I’ve tackled ineffective ways to make money online before. My post The Worst Online Money Making Ideas covers some of the worst forms of online side hustles, such as survey websites or Amazon MTurk.
In that post, I also briefly touched on why passive investment apps are not always your friend.
Investing your money and watching your portfolio grow in value is an incredibly important life lesson, and anyone who has the financial ability to invest should.
However, if you decide to invest, you should also be aware of the right and wrong ways to go about the process.
This post will cover:
- The mindset you should have when looking to invest your money.
- The worst investment apps and services to avoid.
- Some ‘meh’ investment apps and services.
- Solid apps and services that are very useful.
Let’s get to it!
The Mindset of Investing:
Before I get into the nitty gritty details of this post, I want to quickly discuss my thoughts on the mindset of investing since it relates to my opinion on why so many investment apps are bad.
Investing requires work.
It takes time to learn how to invest, to develop your portfolio, and to understand your goals as an investor.
On top of that, it requires the stomach to ride through periods of negative growth.
However, above all, investing requires the ability to mentally accept the idea that you cannot possibly know or control everything.
You could quite literally spend years reading every book there is on investment strategy, scour through stock market research, and watch market analysts speculate on the next big buy until the cows come home.
However, wise people don’t do that, because that’s frankly a waste of time and a recipe for never getting anywhere.
Instead, wise investors educate themselves as best as possible, buy quality, time-tested assets, and accept that they have made the best decision with the information at hand.
Placing all of your investing responsibility in the hands of apps is taking the easy way out.
And, generally, if something is too good to be true, it is.
Thinking that a single investment app can do all the work for you run your entire investing strategy is a recipe for inadequate return at best.
Instead of apps, people looking to start investing should:
- Educate themselves through reading.
- Reach out for advice from their financial institutions.
- Stick to what works. You don’t need cryptocurrency, penny stocks, day trading, or small market cap buys (4 things my friends have all suggested to me numerous times). Just buy quality assets that will grow over time (i.e. anything involving the S&P 500). It isn’t rocket science.
Now, onto the apps!
Investment Apps to Avoid:
EDIT: 11/10/2018: Acorns has recently made a lot of changes to their app, and I have also been making an effort to remain more open-minded when it comes to this blog and my recommendations. You can read more about my new take on the Acorns app in my post on 10 personal finance apps. I still don’t use this app, and I probably never will, but I am sure there are people out there who might enjoy this app.
I’ve mentioned Acorn before, and this is perhaps my most disliked passive investment tool out there.
Acorn essentially works by connecting to your bank account and withdrawing the amount of money required to make it to the next dollar (i.e. it will withdraw an extra $0.50 from a purchase of $4.50 to make $5).
It then takes that money and invests it on your behalf every time you cross the $5 mark. Acorn charges $1 a month for this service.
However, all Acorn does is invest your money in Vanguard ETFs, which you can do for free with Quest Trade or with your financial institution (if they are commission free).
Additionally, if you aren’t a frequent spender, you will inevitably have income accumulate in your savings account that just sits there.
Since Acorn is no longer doing anything with your money once it’s in your bank account, and since you don’t know how to invest, that money will now lose about 1%-2% a year of value to inflation.
If you just scrap Acorn altogether, you can instead make regular, meaningful contributions to your portfolio, know exactly how much you have invested (rather than leaving this number to the will of Acorn), and maximize how hard your money works.
Moral of the story: save yourself $12/year and don’t rely on this passive investment app to do your work.
Betterment (Similar to Wealth Simple):
EDIT: 11/10/2018: As with Acorns, I’ve learned more about why some people decide to use Betterment and why the service can be valuable. You can read my updated info/take on Betterment in my post on 10 personal finance apps.
Betterment is another investment platform that brands itself as the smart, modern way to invest.
Amidst the multiple robo-advisor options out there, Betterment is also a fairly well known service that also has plenty of rave reviews and many advocates.
Ignoring the fact that Betterment also has a referral program (I’m starting to see a common theme with a lot of these recommendations), I’ll give my opinion on why DIY investing for most people is better than using robo-advisors.
Most starting investors will be punished by Betterment’s management cost.
Unless you have $100,000 to invest with Betterment, you are looking at an annual management fee of either 0.25% or even 0.35% per year.
Sure, Betterment can ask you some survey questions, build you a portfolio, and then manage that portfolio with their “tax-smart technology” (i.e. they aren’t an imbecile with taxes).
However, you can accomplish the same result for free (almost all of the time) just by going into your financial institution and opening an investment account with them.
Banks want their customers to open beginner investment accounts with them to capture their business. Instead of opening an account with an expensive robo-advisor, you can usually just walk into your local bank, ask some advice, and open a beginner-level trading account at no cost.
You might be thinking: 0.25% isn’t really that much.
However, when you consider the MER (management expense ratio) of certain funds AND the impact of inflation, that 0.25% is being added to already present fees and changes in the purchasing power of your capital.
If you are starting out with investing, be sure to avoid robo-advisor programs like Betterment and learn some DIY investing skills. Your bank account will thank you for it.
Robinhood is a commission free investment app that has risen to considerable popularity over the past year or 2.
The app essentially markets itself as a no-frills stock trading platform.
The tricky part about Robinhood is while it doesn’t do anything wrong, it doesn’t do too much that’s right.
Don’t get me wrong, a commission free platform is pretty nice, and the app can seem appealing from a quick glance.
However, Robinhood ultimately isn’t the right platform for experienced or novice investors.
Why Robinhood isn’t Useful for New Investors:
- New investors aren’t heavily penalized by commissions: Sure, you might pay $10…one or two times (when you stick some of your money into a Vanguard ETF and then ignore the damn thing). Personally, I’ll gladly pay $10 for the sake of keeping my money within my financial institution (where I can also access great market research).
- Robinhood doesn’t offer mutual fund trading: ETFs and stocks are great, but a low MER, balanced mutual fund can be a great way for a novice investor to start out. Not offering mutual funds forces new investors to purchase mutual funds via their financial institution and separately invest in ETFs or stocks with Robinhood, which frankly sounds annoying.
Why Robinhood isn’t Useful for Experienced Investors:
- Lack of data: Robinhood can’t even come close to the market research that’s offered by major banks. This basically forces experienced investors who use Robinhood to do all of their research elsewhere and simply use Robinhood to purchase.
- Mobile only platform: Good luck day trading from an app.
Once again, if you are new to investing take time to learn the process and generally stay away from alluring mobile apps.
Investment Apps that are Kinda Cool:
Stockpile – A Way to Gift Stocks:
While Stockpile is NOT a good way to invest or manage your finances, I have to admit, the idea behind the app is pretty adorable if you think about scenarios where this app can be used.
Stockpile is an app that allows users to buy fractional stocks as gifts.
The apps works on the premise that in order to encourage kids or teens to start investing when they are young, they should have some skin in the game.
Additionally, that ‘skin’ should be in the form of fractional stocks from well-known companies that a child will be familiar with.
No one wants to buy their 10 year old a full share of Apple or Microsoft. However, with Stockpile, it’s easy to buy, let’s say, $25 of fractional stock in Apple and gift that to some youngling.
Additionally, you can also buy more than just stocks: you can also purchase some ETFs as gifts.
Stockpile does have fees associated with the platform, but for a one-time gift, it’s not the worst thing in the world.
When you purchase stocks or ETFs on Stockpile:
- You will be charged $2.99 for the gift card of stocks.
- You will also be charged a 3% fee of the value of the gift card.
- There’s also a $0.99 trading fee on the platform.
Alright, so if you purchase $50 of Apple, you’ll pay about $4.50. That’s not too great.
But for the sake of a gift that can potentially start a young investor off on their journey of financial management, maybe it’s not so bad.
Note: Stockpile requires you to have a social insurance number to sign up.
You can check out Stockpile on their website.
Investment Apps and Tools I Like:
Learn – How to Invest in Stock:
If you are a complete novice to investing and want to learn some fundamentals, Learn is a great way to start educating yourself for free.
I have had conversations with friends or family before where I say something along the generic lines of: “you should read and learn how to invest, it’s pretty groovy.”
However, I do understand that it can be hard to know where to start.
Learn is a nice app because your stock market lessons are broken into 40 easily manageable, concise lessons (lessons are about 1 minute long).
The app focuses primarily on the U.S. stock market, and aims to teach new investors the fundamental concepts and basics of investing.
Ultimately, if you have limited knowledge on investing I would suggest downloading Learn for Android or IOS.
If you’re looking to become more financially literate and remain up to date on financial news, I’d recommend installing Bloomberg’s app.
The Bloomberg app includes the latest financial news and live stock tickers for stock exchanges around the world. This combination ties in financial news and the performance of stocks you’ve been eyeing quite nicely.
You can use Bloomberg to specifically track and display stock prices that interest you, and adjust your news feed to contain more relevant information based on your interest.
While this isn’t an investing platform, I argue that knowing what is going on in the financial world is probably a good idea.
Additional Resources you Should Use:
You might have noticed that I have not listed any robo-advisor tools or passive investment apps that I like.
Well, that’s because I don’t like them.
I’ll stick to my guns when it comes to DIY investing versus managed investing, and I’ll only recommend apps that I think are worthwhile.
However, I want to expand on the ‘good list’ a bit more.
Some additional reading and resources that are great for investing include:
- Financial research from your bank: I bank with TD, and their market research and available tools are a great example of why apps like Robinhood suck. You can learn so much from just reading the information your bank provides you when you open an investment account with them.
- Mr. Money Mustache: This guy is so good with his money, he retired in his mid thirties and is completely financially independent (with a wife and kids). If you want to learn about investing, saving, online money making, and early retirement, use his blog as your bible.
- Microsoft Excel: You don’t need to download a fancy budgeting app or link all your credit cards to third party websites that budget for you. Make a simple Excel spreadsheet (or get one of the hundreds of solid ones from Google), and take time out of every week to track your spending and earning. This isn’t directly related to investing, but the more money you save, the more money you can invest. Hence the power of budgeting.
I could list dozens of more blogs that are fantastic resources for investing information, but I’ll leave it at that.
If you are just starting out on your investment journey, I think it is important to educate yourself without becoming overwhelmed. Pick a few resources to use, consult your financial institution, and don’t rely on passive investment apps to do everything for you.
Ultimately, investing requires time, knowledge, and your hard earned money. Take responsibility for your investing success and put in some work. Your future self will thank you for it!
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Tom is a 22 year old recent college graduate from Canada with a passion for side hustling, passive income, and marketing. This Online World is all about providing people with honest ways to make and save more money by using technology. To learn more about Tom, read his About Page!