.
- Link it with your bank account or UPI apps as required.
- Answer the questions which determine your risk profile.
- Grant necessary permissions to the app to access your SMS messages.
- Start investing.
ARE MICRO-INVESTING APPS WORTH IT?
PROS OF MICRO-INVESTING APPS
- It lets you enter stock markets with very small amounts.
- Apps automate the process of saving and investing.
- It is a channel for financial literacy, as a beginner learns the benefits of saving and investing.
- Some American apps like Public allow interactions with other investors, as on social media.
- Other American platforms like Robin Hood allow transactions on a large scale too, but charge a fee of $1.
- Robo-advisory services are available.
- Most of the apps allow you to add more money, other than the small amounts debited from your account.
CONS OF MICRO-INVESTING APPS
- You have no choice in deciding where to invest.
- The platforms do charge a fee, which needs to be checked. It should not be higher than the gains on your micro-investments.
- Holding fractions of ETFs or shares will not entitle you to benefits such as dividends. You need to ensure that the number of units you hold are in integers, to avail of benefits.
- The returns are market-linked, and will be affected by volatility in gold prices, stock markets or cryptocurrency markets.
- Taxes on gains are applicable as usual.
- Power of compounding benefits will be visible, only if you do not withdraw money in between.
MoneyGoalz neither recommends any app or earns a commission from them. Investors need to decide at their own risk.