The word “investment” conjures a myriad of images—most of them connected to Wall Streeters in bespoke suits watching electronic tickers like red-eyed hawks. These are the tycoons who are worth millions. Why? Because they know the intricate rules and tricks of the trade. It takes them years to learn how to play the game, but their years of study and practice pay (big) dividends.
Glorified though this image is on the big screen, the world of investment is changing (as evidenced by this new approach to share-based royalty sales). Democratization of the investment marketplace is making it easier than ever to invest with little risk, low knowledge, and high control. Most recently, investment apps have come online as a way to connect the average consumer with Wall Street shares. As popular app Stash succinctly sells it, you can “become an investor with just $5 and learn as you go.” No knowledge of trading, no big-dollar buy-ins. Just throw in the price of a latte and start reaping the rewards.
Is it really that simple? Yes and no. We’ve highlighted 3 of the big investment apps for newbies, and dug into what makes them tick—and why you might want to invest with care.
For the less-engaged beginner
Founded: 2012 by a father-son team with investment management experience
Minimum investment: $1/month
SEC Registered: Yes
How it works: Acorns rounds up everyday purchases (made using credit/debit cards) to the nearest dollar and invests this in a diversified portfolio customized for each customer based on a brief questionnaire (and the user’s risk commitment). Users can also deposit a lump sum or set up recurring investments if desired.
Fees: Accounts under $5,000 pay $1 per month. Accounts of $5,000 or more pay 0.25% per year.
Security: 256-bit encryption. Accounts protected via SIPC up to $500,000.
Selling stocks: No time or amount limitations.
Conclusion: Best for those who know they should be investing but have little interest (or time) in learning about it.
As popular app Stash succinctly sells it, you can “become an investor with just $5 and learn as you go.” No knowledge of trading, no big-dollar buy-ins. Just throw in the price of a latte and start reaping the rewards.
For the newbie with an interest in investing
Founded: 2015 by former investors
Minimum investment: $5
SEC Registered: Yes
How it works: Connect your checking account directly to Stash and select your investment amount. Choose your specific investments (ETF, or Exchange-Traded Funds) based on questions asked by Stash. You can automate investments or update/buy manually.
Fees: It gets complicated if you have more than $5,000 in your Stash account (monthly fees total .0208% of the balance, depending on the kind of account), but if you have less than $5,000 in your account, a $1 monthly advisory fee is charged.
Security: Stash uses a protocol called Plaid to authenticate payments. Plaid takes the username/password users provide for their bank accounts and converts them to access tokens that are submitted to Stash using 256-bit encryption. This way, no sensitive information actually makes it to Stash.
Selling stocks: If you submit a sell order, it takes 2 business days for your funds to settle in your account per SEC regulations. After that settlement period, you can withdraw funds to your bank account, provided they have been in your Stash account for at least 5 business days. Stash puts the 5-day hold in place to prevent fraudulent activity on your account.
Conclusion: Best for those who are new to investing, but want to take a more active role in shaping longterm investments.
For the engaged investor with an investment budget
Founded: 2010 (mobile app launched in 2012) by a Microsoft vet
Minimum investment: $1,000
Commissions: None (depending on account)
SEC Registered: Yes
How it works: Motif is a concept-driven trading platform that allows investors to act on investing desires. For example, portfolios can be created around hot trends like “robotics revolution,” a trading strategy like “buy the dip,” or an investment style like “Ivy League endowment.” These become “motifs,” or intelligently weighted baskets of up to 30 stocks or exchange-traded funds. Users can customize these baskets or go with the preselected stocks/funds chosen by Motif.
Fees: “Pay as you go” (ranging from $4.95-$9.95 per stock or motif) or subscription-based accounts up to $19.95 per month; other fees include wire transfers out of Motif accounts, general “platform” fee, etc.
Security: Accounts protected via SIPC up to $500,000.
Selling stocks: Limited depending on account; can cost $25 or more
Conclusion: Best for more savvy users with some investment experience and deeper pockets. User’s investment interest centers around causes or ideas more than specific stocks.