Micro investing — investing tiny amounts at a time — is considered a universally good thing and platforms that offer it have been praised for allowing people with little to invest to safely and responsibly start doing so, regardless of how little they know about the stock market.
People can learn more about savings, compounding growth and long-term returns on micro-investing platforms, according to Jody D’Agostini, a certified financial planner with Equitable Advisors.
“These small amounts accumulated over time can make a difference,” said D’Agostini in a Nerd Wallet interview. This is because you earn compounding interest on your initial investment and also on the growth.
Here are three investing platforms for micro-investing in startups, stocks and alternatives.
Palo Alto, California-based Stockpile is an app-based brokerage whose goal is to make investing in the stock market less intimidating and more accessible, especially for young investors by allowing micro investing. It has a simple, streamlined interface for buying and selling fractional shares of stocks and ETFs that can be easily understood by a child or newcomer to investing, according to a review by Investor Junkie. Stockpile is somewhat unusual in that it also sells gift cards so users can give shares of stock for birthdays, graduations and holidays.
Stockpile requires a low minimum investment and its trading fees are among the lowest in the industry at $0.99, but there is a tradeoff. The product range is limited and there are minimal research tools. The platform was built for those who might not otherwise try investing at all, so you won’t find in-depth charting tools or paper trading options, according to an Investopedia review. Stockpile is good for people just starting out in the stock market or who want to encourage younger people to start investing.
Gift cards can be bought on the Stockpile website and at select retailers and grocery stores as e-gifts or physical gift cards. They can be used to buy small amounts of stocks — fractional shares — making investing in household-name companies accessible to a broad audience. These include Google, Amazon, Apple, Berkshire Hathaway, the Bitcoin Investment Trust, Disney, Cisco, McDonald’s, Microsoft and Netflix and more, according to a review by Investor Junkie.
To redeem a gift card, a recipient has to open a brokerage account with Stockpile. Recipients are often not of legal age, so parents have to open a custodial account for the child. Gift card recipients can hold the shares with Stockpile, but fractional shares cannot be transferred to another broker, Investor Junkie pointed out.
Stockpile was founded in 2010 and its subsidiaries include Stockpile Investments and Spark Gift Sales. The company’s limitations may turn off more sophisticated investors.
There aren’t too many ways to invest in a private business, even if you are accredited. There are thousands of publicly traded companies available on the stock market for people who want to invest in large companies. Mainvest allows you to do micro investing in small private brick-and-mortar businesses — a field that has traditionally been accessible only to accredited investors or venture capitalists with billions of dollars to invest. Mainvest allows investors to get in on the ground floor when the business is just starting or just taking off by investing in funds or fractional shares with no accreditation required.
Anyone age 18 or older with a U.S. bank account can invest in local startups and early-stage small businesses for as little as $100 on Mainvest. All investments are open to anyone via Regulation CF, aka equity crowdfunding. The platform doesn’t charge any fees to investors but does charge 6 percent to the businesses that receive funding through it. If the project doesn’t reach its funding goal, Mainvest will return 100 percent of your investment back to you.
Founded in 2018 by tech-company veterans (including several former Uber employees), Mainvest “is a stellar example of how to make online alternative investing look and feel a lot like e-commerce,” according to a review on Yield Talk. Based in Salem, Massachusetts, Mainvest vets each business before listing it but there’s no way to tell how successful Mainvest has been, according to a review by The College Investor. Mainvest has raised $3 million through a seed round.
Each Mainvest investment is an investment in a security, and all businesses have to file with the SEC. You can see each SEC filing with balance sheets, income statements, and financial projections and there’s a ton of data available for each business. You can contact any of the businesses through the Mainvest platform.
Mainvest says that you can invest in debt or equity opportunities, however, nearly all listed opportunities are revenue shares, which implies equity investments, according to The College Investor. When you make an equity investment on Mainvest, the company agrees to pay you a percentage of its revenue each quarter until you receive a certain investment multiple. It also promises to pay the entire investment multiple by a certain date regardless of its revenue.
Mainvest advertises returns of 8-to-10 percent, has very transparent investment terms and a novel “petitions” feature that allows prospective investors or customers to ask for particular businesses in their community, according to L3M’s Yield Talk.
However, on Mainvest, funds are not FDIC- or SIPC-protected putting you completely at risk from investment losses. There is no secondary market with Mainvest, so you will probably not be able to resell your securities. Plus, Mainvest only funds brick and mortar businesses, not online businesses.
Wefunder: highlight Redbay Coffee
Wefunder is a crowdfunding platform that connects investors to startups and startups to investors. It’s great for founders and startups looking to raise $50,000 to $5 million without running into high fees, according to a Business Insider review. It’s also good for non-accredited and accredited investors who want to invest in private companies.
It requires a $100 minimum investment and fees can range from 2-to-3.5 percent, depending on your payment method. Founders can start raising funds for free but may have to pay 7.5 percent of what is raised.
Wefunder is one of the largest Regulation CF platforms and one of the few offering the trifecta of crowdfunding investment options Reg D, Reg A+, and Reg CF. It offers low minimums but does not approve or curate companies, unlike some other investment platforms. Wefunder has excellent investor education resources and a novel investor club model, according to a review by Yield Talk.
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Overall, Wefunder has helped more than 270 startups raise $91 million from 240,000-plus investors. More than 180 companies have raised more than $61 million in Reg CF financing through Wefunder, including Red Bay Coffee Company.
Operating out of a 7,800 square-foot warehouse in Oakland, California, Red Bay Coffee opened in June 2016. Its founder is Keba Konte, a local artist and food entrepreneur with 10 years of experience in the specialty coffee and hospitality industry. Red Bay has raised more than $87,000 from 822 backers on Kickstarter and $700,000 in seed capital from Fund Good Jobs and Pacific Community Ventures. The company claims to transparently source its beans, hand-roasting them in Oakland, and distributing them to more than 55 partners around the Bay Area and the U.S.
Wefunder is a graduate of the Y-Combinator startup incubator, and the founders personally helped lobby the SEC and Congress to pass the 2012 JOBS Act, Yield Talk reported. Wefunder appears to have invested heavily in automation, including offering a “Wefunder in a box” funding portal to create your own free SEC and FINRA registered Reg CF funding portal, including all the tech and legal setup.
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