online investing

Pros and Cons of Investing Apps

investing apps

There are many different investing apps available now. It’s possible to easily start investing through your phone with minimal money and minimal hassle. However, there are drawbacks to these apps as compared to other investment options. It’s important to understand the pros and cons of investment apps so that you can make the best use of them.

What Are Investing Apps?

Any app that you use specifically to invest your money is an investing app. For example, if you use Acorns to “round up” your payments and invest your small change then you’re already using one of these tools. Some of the most popular investment apps today include Robinhood, WealthFront, Stash, and Betterment. Investing apps may or may not include robo-advisors. They each have different features and limitations.

Benefits of Investing Apps

Each app is different, so you have to look at your options carefully to figure out the benefits and drawbacks. Generally speaking, though, the biggest benefit of investing apps is that they make investing easy. You download an app, follow the online advice, and before you know it, you’re investing your money. If you are brand new to investing, then this is a great way to get a toe in the water. It starts you on the path.

Another huge benefit of investing apps, as compared to other investment options, is that you don’t pay a lot to use them. If you get into more serious investing, then you’re going to have to understand fees for financial advice, making trades, etc. Many of the investing apps do have fees, however they are low.

Moreover, you can start investing with just a small amount of money with many of the apps. In contrast, other types of investments might require you to have a high minimum just to begin. So, if you don’t have a lot of money and/or you don’t want to spend a lot of money, then investing apps can help you out.

Drawbacks of Investing Apps

Investing apps are easy to use, but that doesn’t mean it’s easy to make money with them. If you don’t know what you’re doing, then you can make a lot of bad decisions. You might not even realize the consequences at first, because you’re just swiping on your phone. It doesn’t feel as serious as “real investing,” therefore you might not take it as seriously. You can end up losing money. Even if you make a bit of money or stay even, you don’t gain the experience of truly understanding your investments. Therefore, you don’t learn how to make bigger money and play the investment game to its true benefit.

The thing that you pay for when you work with a financial advisor is the advice and knowledge of a person with experience in the field. When you use an app, you don’t get that. Some apps are better than others at automating good options and offering personalized advice. However, none are as good as working with someone one-on-one. Therefore, if you really want to get serious about investing, then you have to go beyond the apps.

What do you think are the biggest pros and cons of investment apps?

Read More:

Why Aren’t Millennials Investing?

millennials investing

Why aren’t millennials investing?

Millennials investing seems to be a scarcity in this decade, but it doesn’t mean they shouldn’t. So what’s the problem? Why aren’t we millennials investing more?

I can’t speak for everyone, but I know personally, my top reasons for not investing in earlier years are as follows:

 

  • Lack of funds. When I first graduated college in 2009, I was feeling the recession along with many other freshly graduated college students.
  • Lack of knowledge. I never felt confidently enough to invest. I thought the risk was much too large and that the return would reflect this.
  • Lack of skill. I did not create a steady budget for myself nor did I have any type of savings. My personal finance skills were nonexistent.

Over the years, I’ve educated myself and learned the importance of investing. I’ve also improved my personal finances by taking the time to grow my savings and seek out financial opportunities. But, despite the improvement of the economy over the years, the rate of millennials investing is still low. Why is this?

Various studies show similar reasons as mentioned above as to why the amount of individuals that dedicate time to invest is lower than in previous generations. If parents were not encouraging or enforcing the investing, it seems to have rarely happened on its own. Or rather, it takes longer for it to happen on its own.

We need answers.

While this age group tends to be stereotyped as self-centered and entitled folk who are focused on instant gratification and all things digital, these studies portray a different (and more accurate) light. In addition to simply a lack of investing confidence, Merrill Lynch’s Private Banking and Investment Group’s survey on millennials and money shows that this generation is very careful in making investment choices. They want to be “shown the math.”

We want more control.

Merrill Lynch’s survey also found that trust is a big issue for millennials investing. In fact, 72% of the 153 young Americans surveyed stated that they are “self-directed in their investing.” We’d rather be the ones making the decisions than having an adviser we don’t trust working with our cash. We want to invest with people or resources we personally trust rather than just any certified professional.

We’re more conservative (when it comes to investing).

Millennials, in terms of money, have been compared to post-Great Depression era. We not only watched what happened to our parents in the early 2000’s due to the stock market crash and recession, many of us experienced it ourselves after college. Jobs were harder to come by, and therefore, our focus has shifted. We are just as concerned about our parents and their future as  they are with us. UBS Investment Bank’s 2014 survey confirms this notion. We do our research and are much less willing to take high risks with our money. Although high risk investments do often yield high returns, we are typically holding more than half of our assets in cash, according to the research.

Surprisingly, the results of these surveys show that it is more about being careful and not as much about student debt. We are still feeling the effects of the financial crisis, and this generation needs more education on the topic in order to confidently create a diversified financial portfolio. Millennials tend to have more short-term investments instead of long-term, and we also tend to care more about life experiences than substantial wealth.

The good news is that there are more online tools and resources to help educate and guide millennials on investing. WiseBanyan and Acorns are just a couple of examples of investing sites to get a beginner started. Additionally, if nothing else, young Americans should at least focus on a retirement account as their form of investing, whether it be a workplace 401(k) plan or a Roth IRA.

Knowing the importance of investing is the first step in this process, and it’s one that we need to know we can truly benefit from with the right tools and knowledge.

Are you a millennial who invests? What routes do you take?