Investment apps: how to start with less than $100

You can become an investor with just $5, but the costs of buying shares or property make it wise to have a little more.

Less than $100 is all it takes to become an investor using modern apps.

Record-breaking share markets and property prices are tempting Australians everywhere to seek some investment action, and it can be done with less than $100.

Micro-investing options are expanding, and offer newcomers easy ways to test the waters, but there are still some traps to understand.

Author and financial commentator Effie Zahos says research has found millions of Australians believe people need $2000-$5000 to start investing but “nothing could be further from the truth”.

“We now have investing apps, saving apps, micro-investing apps that go into your super … in some cases you only need $5 to start,” she says.

Would-be real estate investors who don’t have hundreds of thousands of dollars can buy fractions of properties through BrickX for as little as $50. People unwilling to pump big bucks into their own share portfolio can consider apps such as CommSec Pocket, which offers share exposure for $50, or Raiz, which rounds up lose change and enables sharemarket investment from just $5.

Financial coach Karen Eley says starting small still connects your mind to investing.

Zahos says micro-investing apps are “a great way to dip your toe into the investing world”.

“Even small amounts can make a big difference to your wealth over time,” she writes in her book Ditch the Debt and Get Rich.

CREATE A HABIT

Financial coach Karen Eley says the first step in the right direction is simply making a start.

“Even if it’s $50 your mind is now connected to starting that wealth creation journey,” she says.

“It’s about creating that habit – moving from a consumer to an investor.”

However, Eley says there is one hurdle to clear before investing: “have an emergency fund”.

“You don’t want to put all your money into an investment and then something goes wrong in three months and you have to sell,” she says.

“You need to have some liquid cash. Ask yourself what is your reason for investing.”

Shares and property should be held for at least seven years to help smooth out the volatility of market rises and falls.

Australians can invest directly on the ASX with a minimum $500, and Eley says buying into an exchange traded fund can provide small pieces of hundreds of stocks.

“The process of setting up your online broking account, if you bank with the broker, is simple and can only take a few minutes,” she says.

A good way to invest in shares and managed funds is “drip feeding investments on a monthly basis”, known as dollar cost averaging.

“There’s a lot of investments where you only need to add $100 a month – that’s basically just $25 week,” Eley says.

CONTROL COSTS

Eley recommends building $1000 or $2000 in an account before investing directly on the ASX to minimise the negative impact of transaction costs.

Zahos says brokerage costs of typically $20 a trade should be considered for ASX investments, and for micro investing apps the fees “can have an astronomical effect on small balances”.

For example, $2 fee may sound small but that equates to 4 per cent on a $50 deposit or balance – four times as much as what cash deposits currently pay.

“If a fee is more than 1 per cent you can do a lot better,” Zahos says.

Author and financial commentator Effie Zahos says keep an eye on costs. Photo: Tim Hunter.

INVESTING OPTIONS

COMMSEC POCKET: Invest in one of seven exchange traded fund options spanning either Australian or overseas markets, with as little as $50. Trades up to $1000 cost $2.

RAIZ: Round up spare change from credit and debit card purchases and invest in ETFs or super. Investments start at $5 and there’s a monthly fees can be $3.50 to $8 depending on the product.

BRICKX: Invest in fractions of residential properties across Australia from $50, and share in the property’s income, expenses and capital growth.

DOMACOM: This fractional property investing business also offers commercial and rural real estate but the minimum investment is $2500.

PLENTI: Invest in other people’s personal loans with as little as $10.

Originally published as Investment apps: how to start with less than $100