Micro-investing.
In plain English
Micro-investing is putting very small sums to work through apps that buy fractional shares of funds or stocks, so a deposit of a few dollars can still be fully invested. Fractional ownership is what makes it possible, since a 5 dollar deposit can hold a slice of a share that trades for hundreds. The appeal is that starting requires almost nothing and the habit forms early. The catch is fee structure: a flat monthly fee is trivial on a large balance and enormous on a small one, so the same 3 dollars a month means very different things at 100 dollars and at 10,000 dollars.
01Why it matters
A flat monthly fee on a tiny balance can outrun the return, so the fee expressed as a percentage of the actual balance is the number worth checking.
02The math, step by step
A 3 dollar monthly fee is 36 dollars a year. On a 300 dollar balance that is 12 percent, more than most reasonable return assumptions. On a 12,000 dollar balance it is 0.3 percent. Same fee, two completely different costs.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
It is not automatically low cost. Small deposits reduce the dollars at risk, not the fee percentage. What matters is total annual cost divided by the balance, and on small balances a flat fee produces a percentage that would be unacceptable anywhere else.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice