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If you want to have a financially sound future, it’s important that you start thinking about investing as soon as you are able. If you can, you should consider investing a little money from each paycheck. Investing has become much easier thanks to technological advances that put you in control by removing the middleman.
You shouldn't be too intimidated to start investing--in fact, everyone should know the basics about investments so they can make smart money choices. Investment apps often offer educational resources to help you understand how to grow your money in an easy-to-understand way. They also allow you to view your accounts in real-time, so you're always up to date on how your investments are doing.
Features to Consider
When choosing the right investment app, consider your needs. Do you know what type of investment you're interested in? Perhaps you want to start simple with stocks and bonds or want to get in on the cryptocurrency trend. Not all trading platforms allow crypto trading, so if that's something you're interested in make sure you do your research first.
For the novice investors, some apps for beginners offer educational resources to help you understand how investments work so you can make an informed decision on how to use your money. Some apps will even allow you to earn stocks by reading articles or playing investment games. If you prefer to take a hands-off approach to investing, some apps will provide robo investors so you can set it and forget it. Before choosing this option, you should at least have an idea of how aggressive you want to be with your investments.
Monetary Considerations
How much money do you plan to invest? If you don't have a lot of extra money to invest right away, that's okay. However, it's important to bear in mind that some apps charge higher fees than others, and you don't want a large portion of your investment to go to commissions and other administrative costs. Luckily, you don't need to be a millionaire to invest your money. You can start investing with as little as five dollars; just be sure if you do, you choose an app with minimal or zero fees so it's worthwhile. As you grow your money over time, you can choose different investment strategies once you're ready.
A common misconception is that you need to have a lot of money initially to invest. What matters is not how much you have, but how much you continue to invest over time. Someone who regularly puts money away is going to be more financially successful in the long run than someone who invests a lump sum and never puts money away after their initial investment. Once you open your investment account, add more cash at regular intervals to maximize your investment strategy. Some apps do require an account minimum, so read the fine print before you start investing.
Invest Safely
Before you invest any money, you should be aware that any investments that are made in the market are not FDIC-insured. When money is FDIC-insured, it means it's protected from any deposit losses that may result from a bank failure. The FDIC is an independent agency of the government and is not affiliated with any personal financial institutions. This means you could lose any money you invest. If you can't afford to lose your money, then a market-investment may not be the best choice for you.
What's a Market Investment?
Most personal finance investment apps allow you to trade market-based options. A market investment includes a variety of asset choices, including:
- Stocks
- Bonds
- EFTs
- Mutual funds
- Cryptocurrency
The value of these market-based assets is volatile, which means it can change over time. There is no guaranteed return on a market-based investment, so keep that in mind before you choose these options for your money.
If you want a safer option that is FDIC-insured and guarantees a return, there are options available. FDIC-insured accounts protect up to $250,000 of your money per account and can often be found at traditional financial institutions. These options include:
- Savings accounts
- Money market accounts
- CDs
- IRAs
These types of investment options are much more stable but may not provide as strong of a return as a market-based investment option.
If you want to be able to engage in active trading or buying and holding a stock for a short period of time, know which apps allow this. Some require you to hold onto stocks for a certain amount of time before trading them while others will allow you to buy and sell assets quickly.
You may have heard about aggressive versus conservative investments but aren't sure what it means. To put it simply, an aggressive investment is one that often provides a larger return--but at a larger risk. That means that while you may grow more money over time, you also risk losing a higher amount of money if the market takes a downturn. Conservative investments often offer a smaller return on your investment but are steadier and less likely to lose as much when the market is down.
Popular Investment Apps
There are plenty of investment options to choose from. Before you open an account, take some time to read the facts about these popular platforms, which offer different features and benefits that can help you in your investment journey.
Acorns
Acorns is one of those set-and-forget apps that allows you to start investing without putting in a lot of effort. It's a great financial investment app for beginners who may be nervous about getting into investing. Simply connect Acorns to your checking account and it will round up your change from your purchases and invest it for you. Here are some helpful details to know:
- No minimum balance required
- Fees range monthly but are generally just a few bucks
- Using your target retirement date, your investment strategy will taper from aggressive to conservative as you near your retirement goal
Charles Schwab
If you want a great app for beginners, Charles Schwab makes investing easy. Their mobile app is designed with plenty of educational resources to help you become more comfortable with personal finance and investment strategies. If you start with a $25,000 deposit, you'll receive a cash bonus on your investment to give you a head start. Other important facts to know:
- There is no minimum balance required
- This investment account has zero fees
- You can invest your extra money in fractional shares to maximize your funds
- There are zero commissions on trades
- You can also invest in mutual funds with no transaction fees
Ellevest
If you have a duty to be socially responsible, Ellevest's mission is to empower women to become investors. Anyone can join to support their mission, making Ellevest a popular trading platform for people who want to start investing. Some other facts about Ellevest:
- There is no minimum balance required
- Monthly fees vary but are usually less than $10
- Investment portfolios are created with a woman's lifetime earnings in mind
- Your money is invested into companies with women leaders who have socially-minded missions
Betterment
Betterment uses investment strategies that are personalized to consider your risk tolerance. You can also choose to invest your funds in portfolios with a socially-conscious mission, such as climate change. So not only are you improving your personal finance portfolio, but you're also making a difference in the world around you. Some other facts about Betterment to consider:
- Minimum balance varies from $0 for digital only to $100,000 for premium access
- You can also take advantage of a free cash management account
- There are safe portfolios available for those with lower risk tolerance
- Robo-advisors available for a set-and-forget option
- Set personal goals for your investments
Robinhood
Like its name suggests, Robinhood offers commission-free trades, so you can maximize your investment strategy. Their mobile app is user-friendly and makes trading fast, easy, and hassle-free. You can also choose to trade stocks, cryptocurrency, EFTs, or other options to diversify your portfolio. Some other fast facts about Robinhood:
- $0 minimum balance required
- No hefty commissions
- Their app has a news section so you can stay up to date on your investments
- You can track your individual stocks and view its performance over time
Fidelity Investments
You can manage all of your personal finance needs with Fidelity. If you don't want the hassle of having multiple financial institutions for different needs, you can do it all in one place. You can get a checking account, brokerage account, retirement account, credit card, and more from Fidelity. Everything is integrated into one platform to save you from remembering a bunch of passwords and to make your financial life easier. Fidelity also offers:
- No minimum balance requirements on investment accounts
- Fees range by transaction type and are typically reasonable
- Educational resources which include articles, webinars, and more
- Quick and courteous customer service
- One integrated dashboard for easy management
Wealthbase
If you want to gamify your investment experience, this app makes it fun and easy. The app's interface is user-friendly and you'll learn about investments in a no-pressure game environment. Once you become more comfortable with investing, you'll be ready to spend real money with Wealthbase on a variety of investment strategies. Other facts about Wealthbase:
- They have a $0 balance requirement
- Fees can range depending on the transaction
- The app offers a social experience to encourage active engagement
Invstr
If you want a mix of games, educational resources, investment options, and social engagement, this app offers a little bit of everything. You'll be able to manage a virtual portfolio to test your investment prowess before diving into investing in real time. Some other facts to know about Invstr:
- No minimum balance required
- Trades on stocks, EFTs, and crypto are commission-free with a $5 investment
- Fees vary but are generally less than $5
- Top game performers may be able to win real cash to invest
- Fractional shares available
Wealthfront
An independent robo-advisor, this app will manage your money for you. If you aren't confident with stock trading but still want to invest, you can set up your portfolio and let Wealthfront do the work for you. They also offer IRAs as a more conservative investment strategy for those with lower risk tolerance. Other facts to keep in mind:
- There is a $500 minimum fee required
- Annual fees average a small percentage of your assets
- Set up a goal and Wealthfront will keep your portfolio balanced to help meet it
- An interest fee is paid on cash balances
Ally Invest
This app was created for investors of all levels. Some additional facts about Ally Invest:
- Zero account minimums
- Commission-free trades
- Intuitive trading platform
- No no-transaction-fee mutual funds.
Stash
Another investment app designed for beginners, Stash will help you learn about how investing works. Their mobile app offers plenty of educational resources and interactive games that break down financial topics in an easy-to-understand way. Some other facts about the Stash app:
- Only requires a $5 minimum
- Monthly fees are typically less than $10
- The ability to invest in both stocks and EFTs
- No fees if your account goes inactive
- Customizable goals
- The app offers suggestions for building a strong portfolio
- Tools to help you make investment decisions
Opening an Account
Opening an investment account is fairly easy. Once you decide which investment company is the best fit for your overall needs, download the mobile app from your app store. You'll be asked to provide some basic information to meet federal regulatory requirements, so prepare to have the following available:
- Name
- Date of birth
- Social Security number
- Mailing address
- Annual income
- Net worth
Once you've provided the required information, you can begin setting up your investment portfolio. You may be asked to provide your risk tolerance and overall investment goals so the app can help set up an appropriate portfolio and make recommendations. Your goals may change over time as you age and your life situations differ. As you grow and change financially, you can alter your investment goals to fit. Once you've started investing, be patient. You will not become a millionaire overnight. Your money will see ups and downs depending on the market.
If you grow your investment over time and decide to withdraw, you should be aware that you may face fees and taxes for doing so. Withdrawals from an investment account are subject to income taxes and may even be imposed an additional 10% federal tax penalty. If you are over 59½ when you withdraw your money, you may be able to take it tax free or avoid long-term capital gains from your withdrawal. You should always be aware of the potential benefits and drawbacks so you are prepared come tax time. If you're ever unsure, you can speak with a tax professional before withdrawing money from your investment account.
If you want to understand your investments better, read the educational resources provided in the apps. If you have time, play the games to simulate how your money would grow based on your investment strategies. You'll learn a lot about bull and bear markets, what affects that market, and how to maximize your investment.
