The stock market has seen record-breaking gains in the last year since President Donald Trump took office, but this has not encouraged Americans to invest, notably the millennial generation. A Gallup poll conducted in May 2017 revealed that only 54 percent of the population has stock market interests through personal investment accounts or 401(k) plans at work.
The low rate of engagement has driven the development of apps to encourage investing. While these apps offer a simplified investment process with lower fees, they may not be the right solution for everyone. Edukate CEO and founder Chris Whitlow said people should closely examine their finances to ensure an investment app is the correct choice before diving in with IRA contributions and extra income from recent tax cuts.
The pros and cons of the most popular investment apps are explained below.
Acorns monitors the user’s bank account and invests the leftover funds after purchases. The system is called “roundups,” and it is one of the easiest ways to invest.
Pros: An excellent app for beginners with a minimal learning curve
Cons: Limited choices for investing
Stash is another simple app that allows the purchase of fractional shares, starting at $5. The focus of the app is on retirement savings, and the only requirement is a checking account.
Pros: Many available investment options based on market preferences
Cons: Only good for long-term investing
Those who are concerned about fees are a good match for the Robinhood app. It offers the ability to trade stocks and not pay fees. Users must apply to use the app, and are sent an instructional video after approval.
Pros: Allows for complete control of an investment portfolio.
This app falls into the “roboadvisor” category by doing the same job as a human advisor for less money. It works by automatically investing in stocks and bonds based on the user’s risk threshold.
Pros: Provides guidance for long-term investment goals at a lower cost
Cons: Lacks the support level of a human broker
Twine is a newcomer to the investment app scene and is the first one built especially for couples. It simplifies the process of saving for life events such as vacations, weddings and down payments on homes.
Pros: Perfect for collaborative saving
While all of the apps listed above are a good entry point for investing by people with low or moderate incomes, Chris Whitlow warns they should not be considered as an ultimate financial strategy. He added that it is important to know both the risks and the advantages to meet money goals, and the apps are simply one way of accomplishing that.
Mark Angelo co-founded the Investment Manager in August 2009 and two affiliated investment managers.