Guide to Investment Apps and Robo-Advisors

If you’re interested in investing without all the hassle commonly involved then the investment apps on this post will probably be useful for you. If you’ve heard about robo-advisors but you don’t exactly know what that means don’t worry because we’ll also get into that and much more.

First things first, who are these apps for? well, most of part these apps are built for new investors and beginners who might not know a lot about finance, that being said there are some apps that have features that might attract some experienced investors. The main benefit these apps comes from their low fees and how easy to use they are.

But before getting into the specific apps we need to answer the question of what exactly are robo-advisors and what’s robo-investing:

So, what exactly is a Robo-Advisor?

Well, in simple terms a robo-advisor is an algorithm thatt will pick your assets for you. You might be familiar with the idea of mutual funds or hedge funds where you basically you give your money to financial analyst and they manage it for you, the problem with that model is that they charge high fees and don’t always offer great results. Robo-advisors do the same job but for lower fees basically, you give them your money on based on your preferences the algorithm will create a portfolio for you. In practice most robo-advisors work through an app or a website and you just put your money with them and through their user-friendly interfaces you can tell them how much risk do you want, what are your financial goals, how much do you plan to invest, for how long are you investing etc. and after that the robo-advisor will build the perfect portfolio for your needs for the lowest fees.

So now let’s talk about the most popular apps and robo-advisors.

Robinhood

Robinhood is an app that allows you to invest in stocks and other securities without charging any fees. They are basically a broker that provides a simple interface that anyone can use to buy mostly stocks (though Exchange Traded Funds/ETFs and Options are available too) for free. They do not pick portfolios for you or offer any advice, they just provide the brokerage service which makes this platform useful for traders and active investors who know a bit about financial markets already. They also offer a premium service called Robinhood Gold where you can use margin and they charge you an interest on that margin and require a $2000 minimum deposit for that account.

Pros

  • No Fees, you basically trade for free.
  • Easy to use and friendly user interface.
  • No minimum account requirements, you can star with whatever money you have.

Cons

  • Not the best for new investors since they don’t offer recommendations or warn you about how much risk you’re taking or encourage diversification etc.
  • Advanced investor might find the interface too simple and will have to get their charts and analysis from other platforms (No Moving Averages or any technical analysis on the platform).

Acorns

Acorns is an investment app available on both ios and android devices that automatically invests spare change for you. It works through robo-advisors so it basically asks you to pick a risk profile and after that invests your money accordingly. The app has 5 risk profiles that go from “Conservative” to “Aggressive”. Each portfolio is comprised of 6 types of assets that vary among the different risk profiles. All you have to do is add your credit/debit card and everytime you use your card it will round up to the nearest dollar, so let’s say you buy a coffee for $2.30 it will take those 70 cents and invest them for you (It will put the money into investments every time it reaches $5). It might not sound like a lot but after a few swipes of your credit card, it will amount to something. The main benefit is that you don’t really have to do anything once you’ve picked your risk profile and added your cards.(You can also do manual deposits and set recurring deposits), their fees are pretty low since they only charge you $1 per month.

Pros

  • No minimum deposit you can start with just $5.
  • The Found Money Feature, some brands are partnered with Acorns and will give you back some percentage of your purchases, some brands that offer this service are Apple, GAP, Macy’ among many others.
  • Perfect for investors who want to automate their investments and don’t have to worry about them.
  • Good for beginners since they don’t have to pick the assets themselves
  • For college students, there are no fees.

Cons

  • Not enough variety in the portfolios, you can only pick from 5 prebuilt portfolios so there’s a not lot to choose from.
  • For small balances fees can be too high, if you have a $10 balance they’re basically charging you a 10% fee each month.
  • You cannot invest into individual stocks.

Betterment

Betterment is basically an automated investing platform similar to Acorns. It’s probably the most well-know robo-advisor, which means they build the portfolio for you. When you open an account they will basically make you a few questions about how old you are, how much do you plan to invest, what your financial goals are etc. and then they will create a portfolio that suits your particular needs. Since it’s done through an algorithm the fees are pretty low, they charge you a 0.25% annual fee on your balance account and have no minimum balance to open an account. The portfolios created by Betterment basically invest in a variety of ETFs. They have other investment plans aside from the regular one that charges 0.25% where you only get the robo-advisor, if you want to have someone you can call on the phone then you need the Betterment Premium plan where they charge a 0.40% annual fee (plus a $100,000 minimum balance).

Pros

  • They offer a lot of diversification through their portfolios (they will invest in 12 assets classes instead of the 6 from Acorns).
  • They offer Retirement Accounts so you can take advantage of the tax savings.
  • You don’t need to do anything once you’ve set up your account, you can even automate deposits to make the process even more passive.

Cons

  • No deep customization unless you have a $100,000 account balance required for the flexible portfolio.
  • No exposure to Commodities and REITs (Real Estate) that could be useful for greater diversification
  • You cannot pick individual stocks, like with Acorns the app provides 100% passive investing.

As with almost everything, there’s not really a best app, which app is the best for you depends on your particular needs and financial plans however I do hope that this basic guide has been useful if you any questions be sure to left them in the comments.

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