5 Apps That Make Investing Easy and Way Less Stressful for Beginners, According to Experts
Whether you’re looking to supplement your income in the near future, or thinking long-term about your finances, a sound investment strategy is a great way to grow your money over time. That doesn’t mean it needs to be intimidating, though!
“Investing refers to putting your money into an asset that will potentially grow and generate income, or provide for other financial goals down the road, such as college education, retirement, and real estate,” Julie Prince, a wealth management advisor at Northwestern Mutual, tells Apartment Therapy. “It involves taking risk, typically in the stock or bond market, and possibly losing some of your initial investment, in exchange for the chance of earning a return on the amount or ‘principal’ you invested.”
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While anyone with spare funds can invest their money in the stock market, Chris Davis, an investing specialist at NerdWallet, says that doesn’t mean everyone should. “Investing is risky, and you should only invest cash you won’t need for a long time, say five years or more,” he explains. “If you’ve already built up sufficient cash and emergency savings and you understand the risks, investing can be a valuable way to grow your money over the long-term.”
A rise in user-friendly investment apps has turned the otherwise intimidating act of investing into a simple, straightforward process you can practice from your smartphone. However, Priya Malani, the founder and CEO of Stash Wealth says that rookie investors should still take time to research and learn the ropes of investing before relying on apps for future income. “Learning how to invest by ‘dipping your toe in the water’ is like trying to learn how to swim without actually getting into the pool,” she warns. “Sure, you can roll the dice and win on the apps, but without proper education about what you’re doing, investing with apps becomes more of a game with play money than it does a way to plan for achieving your mid- and long-term goals.”
Before You Get Started:
It’s important to remember that no investment strategy — be it through an app or with an advisor — is risk-proof. Be sure to think about your risk tolerance, otherwise known as an investor’s ability to withstand the potential of losing money on an investment.
“Generally, the longer your investment timeline, the more risk you can take on,” Davis says. “For example, a young investor who has a retirement fund that they plan to contribute to (but not touch) for 30 years could allocate most of their portfolio toward stocks, because they’ll have plenty of time to ride through any downturns and take advantage of the recovery.”
To minimize your chances of losing money when investing, Davis recommends working with a financial planner to create a straightforward investment plan that you can actually stick to. “Calling on a financial adviser can bring you immense peace of mind when setting up a long-term investment strategy,” he says. “Whether you’re searching for a one-off financial plan to get you started confidently, or looking for an advisor to guide you along the way, financial planners can help you improve your spending and saving habits while looking after your assets.”
If you aren’t interested in consulting with a financial advisor, Davis says investors can use sell limit orders, which automatically trigger a sale at a specified price, to protect themselves from sudden spikes in stock prices. “This also takes the emotional influence out of investing,” he explains.
Looking for a beginner-friendly phone app to help you either get started, or feel more comfortable with investing? From goal-oriented investment applications to ones that automatically invest your spare change, here are five apps that experts say make learning to invest a breeze.
If you like the idea of investing in a particular long-term goal, like a new car or a pricey vacation, to help you get more comfortable with the process, Malani recommends the Betterment app, which “invests your money based on the goals you’d like to accomplish,” she explains.
Betterment starts off by asking new users a series of questions, ranging from their age and annual income to future plans, and the app will suggest a handful of general investing goals based on responses. For each suggested goal, Betterment supplies a recommended target and asset allocation, which you can adjust as needed The goal is to invest mindfully given each person’s unique financial situation. “Their app acts like a hub for all your financial information, and gives you the ability to name your accounts based on what you’d like to buy with them,” Malani explains.
Betterment is also considered a low-fee investment app: There’s no account minimum required to join, and you’ll only be charged 0.25 percent of whatever assets are currently under their management annually.
Designed to accommodate rookie investors, Davis says the Stash app simplifies the process of selecting investments, particularly stocks and exchange-traded funds (ETFs), for beginners. “Stash is breaking the mold in all kinds of cool ways,” he explains. “It guides users through the process of choosing investments, helps you decide which investments should be the backbone of your portfolio, and explains investment risks clearly.”
In order to help newbies learn how to better invest their money, the app asks new account holders a handful of questions to determine their goals and their risk tolerance. The app then generates a list of suggested stocks and ETFs to consider investing in.
While the service doesn’t require an account minimum to open a personal portfolio, Davis says that there is a $1 to $9-a-month charge to maintain the account. “The fee structure is a little different and could be considered high, but the straightforward flat-fee approach is definitely easy for beginners to understand,” he explains.
Ask any seasoned investor and they’ll say the same: A sound investment strategy is one that includes a diversified portfolio. That’s why Malani believes that Wealthfront is a solid app for beginners hoping to invest in an array of stocks and exchange-traded funds. “Wealthfront automates your finances so that you can build a full portfolio under one application, instead of spreading your financial information over several apps” she explains.
Wealthfront also uses a questionnaire to assess a user’s risk tolerance and then generates a list of investment suggestions, ranging from foreign stocks to real estate. “They also offer a low annual management fee,” Malani adds. But that 0.25 percent fee comes with a catch: “However, you must keep a minimum of $500 in your investment account at all times.”
For a no-fee investment app that supplies up-to-date stock market information, Davis says to look no further than Charles Schwab. “While it may not offer the same level of hand-holding as an app like Stash, beginner investors can still learn the ropes with the Charles Schwab app,” Davis explains.
Davis particularly likes the Charles Schwab app because users have access to all the resources of a big-name brokerage at their disposal, including the company’s own equity ratings, as well as real-time earning reports from investment research firms such as Morningstar, Credit Suisse, MarketEdge, Ned Davis, and more. “Charles Schwab also offers fractional shares on S&P 500 stocks, which can help new investors build diversified portfolios in an affordable way,” he says.
If you’re a newbie investor that’s low on cash, Davis says the Acorns app can be a great tool for learning both good saving and investing habits. “The app has an automatic roundup feature that collects ‘spare change’ from your credit or debit card purchases, and invests it for you,” he explains. “This helps investors see the power of regular deposits and compound growth.”
Acorns implements a flat-fee structure of $1 to $5 a month to maintain an account — but no minimum account balance is required. “The low monthly fee may be attractive to new investors, but it might technically be a high fee when it’s looked at as a percentage of assets for investors with small balances,” Davis explains.