3 Best Investment Apps for Newbies

best investment apps

After you work hard to minimize your debt, you may wonder what’s next on your financial priority list. You can continue your path to financial success by building a savings habit so you can reach important goals, but don’t stop at putting your cash in a savings account.

Investing your money is a great way to build wealth and increase your net worth, even if you have student loans. You don’t need a lot of money or encyclopedic knowledge of the stock market to invest. You don’t even need an investment manager to work on your behalf.

Today, technology makes it easier than ever to start investing. Thanks to the best investment apps available, you can make the most of your money — and you can start as soon as you finish reading this article.

What makes the best investment apps so great?

Historically, to start investing you needed to find a broker or a financial advisor to invest your money for you — and most advisors would only work with you if you had hundreds of thousands of dollars to invest.

Even low-cost investment management companies that make it easier for average people to start investing, such as Vanguard, come with barriers to entry. To buy into most of their index funds, you need to have $3,000 in cash already saved.

The best investing apps allow you to get started now with small sums of money.

That’s incredibly valuable because time is a critical factor in building wealth. The sooner you start investing, the easier it will be to build your net worth. That’s thanks to the exponential growth effect possible with compound interest.

Let’s take a look at the tools that can help you start investing money today.

Acorns

Acorns is an app that puts your spare change to work by tracking your spending, rounding up your purchases, and automatically investing the difference between the rounded total and what you actually spent.

“For example, if you buy a coffee for $3.27, this app will round up the purchase to $4.00 and automatically invest $0.73 in a diversified ETF [exchange-traded funds] portfolio of stocks and bonds,” explains Ben Wacek, a financial planner who helps people use money in a meaningful way at Wacek Financial Planning.

“If you have an average of three transactions per day and save an average of $0.50 per transaction, you will save an extra $45 per month and might not even notice it,” he adds.

Acorns calls this micro investing. The change from your rounded-up purchases (which are tracked after you connect your debit or credit cards to the app) is invested in a portfolio that is determined by your risk tolerance.

Portfolios range from a conservative allocation to an aggressive allocation, and all the funds are made of ETFs from companies like Vanguard and Blackrock.

The benefit of Acorns is that it makes investing simple, automated, and easy to start with because there are no minimums. However, once you want to choose more advanced investing options, Acorns doesn’t offer them.

You can only open a taxable account and you can only choose from their preset portfolios. It’s great for beginning investors with no experience, but as you learn more you’ll likely want to try other tools for investing.

The app does charge you a fee to use: It’s $1 per month if your investment account balance is under $5,000. Once you reach this level, the fee changes to 0.25 percent of your balance. But if you’re still in college with a valid .edu email address, you can sign up and enjoy the platform for free for four years.

Robinhood

Robinhood is another investing app that allows you to quickly start playing with investments without requiring a lot of money upfront. You can buy and trade US-listed stocks and ETFs and pay $0 on commission.

This is radically different from most other stock brokers who charge around $10 per purchase or trade, and can save users a lot of money in fees. The company says they can cut the commission fee entirely because their operations are so lean.

With no physical offices or manual account management, their overhead costs are simply lower and they pass the savings on to their users. Instead of charging commission, the app generates revenue by collecting interest on any uninvested cash balances that users hold.

To start, you can apply for a taxable brokerage account (the only type of account Robinhood offers). Once your application is approved and your account is open, you can start trading — no minimum balance required.

This app is a good, low-cost option if you’re interested in investing in individual stocks and ETFs instead of a portfolio designed for you. But note that Robinhood is for a different type of investor than Acorns.

Acorns promotes more of a “buy-and-hold” strategy, where users invest their money into a set portfolio of ETFs that attempt to follow the market instead of beating it. This is a passive investing approach.

Robinhood, on the other hand, is for people interested in an active investing approach. While your investing options are still limited to stocks and ETFs (with the company working on providing more advanced securities options in the future), beginning investors should be very careful.

Trying to beat the market with stock picking is risky and can result in serious losses. While you can save money on fees when you use this app over other stock brokerages, only experienced investors should attempt to buy and sell individual stocks.

Educate yourself and determine if this is the kind of investing strategy you want to pursue. It requires a lot more work, research, and effort to make sure your investments remain appropriately allocated and diversified.

Betterment

Understandably, you may be interested in finding an investment app that strikes a balance between the simplistic Acorns and the more complicated Robinhood. Enter “robo-advisor” platform Betterment.

Betterment is an investment platform with a $0 account minimum, making it easy for anyone to start investing money. It also keeps the process of investing simple: The company uses modern portfolio theory to design your investment portfolio in accordance with your risk tolerance.

Betterment also provides more options than other investing apps, allowing you to open a variety of accounts, from taxable brokerage accounts to traditional and Roth IRAs. Companies can even use Betterment to run their 401(k) plans for employees.

Once you open an account and get started, your money is invested in Vanguard ETFs. Betterment will also automatically handle tax loss harvesting and rebalancing for you, two complicated practices that new investors will appreciate not having to figure out themselves.

This is one of the best investment apps available because of all the features it offers, and the high-quality technology that makes the app’s dashboard a breeze to use. Betterment also allows you to:

  • Choose your risk level
  • Set goals
  • Customize your portfolio
  • Automate deposits

As far as fees, Betterment’s annual pricing system is based on account balance:

  • Accounts with less than $10,000: Fee is 0.35 percent of balance with $100 a month in automatic deposits, or $3 per month
  • Accounts with $10,000 to $99,999: Fee is 0.25 percent of balance
  • Accounts with $100,000 or more: Fee is 0.15 percent of balance

Betterment allows you to be highly hands-off as an investor, but also provides the tools you need if you do want more control in the future.

Understand risk and return

It’s important to remember that every single investment comes with risk. No investment is guaranteed to earn you a return.

That being said, these tools can help you balance risk and return automatically. Many of them, like Betterment, use algorithms to determine how much risk you should carry in your investments and how much of a return you need to earn.

It’s another reason these investing apps are so useful to beginner investors. It lessens the chances of human emotion and irrational thinking to interfere with building a balanced investment portfolio.

Increase the power of the best investing apps

The best investment apps should be a stepping stone in your journey to financial success. Get started with these tools — they’ll help you build the habit of allocating some of your monthly cash flow to your investments.

Once you feel comfortable with investing small amounts of your money, consider looking at opening more traditional brokerage accounts with investment management companies. To help you, look for a fee-only financial advisor who is willing to sign a fiduciary oath on your behalf.

Regardless of the wealth-building path you choose, you should always continue learning, educating yourself, and asking questions. That way, you can continue to use powerful tools like these investing apps to make the most of your money.

Want to get started investing?

Here are the top investing options for 2017!
NameCommissionAccount Minimum 
$4 to $79 a month$0Visit Blooom
0.5%$0Visit Future Advisor
0.15% - 0.35%$0Visit Betterment
0.49% - 0.89%$25,000Visit Personal Capital
0.25%$500Visit Wealthfront
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