The pros and cons of investment apps
It’s no surprise that most Americans — especially millennials — aren’t investing in the stock market despite its historic gains under President Donald Trump.
According to poll released last May, Gallup found only 54% of Americans are currently invested in the stock market — either through a company-sponsored 401 (k) or personal investment accounts.
These low engagement rates have prompted many entrepreneurs to create and develop several investment apps to encourage more people to invest in their futures.
And while investment apps like Stash and Robinhood, do make it easier for people to invest their post-tax income with lower fees than traditional 401 (k)s, Chris Whitlow, founder and CEO of Edukate, a workplace financial wellness provider, warns they’re not for everyone.
“Before you start investing with your extra take-home pay from the recent tax cuts or modifying your existing Roth IRA contributions to instead invest with these newer apps, take a hard look at your current financial plan to make sure they’re right for you,” Whitlow told FOX Business.
Here are some pros and cons of popular investment apps on the market today, according to Whitlow.
This app encourages users to invest their spare change using a system it calls “round-ups.” It works by allowing Acorns to monitor your bank account and automatically invest the change from your purchases.
Pro: Great for beginners with hands-off investing approach. Con: Only has a few investment choices.
This app allows users to buy fractional shares with as little as $5 to start investing towards their retirement. To open an account, users need to provide some basic information and allow the app access to their checking account.
Pro: Plenty of investment options based on markets you’re interested in. Con: Best for long-term investing, not short-term.
This app lets users trade stocks without paying any fees. To sign up for the app, users must fill out an application. Once accepted, users are sent a brief video that explains the app, how to make trades and how they can get away with $0 trades.
Pro: Perfect for frequent traders who want additional control over their portfolio.
This app is described as an automatically managed investment account, or “roboadvisor.” It automatically invests your cash into index funds, dividing it between baskets of stocks and bonds based upon your risk tolerance.
Pro: Guided investment advice. Good for long-term investing with low monthly fees and oriented around future goals.
This brand new app is the first savings app built for two. It simplifies saving for major milestones like weddings, down payments and vacations.
Pro: Good for married couples or partners to collaborate on investments and savings.
Whitlow added that while modern smartphone apps like Stash, Robinhood, Acorns and Twine make investing an “activity” and are good for people with lower incomes because of the low investment amounts required to get started, it shouldn’t be used as a “front-line strategy.”
“But if you understand their advantages and risks in helping you achieve your financial goals, this new breed of investing apps may be right for you,” he said.