Ever found yourself standing on the precipice of investing, eager but uncertain? Maybe you've considered Shares, but the minimum spend threshold feels a bit daunting.
As you stand there, you might lean towards the convenience of micro-investing with as little as $5. On the flip side, though, a traditional Shares account provides direct ownership and broader horizons.
So, what's the move? Should you invest in Shares or micro-investing?
For starters, there is no should in investing. All investments carry risks, so the only "right" investment is the one which aligns with your goals, preferences, and risk profile. To help you make an educated decision, this article clears the fog about micro-investing and traditional investing. For this one, we’re unpacking our own Pearler offerings as examples. However, there are a range of platforms out there, so please choose the right one for you.
Micro-investing vs. traditional shares investing
The secret of calm and steady investing experience lies in understanding and choosing the right starting point for you. This section gives you rundown of two common options.
Micro-investing
If your finances are in order, you might feel you’re emotionally and financially ready to invest. But here’s the hitch: for many, the share market feels like deep and uncharted waters.
If you’re in this boat, micro-investing platforms might be your starting point for this financial journey.
Here are the prospective benefits of micro-investing:
- You can enjoy simple start that may cost as little as a cup of coffee
- As a general rule, micro-investing offers lower fees
- You have the chance to build a consistent habit for saving and investing
- You receive instant diversification by investing in funds that track hundred or thousands of assets
- You have the option to employ Dollar Cost Averaging (DCA) at your own pace and budget
- You can set up automated investing through cash deposits or spare change from your purchases
However, as with any type of investing, there are also disadvantages and risks to micro-investing:
- Tiny investments typically lead to lower returns and minimal dividends
- Minimal monthly investments, like $5-$10, can be eroded by even the lowest fees (although Pearler Micro charges no fees for portfolios under $100)
- Micro-investing small amounts might not meet your ideal long-term investing goal
- Traditional accounts may offer more scalability, customisation, and diverse options
Traditional investing in shares
With the traditional route, you open doors to more investing options. This may also mean you solidify your commitment to long-term investing. Crucially, a steady emotional compass is a must to navigate the market's inevitable downturns.
These are some of the potential advantages of investing in your shares using a regular account:
- In Australia, your shares are CHESS-sponsored . You have verified ownership of your shares and the Australian Securities Exchange (ASX) knows it
- You keep your investments under a single Holder Identification Number (HIN)
- You can switch brokers with ease, thanks to the centralisation of all shares under your HIN
- If your Shares pay dividends, you can opt for direct dividend payments to your bank account. You can also explore options like dividend reinvestment plans and bonus share plans
- You receive just one concise statement annually.
Investing in shares the traditional way also has its own set of challenges:
- It generally requires larger capital for diversified and long-term investing
- Only investments in Australian shares and exchange-traded funds (ETFs) are CHESS-sponsored
- It can be more expensive to buy shares with Dollar Cost Averaging (DCA) strategy
- Monthly pricing or fees may be higher and charged per transaction
And in both cases, by investing, you're exposing yourself to risk – so be mindful of that when you begin.
Starting Small: Pearler Micro
Gone are the days when investing was a playground for the 6-figure earners alone. In most cases, traditional share investing platforms demand a stake of $500 or more. This steep entry can be a barrier for the average person who’s on a budget and testing the waters.
Now, with as little as $5, micro-investing platforms allow you to diversify across an extensive portfolio of funds. The concept? Consistent, small contributions that can blossom into a robust portfolio.
An example of micro-investing platforms in Australia is Pearler Micro. At Pearler, our take on micro-investing keeps a focus on low fees and uncomplicated investing.
Pearler Micro offers a managed fund with ten simple, diverse options. Each option tracks one or two popular ETFs that align with your values, interests, and goals. All these fund options sit in a single app alongside any shares you might hold in Pearler.
Every investor, regardless of their investment size, can delve into any of the fund options. Here, Pearler pools your money with that of other micro investors.
Now, you may question the reach of $5 and elicit a chuckle or two. But with regular, small contributions, your investment sprouts can potentially grow over a long period.
Still, there’s one thing we’d always like to remind our readers and investors: the past performance of the sharemarket does not guarantee future profits.
Switching lanes to Pearler Shares
As you educate yourself more about investing, you’ll yearn for more choices and direct control of your shares. There may come a time when you think, "why not choose and own shares directly?" This can be especially valid if you want to hold your shares for decades to build your retirement nest egg.
In that case, exploring beyond micro-investing might be the next move.
Before you make the jump, ensure a few things:
- Do you have emergency fund covering at least six months of expenses?
- Do you have larger disposable money ready for investing?
- Are you geared to sidestep the quagmire of emotional investing?
- Do you understand the natural ebbs and flows of the sharemarket?
- Do you want to invest in Shares?
Do they tick your boxes? Then a traditional shares account could well be the next level in your journey.
If you're already using Pearler Micro, opening a Pearler Shares account is straightforward. You have the liberty to either keep your existing micro-investments or merge them into a unified shares account. The choice, as always, rests in your hands.
Pearler Share cover a spectrum of investments. You can choose from every asset listed on the ASX—such as shares or ETFs and LICs —as well as US ETFs and shares. More choices mean more chances for you to build a portfolio that resonates with your goals, age, and risk appetite.
But before you get all starry-eyed, here's a detail to keep in mind. Pearler Shares has a $500 minimum order when it comes to any ETFs or individual shares in Australia and the US.
For instance, aiming to hold IVV shares directly requires an initial investment of at least $500. Meanwhile, the Pearler Micro realm allows you to invest several dollars in the “American Buffet” fund option tracking IVV.
Remember, the choice between Pearler Micro and Pearler Shares isn’t a dichotomy. You don’t have to pick one over another. You may even realise both options are not for you after all. It’s always best to make decisions that are well-anchored in your unique financial situation, and not made in haste.
Ownership of shares: Pearler Shares vs Pearler Micro
Investing is all about personal preferences and choices. Your financial journey is deeply personal and unique. Pearler is here to offer the tools, not make the choices for you.
So, to help you make the right decision for yourself, let’s discuss the thing that sets micro-investing and traditional investing apart. And that’s how ownership of shares works in Australia.
For this article, we're once again using Pearler Shares and Pearler Micro as examples.
Opting for Pearler Shares?
When you opt for Pearler Shares, you invest through the CHESS-sponsored model of buying and owning shares.
In a nutshell, ‘CHESS-sponsored’ means you interact with the Australian Securities Exchange (ASX). Your purchases are recorded in your name, solidifying your position as the shareholder.
It's a direct, straightforward, and transparent model of investment where you hold your assets without an intermediary.
Opting for Pearler Micro?
On the flip side, with Pearler Micro, you tread on the path of micro-investing. Here, you're buying, selling, and holding units in managed funds created by Pearler Micro.
This non-CHESS-sponsored model means you don't directly own the shares or ETF which the managed fund is tracking.
Picture this as pooling in money with other investors. Your monies are then invested by Pearler Micro on behalf of everyone, in alignment with specified rules.
While it may appear similar to custodial investing, the difference lies in the timing. The micro-investing app allocates the funds at the end of each business day. This makes micro-investing a collective and scheduled investment approach.
Both Pearler Shares and Pearler Micro have their unique sets of features. Each one is catering to diverse investment strategies and preferences. For a comparison between CHESS-sponsored, Micro-investing, and Custodial, explore this in-depth article .
Pricing and fees: Pearler Shares vs Pearler Micro
You're thinking about investing, and you've got Pearler Shares and Pearler Micro on your radar. Here comes the question: What is the cost of investing with Pearler? How do Pearler Shares compare to Pearler Micro in terms of fees?
Pearler Micro fees
Let's get down to brass tacks:
- If you're dipping your toes into a single fund, it'll set you back $1.70/month.
- Planning to invest in multiple funds? Bundle pricing starts at $2.30/month.
- Great news for the beginners: there's no fee if your balance is below $100.
Pearler Shares fees
For those considering Pearler Shares, here's what's on the bill:
- Trading AU and US shares? That'll be $6.50 AUD per transaction, whether buying or selling.
- If you're converting between AUD and USD, there's a 0.5% AUD fee.
- Prepay $55 and get a bonus of $10 Pearler Credit, effectively lowering your per investment cost from $6.50 to $5.50 AUD.
- If structure is your thing, there's a $6.00 monthly subscription. This includes one ASX or US trade. You can cancel whenever you like.
Note : The fees and structures mentioned are based on current information at the time of writing and are subject to change. For the most accurate and current pricing, Pearler’s pricing page has all the details.
Autoinvest with both Pearler Micro and Pearler Shares
While appearing worlds apart, Micro and Shares stand united in their aim to simplify investing. If you decide to give Pearler a try, it's worth noting that Autoinvest is available for both options. Pearler's Autoinvest is a set-and-forget tool that takes the guesswork out of investing.
The fees for using Autoinvest are the same as every other transaction on the Pearler app. The only time you pay is when Pearler charges a brokerage fee for buying or selling a share.
However, certain Autoinvest settings can result in buying multiple shares – increasing brokerage fees.
Choosing between Pearler Micro and Pearler Shares
Disclaimer: The hypothetical examples below are merely informational and not financial advice. Conduct personal research and consult a licensed financial adviser before making investment choices. Past sharemarket performance doesn’t guarantee future gains.
Let's dive into a hypothetical tale of two investors: Matt and Emma. Both are exploring their investment paths—starting with Pearler. While Matt is intrigued by Pearler Micro, Emma takes a shine to Pearler Shares. Let's venture into their financial journeys and decode their choices.
Matt’s Path with Pearler Micro
Matt is just beginning to understand the investment landscape. He feels that time in the market is more important than timing the moment you enter the scene. However, there are three things that’s making him reluctant to start investing ASAP.
First, Matt wants to prioritise paying off a debt that’s been eating away a huge portion of his salary. Second, the fees of traditional investing accounts feel steep for him. Third, all the fluctuating news about the global sharemarkets are giving him pause. Is it worth the effort learning how to invest for the long term?
Then again, Matt has the advantage of being young and passionate about seeking knowledge. So, he decides to start small without risking his savings or cutting progress on debt payments. Matt has heard about about micro-investing platforms, and he's attracted to the simplicity and low fees.
With Pearler Micro, he begins his investment journey $10 or $15 a week. He enjoys being able to pool his investment with others. For him, the ‘we are all in this journey together’ aspect to it makes investing a less scary place.
He chooses the “American Buffet (IVV)” fund option to diversify and potentially reduce the risk. This clear and simple fund option align with his values, making his journey straightforward.
Matt understands he doesn't own the shares directly. Yet, it's a foot in the door, a learning curve for him, while he’s finding his financial footing and improving his financial literacy.
Emma's Direct Dive with Pearler Shares
On the other side, Emma has been saving diligently for years now. She is no stranger to the intricacies of the sharemarket as she has been reading about it. Her appetite for risk is a tad bigger because she has ample emergency funds, a decent disposable income, and little debt.
She’s yearning for a direct control over his shares, which is why she’s leaning towards Pearler Shares. With this option, she has the liberty to craft a portfolio that resonates with her goals, age, and risk appetite.
She invests in the VDHG ETF and holds her shares directly. She’s plans to hold them for decades, knowing a thing or two about sharemarket cycles and compound interest.
Hence, the $500 minimum order for any ETFs or shares doesn’t daunt her. She’s prepared for a more substantial investment to increase her chances of retiring early and living on her terms.
Reflection: Your money, your choice
Pearler offers the tools, yet the choice rests entirely in your hands. The hypothetical Matt-and-Emma scenario doesn’t reflect every investor's unique situation, but it does emphasise one lesson. Our fictional investors made a choice that’s aligned with their financial realities and preferences.
As we mentioned earlier, the debate between Pearler Micro and Pearler Shares isn’t binary. The differences in share ownership, the level of control, and the amount needed to start are clear. Both have their places, and sometimes, neither might be the right fit for you.
Get inspiration from the Pearler Community
Remember the age-old tale of the tortoise and the hare? It’s not about sprinting and timing your race but about steady progress and spending time on the track. In other words, when it comes to investing, it’s not when you start but that you start. And if you do decide to invest, the Pearler Community will be right there running alongside you.
You don’t have to rush the decision to invest and do it this instant. But if the investment bug has bitten you, the Pearler Exchange is a great place to hear from other investors.
Happy investing!
