When should I stop investing into Pearler micro?

Question

I am new to investing and have been DCA investing $300 monthly for about 18 months into 3 ETFs on the micro platform. I’m looking to continue to increase this amount as able (at this stage increasing $100/month each year as my salary increases). My question is when does this no longer make sense? When should you direct the money towards ETF shares instead of micro ETF shares? Or is it fine just to continue with Pearler micro even if say you were DCA $1000/month? Also, do people stop investing into micro, sell and take the capital gains hit and redirect the leftover into the “real” ETF shares or keep the micro shares and just have them and the new ETF shares portfolio?

Answer

Hey Brett, nice work getting started!

There’s nothing really wrong with continuing with micro if you like it and it works for you.

I’d guess most people do keep micro thing in the background and maybe use it for the round-ups feature etc.  But eventually most people go for a normal ETF/shares portfolio due to having more funds to choose from, no ongoing account fees, and more flexibility to move providers without selling etc.

Answer

Dollar-cost averaging (DCA) is a robust strategy, particularly for new investors, as it helps mitigate the risk of market volatility by spreading out the investment over time. This approach can be especially effective with ETFs, as they provide diversified exposure to a range of assets, reducing the risk further.

Regarding your query about when to switch from micro-investing platforms to direct ETF investments, there are a few factors to consider:

Transaction Costs and Fees: Micro-investing platforms often charge fees that might be higher proportionally for small investments but could become less economical as your investment amount increases. Compare these fees with those associated with buying ETFs directly through a brokerage account. As your investment amount grows, the economies of scale might make direct ETF purchases more cost-effective.

Investment Control and Options: Direct investment in ETFs typically offers more control over your investment choices, such as specific ETFs not available on micro-investing platforms. If you find that the micro-investing platform limits your choice or doesn’t align with your investment goals as your portfolio grows, it might be time to consider switching.

Tax Considerations: Selling your micro-investments to transition to direct ETF shares will trigger capital gains tax if there are profits. It’s essential to weigh the tax impact against the potential benefits of switching. Sometimes, it might make sense to keep your existing micro-investments and start directing new investments into direct ETF shares to avoid the tax hit.

Investment Goals and Time Horizon: Your strategy might evolve based on changes in your financial goals or the economic landscape. Regularly reassess your investment approach to ensure it aligns with your current objectives and market conditions.

As for whether to continue with Pearler micro even if you were DCA $1000/month, it largely depends on the factors mentioned above. If the platform’s fees remain competitive, and it meets your investment needs, there’s no inherent disadvantage to continuing with micro-investments at a higher monthly contribution. However, always compare the costs and benefits with direct ETF investments as your investment capacity grows.

Many investors choose to maintain their micro-investment portfolios while expanding their direct ETF holdings, thus diversifying their investment strategies and potentially mitigating risks. This approach allows you to benefit from the simplicity and automated features of micro-investing while taking advantage of lower fees or more investment options available through direct ETF investments.

Pearler, with its focus on long-term investing and financial independence, supports various strategies, including both micro-investing and direct ETF investments. The platform’s tools and resources can help you make informed decisions as your investment needs evolve, ensuring that your strategy remains aligned with your financial goals.

You can find out more about this topic here: Investing Strategies

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

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