3 Best Investment Apps for Newbies

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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, and you can even invest while paying off 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 Vanguard’s mutual funds, for instance, you need to have $3,000 in cash already saved. These funds allow you to invest in various stocks and other investments to diversify your portfolio and limit your risk.

The best investing apps, on the other hand, allow you to invest with just a few dollars. And the sooner you start investing, the easier it will be to build your net worth thanks to the power of 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. An exchange-traded fund is a type of mutual fund.

“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.

The change from your rounded-up purchases (which are tracked after you connect your debit or credit cards to the app) is invested in ETFs based on your risk tolerance. Portfolios range from a conservative allocation to an aggressive allocation.

The benefit of Acorns is that it makes investing simple, automated, and easy to start with because there are no minimums. You can open a taxable account or an individual retirement account (IRA) with the app.

The app does charge you a fee of $1 to $3 per month, depending on the type of account you have. Check out the Acorns pricing schedule to see what each account offers. Also, note that the $1-per-month level is free for college students.

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 U.S.-listed stocks and ETFs without paying any commissions. Other similar brokers charge up to $10 per trade, which can add up over time.

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 is based on 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.

Robinhood, on the other hand, is for people interested in an active investing approach. You can buy and sell every day if you want. But since the majority of day traders lose money, a buy-and-hold strategy is generally a better option for beginners. As you gain more experience, it might make more sense 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.

Robo-advisors are designed to create a portfolio for you using an algorithm rather than a human investment manager.

Betterment is an investment platform with a $0 account minimum, making it easy for anyone to start investing money. The robo-advisor provides more options than some other investing apps, allowing you to open a variety of accounts. You can choose from a taxable brokerage account or a traditional or Roth IRA. Employers can even use Betterment to run their 401(k) plans for employees.

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.

As far as fees, Betterment has two pricing tiers:

  • Digital: You pay 0.25% of your account balance annually and everything is run by the robo-advisor’s algorithms.
  • Premium: You pay 0.40% of your account balance and can get access to in-house Certified Financial Planners to get extra guidance.

Betterment allows you to be a hands-off investor, which can be great if you have better things to do than learn about investing. But the company also provides the tools and resources you need if you do want more control in the future.

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 have your investment priorities straight and 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.

Ben Luthi contributed to this article.

Want to get started investing?

Here are the top investing options for 2018!
NameCommissionAccount Minimum 
Blooom$10/month$0Visit Blooom
Future Advisor0.5%$0Visit Future Advisor
Betterment0.15% – 0.35%$0Visit Betterment
Personal Capital0.49% – 0.89%$25,000Visit Personal Capital
Wealthfront0.25%$500Visit Wealthfront
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Published in Investments & Savings