The fear of exposing their capital to risk is the number one factor most people never consider the money markets. They tend to forget that unlike the Forex markets that have almost always posted positive returns on investments, cash deposited in bank savings accounts tends to depreciate in value as a result of inflation.
But I don’t know how the money markets work, you might say.
Well, you don’t need to be an experienced trader to start trading forex, shares and stock or any other financial instrument. Today, there exist numerous newbie-friendly investment apps dedicated to helping you make your first investment, spread your risk, and establish a balanced portfolio even when you have limited trading experience.
In this newbie-focused investment guide, we have reviewed the best investment apps for beginners that allow you to trade and manage your investments while eliminating the often hefty broker fees.
The Best Investment Apps Available Right Now
If you’re in a rush and don’t have time to read our guide in full, here’s a quick look at the very best investment apps on the market.
- Stash Invest – Invest from as little as $5
- M1 Finance – Build passive investment portfolios
- Fidelity – Renowned and trusted broker
- Robinhood – 0% commission stock investments
- Acorns – Easy automatic investing
- Nutmeg – Robo Advisor investment app
- TD Ameritrade – Powerful mobile platform
- Interactive Brokers – Thousands of assets
- TradeStation – Excellent charting tools
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What are investment apps?
An investment app refers to a mobile app that allows you to trade and invest in different securities. Among the most popular securities that you can trade or invest in using mobile apps include stocks, ETFs, bonds, mutual funds, cryptocurrency, forex, and commodities.
There essentially are three types of mobile investment apps; the automated traders/investors and rob advisors, the actively managed investment apps operated by online investment companies, and the customizable investment apps.
Robo advisors and expertly managed investment apps are suitable for newbies and part-time investors. The highly customizable apps are on the other hand suitable for experienced traders that wish to analyze and enter into trades individually.
How do investment apps work?
Mobile investment apps have their ultimate role as helping their users enter into sound investments that help them generate extra income, prepare for retirement, or both. How they achieve this depends on the design of the app.
The robo advisors create a diversified investment portfolio that reflects both your values, financial standing, and risk tolerance. Some have preset portfolios while others allow for minimal customization (allows you to add or remove some of the stocks and ETFs to and from the portfolio). Robo-advisors will usually charge a small annual administration fee.
Actively managed investment apps, on the other hand, work like mutual or trust funds. You only have to deposit funds into the account and a team of experienced money managers will invest it in diverse securities on your behalf. The upside to this is that their experience and professionalism will almost always reflect on your account performance. Actively managed charge relatively higher account administration fees compared to robo-advisors.
The last class of investment apps will only present you with the platform, an array or trading and market analysis tools, and possibly investment guides. They give you absolute control over your funds and allow you to create and manage your own portfolio. These are least expensive as they are either free or have low subscription costs. They, however, are best suited for experienced traders.
What are the pros and cons of investment apps?
- Most require relatively low minimum initial deposits, as low as $5
- There are plenty of free mobile investment apps
- Support the establishment of diversified investment portfolios
- Most feature trading and investment resources and guides that help boost your experience
- Most charge low fees for small investment accounts
- Most mobile investment apps are easy to use
- Management fees may be exorbitant for larger accounts
- Limited investment account options as they don’t support tax-advantaged investing
- The minimal deposits and small accounts translate to intangible returns
What are the Best Investment Apps for Beginners?
1. Stash – Best For Passive Investments from $5
Stash has become one of the overall most outstanding platforms that have emerged in the past few years, not only the company offers access to invest in the financial markets (ETFs and Stocks), but it also acts as a guidance force for any new beginner with little or no experience at all.
The company developed its own model which is intended to help any new investor to learn from the markets and how to make savvy decisions with their investments. One of the challenges that most investors face in the early stages of their career is where to invest their money, specifically in which stock or asset class. Stock picking has its own science, while many can say it is not complicated, it does require new knowledge and skills to be acquired.
Even though many consider Stash as a Robo-Advisor, in reality, it acts as a portfolio manager advisor, guiding their clients for them to execute changes and in the end to manage the portfolio on their own.
After spending some time using the app with my own capital, I found Stash to be a great option for new investors and truly anyone interested in learning from the markets. Be aware that if you successfully grow as an investor and as a trader, you will eventually have to look for another platform in order to reach the next stage of your career.
Please note that the company also offers access to retirement plans like IRAs as part of their account selection, making the firm even more desirable as you will also be benefiting from tax incentives from the government.
- Minimum Deposit :$5 (Stash basically allow anyone with a couple of bucks to start investing)
- Best Feature: Stash allows individuals to start their own portfolios and to invest in the asset or sector of their choice. One of the most difficult parts of investing is to actually feel motivated to doing so while buying shares of companies you don’t really care just because the robo-advisor told you to do so. With their approach Stash allow individuals to follow the investments of their choice in an effort to make the overall experience more personal
- Recommended for: This platform should be the go-to option for any hands of investor that wants to follow their own model of investing with the guidance of the platform
- The app offers a section dedicated to news and education resources, this will help beginner investors get used to the lingo and to the overall logic behind reading news that will affect their portfolio
- The platform is easy to use and very intuitive
- Investors are allowed to partially invest in expensive shares by buying fractions of a share
- Just like with M1 Finance execution of trades is delayed until the first 40 minutes after the market open. While this does not represent a problem for long term investors, it is important to keep in mind that it can result in getting in or out of positions at a different price and this could benefit or affect you depending on the scenario
- Fees and commissions can be considerably high on small accounts
2. M1 Finance – Best App for Building a Passive Portfolio
The brokerage sector has seen many important changes in the past couple of decades, from the advancement of electronic investing to modern systems like robo-advisors making traditional asset and portfolio managers more and more obsolete.
It is important to understand that M1 Finance is not a broker and neither a fully operational robo-advisor provider and asset manager. Instead, the firm operates as a so-called “Hybrid” investing platform, providing investors with access to securities and to a fully managed portfolio experienced.
One of the key differentiators of the firm is that that unlike other robo-advisors, M1 Finance provide access to fully customizable portfolios (hence the hybrid notation). ”’Besides offering its brokerage like services, the firm also offers other services like access to borrowing and payment mechanisms via checking accounts and plastic cards.
Keep in mind that M1 Finance is not a platform for anyone trying to pursue an active approach to the markets. The firm instead aims for a guided model so individuals won’t be so overwhelmed with the overall investing experience. If you still don’t feel comfortable with investing, you might want to go for a fully managed experience which is also offered by the firm.
From an App perspective, there isn’t much you can complain about, like most modern investment apps M1 Finance follow a very minimalistic approach with a gorgeous looking platform. Keep in mind that this app is designed to work as a bridge between traditional banking and investing services, it might not offer high complexity or a powerful platform but in this case, that is actually a very good thing.
If you are interested in investing but you dont know how to start, you might want to take a look and try M1 Finance. The platform will offer most of what you need to get started and you will also be guided through the entire process.
- Minimum Requirements: $100
- Best Feature: The entire company was built around their tailor-made portfolio service, in an effort to differentiate themselves from the rest of the market the company designed a new approach utilizing pie-charts that are easy to use and to manage. Overall M1 Finance is a pretty straight forward platform for anyone interested in starting a career in investing
- Recommended for: One of the first concerns beginner investors usually have is due to not knowing how to pick stocks or ETFs for their portfolio, and as a result, they begin to be afraid of losing money because of their actions. M1 Finance works as your partner and mentor during the building and design of your own portfolio. Keep in mind that even though you will be dealing with AI technology, the overall service is excellent! If you feel that it would be better to have someone guiding your investing career then you should consider an account with them
- Even though I would advise using a computer in order to build your portfolio the first time, it is possible to do so by using their mobile app aswell
- Portfolio rebalancing is automatic in most cases, the firm has its own group of PMs overseeing the accounts
- The firm allows to buy fractionable shares, this makes it easier for investors with small accounts to partially invest in expensive stocks
- New brokerage, accounts SIPC protected up to $500,000
- As mentioned before the business model is not suitable for active investors or traders
- M1 Finance is not a full broker in the sense that all trades are executed when the market opens, this can result in not getting the best price or at least the desired one
3. Fidelity Investments – Best Long Term Investment App
Not many investment apps can say that they manage more than $2.46 trillion between pension funds and other brokerage and banking services. When you analyze Fidelity as a company, it won’t take you long till you realize how big and important the firm is for the US financial system.
It is noteworthy to mention that the firm is a multinational company with many different subsidiaries offering all types of services and products, this makes fidelity a great option for anyone interested in consolidating their funds under one single umbrella.
While the cost of operating with Fidelity is a little bit higher than their close competitors, it is worth paying the extra cost in exchange of the peace of mind of knowing that your funds are in the hands of worldly known professionals. Please note that even though Fidelity’s platform is powerful enough to utilize most investing strategies, their app works best for the long term and passive investment. If you are planning on actively trading securities, you might want to go for a different option like TradeStation.
- Minimum Requirements: Even though fidelity allows for considerably low investments, their core business model has changed as the company aims to offer its services to clients with a bigger net-worth
- Best Feature: When it comes to fidelity their best asset besides their execution and their experience in this game is there portfolio management capabilities. It will be difficult for any other company to even try to come close to the level of technicality and the experience Fidelity offers.
- Recommended for: Fidelity is the best option for anyone interested to have all their accounts under one single brand, from banking to investing and also for retirement plans
- Broad range of assets and financial markets to choose from
- The company owns the second largest library of mutual funds in the world
- While they offer fixed packages for new traders and investors, it will only take a quick call to get them to offer better and cheaper plans not disclosed or offered on their web page. Don’t be afraid of asking for a better price, most of the time they are willing to help you with a better pricing
- Access to the full fidelity experience is not cheap, and it will require to utilize their other services like banking in order to fully unlock all their services
- The company operates under a model pretty similar to a fiduciary institution, for this reason, they are pretty concerned about your best interest. While this sounds like a benefit, it is important to mention that access to more sophisticated strategies of investing and trading will require completing a period of time and also executing a certain number of trades in a period of 12 months in order to get full access
4. Robinhood – Free Stock Trading with No Commission
Most traditional brokers and financial institutions from this list have been around for at least a couple of decades. Even though there has been an increment in the demand for their services, growing their customer base has always been a challenge. And then its Robinhood, six years of existence and has already surpassed most tier2 brokers in terms of assets under management and also in a number of active clients.
The company blames its platform and business model for its success. Instead of following a traditional brokerage service with a modern platform, the firm decided to go beyond that and proposed a revolutionary model on which trading will essentially be free of charge and commissions, they could have not disrupted the markets more than that!
Ever since its inception, the firm has always focused on growing its retail clients base, allowing individuals to open accounts with little capital and for them to have access to their entire platform. From an app perspective, Robinhood currently offers what probably is the best looking mobile app of all brokers!
Please keep in mind that for a brokers app to work not only it should have a nice layout but most importantly it should be reliable and get the job done as fast as possible. Even though Robinhood managed to deliver both the layout and the execution, it still lacks in the later. Their platform is not as powerful or as complete for complex strategies or even simply active investing.
If you are planning on utilizing technical analysis as part of your investment methodology I would suggest you aim for a different platform, you won’t receive the benefits of free trading but at least you will have access to operate freely and with fewer headaches.
- Minimum Requirements: $200
- Best Feature: Robinhood offers a very competitive service when it comes to buying and selling securities with a passive approach, but besides their access to commission-free trading they don’t offer any other differentiator. The firm made investing more accessible to the overall market, but the advancement of other brokers and apps they are far from being the best.
- Recommended for: If you are looking for a cheap option for execution in order to buy and sell stocks and ETFs discretionally then Robinhood is a perfect app for you. Keep in mind that if you are planning on being active in the markets, chances are you will be frustrated due to the poor execution the firm offers in comparison to other discount brokers in the US
- Free Trading of Stocks and ETFs (Probably the only reason why so many individuals choose them)
- Excellent layout, the platform could not look any better
- As of late 2018 the firm has already received the blessing to start their own online banking model, while this is something that will take place in the next months, it could be a great benefit to receive a full service with a single platform
- The company lacks in terms of technical analysis and it is not suitable for most active users. Keep in mind that you are receiving an almost free service and that the platform should be evaluated while taking that into consideration
- While it is not a requirement for a broker or app to offer access to research, it is welcome when they do. Most apps that are oriented for retail investors usually spend large sums of money in developing and providing access to research and other educational content. This is a point where Robinhood can easily boost the overall optic many investors have about them
- Please note that as of 2019 the company is only offering their full services in the US (there is a pilot plan taking place in Australia)
5. Acorns – Automatic Investing / Simplicity
Every year hundreds of new FinTech companies start offering their services in the US, while the biggest portion of them will disappear after just a couple of years, the ones that get to managed over this period of time and become profitable usually expand pretty rapidly. Acorns is just another example of how a simple idea very well executed can transform into a billion dollars idea pretty quick.
The principal over which the firm was founded was to modernize how individuals save and invest their money, especially millennials. Since its early inception, the company offered individuals to connect their current plastic card to acorns in order for them to round up their payments to the next dollar and invest the differences.
This might not sound like much but when you take into consideration how many times you use your card on a monthly basis and you add up the average round up you can see that over time it adds up to a considerable amount.
Acorns do not offer access to typical brokerage services even though it has a full license to do so, instead, the firm offers its clients with a range of portfolios for them to choose from. From low-risk portfolios with an almost fix yield to high-risk ones with high exposure to US equities and ETFs. The reason for this is to simplify investing as much as possible and to deliver a very straightforward service.
Please keep in mind that all the portfolios of this firm have been built by the Vanguard Group and also Blackrock, while they could have used cheaper options for their portfolio design and management, the firm decided to simply offer the very best in terms of portfolio rebalancing and creation.
- Minimum Requirements: One of the fundamentals of acorns is that big things can grow out of small packages, like an Oak and an Acorn. For this reason, the company welcomes deposits and roundups with no actual limit or minimum
- Best Feature: Even if you are into trading and investing, chances are that you won’t be as active as your credit card is. Being able to invest a little every time to buy or pay for something is a great way to save and make sure that you will comply with your investing goals
- Recommended for: Acorn has target young individuals and especially college student. The main reason behind this is the great synergy between millennials and these types of venturing tech. On the other hand, investing such small amounts of money will take time to build up and become something else, starting as young as possible is your best chance to take the best out of this investment method
- Acorns reached a level that should be followed but other platforms, their overall app, and its layout is simply impressive and excellently executed
- Great service for anyone interested in investing in the markets with a passive approach, it won’t be much action besides choosing the risk appetite of each portfolio
- The firm decided to outsource its portfolio designing and management in order to provide the best possible experience and returns to its users. As of May 2019 the company is utilizing portfolios made by The Vanguard Group and BlackRock
- Keep in mind that Acorns portfolios are mainly focused on ETFs and BlueChip Stocks, while this is enough for most individuals looking in this category, it can also become a problem if you are interested in other asset classes
- The firm is relatively new and the same goes for all the portfolios, in order to truly be able to forecast or have a statistical view of returns it is needed to have been running for at least 5 years in order to have enough data to model accordingly. Keep in mind that behind these portfolios there are some of the very best names in the game, but it should still be a point of consideration before choosing an app
6. Nutmeg – Best UK Investing App / Robo Advisor
Another Robo-Advisor platform that you should be aware of is Nutmeg. Even though their name might not be as famous as some of the other options from this list, the company has grown the become a force in the UK market. With more than £1.5 billion in assets under management, it is safe to say that this is a company that is here to stay and that will most likely continue expanding over time.
From a platform and app perspective you need to take into consideration that Nutmeg uses a very passive approach to investing, the best possible way to describe it is as a “set it – and forget it” platform. Under their robo-advisor model, the company creates different portfolios based on the risk profile and appetite of the user. In order to take full advantage of their services, it is key to have a clear self-view, including the goals from investing and the risk tolerance. Keep in mind that any return will be based on the amount of risk and the type of portfolio chosen.
The company offers access to a dedicated desktop platform and also to a mobile app, while both are great assets to have, it is clear that the mobile version is not at the level of its parent. Even though it will get you through with more common and simple tasks like overseeing your portfolio and modifying basics of the portfolio, you will need to get access to the full desktop experience in order to truly be able to use their services. This is a major improvement point for the company considering how good their services are.
- Minimum Deposit : £500
- Best Feature: Nutmeg is a Plain Vanilla robo advisor and it does not offer any type of specific features or simply proprietary models, having said so keep in mind that the firm delivers a great platform at an unbeatable price
- Recommended for: Nutmeg is the go-to option for anyone interest in starting a passive investment portfolio at the lowest cost possible. If you are a cost-conscious investor I recommend you try Nutmeg as your investing app
- Nutmeg offer investors a cheap option of a traditional robo-advisor service, low management fees, and commissions
- The fee structure is very simple and straightforward, you won’t have to deal with hidden fees or surprises
- Setting up a portfolio is considerably faster than with other applications
- ISA accounts have a minimum monthly deposit of £100 in order to keep the account open and an initial deposit of £5000 which makes the firm a considerably expensive option to start utilizing their services
- Minimums to open a pension account are considerably hit at £5,000
- The firm offers very poor access to research and information, you will have to look for a third party app in order to gain proper access
7. TD Ameritrade – Most Powerful Platform
If you are planning on starting an investing career with a hands-on and very active approach, you should take a closer look at how TD Ameritrade and its App Thinkorswim can make your investing life easier. While many brokers offer access to technical analysis and so-called “advanced trading tools”, nor many of them truly deliver, either because their platforms are just overcomplicated or because their pricing is too high for most retail investors.
Besides brokerage services, it is important to remember that TD Ameritrade started as a fully operational bank in Toronto and that to this date they still offer a full banking suite with products and services that connect both traditional and modern banking as a whole.
Form an app perspective the firm offers what is probably the overall best platform available in 2020, not only it is extremely powerful and reliable but it has an easy to use layout. While at first, it might look like a lot (it is a lot), it will only take you a while to get used to how things are spread between their windows to start using it at its full capacity.
A key element of Thinkorswim is how their platform has been integrated between interfaces. Offering a mobile platform has become a standard for brokers in today’s world, but TD Ameritrade took it one step forward with their integration of the desktop and mobile versions of TOS.
One of the things that can result in an unnecessary hassle for active traders and especially those with strong ties to technical analysis is that once they leave their desktop platform they lose access to their studies and even their charts. In order to make both platforms fully integrated TD Ameritrade spend a considerably high sum of money to get both platforms into a cloud network, this allows individuals to have live access to the information and details of their desktop platform on the go.
Keep in mind that this might not sound like a lot, but the level of interaction between both apps is incredible, imagine taking a walk to the park and being able to open or close a trade solely from your smartwatch! That’s the level of sophistication we are talking about.
- Minimum Requirements: Please note that even though TD Ameritrade does not have a minimum amount for deposits, certain types of investing and trading will require a minimum balance of $2,000
- Best Feature: Overall the Thinkorswim platform is one if not the very best platform available in the market. It might be a little bit complicated for new traders but if you are willing to take your time to understand how to use you will truly get the best out of your money with it
- Recommended for: Overall the Thinkorswim app is one if not the very best platform available in the market. It is important to keep in mind that the platform is not suitable for beginner investors since it requires some knowledge trading. If you are interested in a more technical approach to investing then TOS will become your favorite app in no time
- There arent many names than can try to fight Thinkorswim for its crown! With TOS you will be getting the best platform available in the market and the backing of an international bank and all their additional services
- When it comes to technical analysis the firm is a big contender against names like TradeStation
- While the platform is better suited for experienced investors, beginners can take advantage of it if they take their time to understand how the platform operates
- Overall cost of trading and investing is more expensive than its peers, but you will receive in return every extra penny!
- If you are an individual that requires having a stockbroker on the phone for them to put your orders just like it was done decades ago, you will be able to do it with TD Ameritrade but the cost of doing so is extremely high!
- If you haven’t used a trading terminal before there is a big chance that you will feel overwhelmed by all the different windows and buttons
8. Interactive Brokers – Best For International Clients
It was not until some years ago when Interactive Brokers decided to change their business model to offer their services to retail investors worldwide. The company was previously known for its powerful platform and the fact that it was available to institutional players and sophisticated traders only.
In an effort to remain relevant in the market, the firm decided to change their approach and to upgrade their platform so it could also be used by retail investors as well. A key point to mention about IB is that they are focused on a very specific niche of the market, retail investors outside of the US. The firm is worldly known for offering their services in almost every country of the world which until not so long ago was only a dream for most brokers.
As mentioned before the Interactive Brokers app was built from the ground with the sole intention of being powerful and reliable. Keep in mind that even though they’ve modified their business model and also tweaked their platform, it might still be a little bit too complicated to use for beginner investors and traders.
If you are currently in the US, there is no real reason for you to choose IB over Thinkorswim or Tradestation, otherwise, if you are an international investor then you might want to take a closer look at Interactive Brokers. The platform is really reliable and straightforward, but you have to keep in mind that you will be engaging with a platform that has little to zero nannies to prevent you from committing mistakes.
- Minimum Deposit :$10,000
- Best Feature: The platform of IB is a powerful machine, even though I believe it might be too complicated for investors it is still yet available for anyone interested in it. The feature of the platform and broker is easy to access to global markets and its overall service.
- Recommended for: Following a similar the story to TradeStation, Interactive Brokers is another broker that decided to open their platform to retail individuals. The main reason why anyone would pay their high minimum deposit is to gain access to the US market Internationally. If you are an international investor then IB might be one of the overall cheapest options to operate with a powerful platform.
- IB offers very competitive pricing compared to other discount brokers
- The firm offers access to 120 different financial markets in more than 31 different countries, you won’t find any other platform offering such a broad range of assets and markets
- Their broker is currently offering access to stocks from Emerging Markets exchanges which is something never seen before in the international markets
- The workstation of IB can be a little bit too much for certain individuals, even though it provides similar tools to names like TradeStation the problem comes to the layout of the app (its a little complicated for new traders)
- Even if you can afford to open an account with IB, you need to keep into consideration that accounts with balances under its minimum or simply with the minimum can incur penalties and additional management fees
9. TradeStation – Paradise for Chartists
TradeStation is at the bottom of this list not because they are not good enough, but because they are the best in their own category. The firm focuses on delivering a high-performance platform for heavy users, like most institutional players.
Disregarding the size of your account, chances are you might never need the level of performance and accuracy that a name like TradeStation can offer, having said so the company has drifted to a more approachable business model in which retail investors and traders can also use their services.
The TradeStation Appa is a professional terminal for traders, while their layout is stylish and good looking, their goal has been to provide the best execution possible with every single trade.
If you still feel that your current broker is not providing you with the right tools or you are simply looking to try a more powerful platform, you should be aware that TS does not offer any portfolio management services. This means that you will have to rely solely on your trading and your personal execution, while this is not a concern for more experienced investors, beginners should be aware of it.
Please note that TS is the best option for power users if you are in need of a similar approach but with a more friendly platform I would recommend you to take a look at TD Ameritrade and Thinkorswim. It might not be as powerful in terms of charting and technical analysis tools, but keep in mind that just like a racecar might not be the best option for a daily driver, the same can happen with such a powerful platform. Depending on your needs a lower tier might be even better and it will also reduce the risk of committing unnecessary mistakes.
- Minimum Requirements: $500 minimum
- Best Feature: Best in class platform for active trading, access to all major financial markets and asset classes of the world
- Recommended for: I’ve been a TS user for almost five years now, I can actively recommend them for anyone looking to get a higher level of analysis over think or swim and also for individuals that will be trading move volume as it will result in an overall cheaper experience
- Best in class technical analysis platform and suite
- Market analysis and insights done by top financial analysts (courtesy of the platform)
- Trading fees are cheap compared to other brokers (you can trade up to 500 Shares for less than $2)
- Commission-free ETFs are restricted and in some cases unavailable
- While the firm offers relatively cheap trading when it comes to fees and commissions, data packages and live quotes of certain assets can be pretty expensive. If you are interested in getting access to all major markets in the US, be ready to spend up to $80 a month on data packages (stocks and ETFs aren’t that expensive but OTCs and Futures are)
- Dealing with customer support is a hassle if you are planning on contacting them constantly you are going to be better off with TOS
How to pick up the best investment app:
Here are some of the most important factors that you have to put into account when deciding on the best investment app:
- Your experience: Only go for an app that aligns with your investment/trading experience. If you are inexperienced, consider newbie apps like robo advisors
- Ease of use: Some of the factors to consider here include the ease of registering, interacting with its user interface, depositing/withdrawing funds and accessibility of its support team
- Cost: Cost here represents both the app acquisition and trading costs which should only be a fraction of your incomes or expected ROI
- Investment approach: How does the app invest your funds? Do they invest in stocks, crypto, forex or stocks and are your risk tolerance levels in line with the app’s aggressiveness
- Regulation and insurance: Only settle for registered and highly regulated apps. The app must also commit to insuring your deposits
With such a broad range of brokers and service providers to choose from, the reasons and excuses for an individual to stay away from the financial markets and investing are disappearing faster than ever.
I personally advise individuals to start investing as early as possible and to make of it a habit as important as doing exercise and having a healthy lifestyle. Even though there is always the chance of hitting a jackpot and making a lot of money with an early investment, it is key for individuals to visualize their investing career in the long run. Rome was not built in a day, and chances are your dream portfolio won’t either.
Take your time to plan your trades and investments accordingly, never forget investing is a marathon and not sprint. If you are having a hard time trying to decide which approach will be better for you then take your time to understand what are your personal expectations out of investing. By understanding your own self, it will be easier to make decisions that will ultimately drive you to fulfill your goals as an individual and as an investor.
Glossary of Investment Terms
A bond is a loan made to an organization or government with the guarantee that the borrower will pay back the loan plus interest upon the maturity of the loan term. It can be advanced to the national government, corporate institutions, and city administration. It is an investment class with a fixed income and a predetermined loan term.
A mutual fund is a professionally managed investment vehicle that pools together funds from numerous investors and invests it in such securities as stocks, bonds, and other money market instruments. They are headed by portfolio managers who determine where to invest these funds. They are highly regulated and invest in relatively low-risk money markets and in turn post lower rates than other aggressive managed funds.
Peer-to-peer lending (p2p lending) is a form of direct-lending that involves one advancing cash to individuals and institutions online. A P2P lending platform, on the other hand, is an online platform connecting individual lenders to borrowers.
Bitcoin is the legacy cryptocurrency developed on the Bitcoin Blockchain technology. It is a new form of money primarily developed to solve some of the inherent challenges associated with fiat currencies like inflation and over-production. It is virtual (online) cash that you can use to pay for products and services from bitcoin-friendly stores.
An index fund refers to the coming together of individuals to pool in funds that are then invested in the stock and money markets by professional money managers. The only difference between an index fund and a mutual fund is that the index fund follows a specific set of rules that track specific investments and index stocks.
An Exchange-traded fund refers to an investment vehicle that is publicly traded in the stock exchange markets – much like shares and stocks. The fund is expert-managed and its portfolio comprises of such investment products as stocks, bonds, commodities, and more money market instruments like currencies.
Retirement refers to the time you spend away from active employment and can be voluntary or occasioned by old age. In the United States, the retirement age is between 62 and 67 years.
Penny Stocks refer to the common shares of relatively small public companies that sell at considerably low prices. They are also known as nano/micro-cap stocks and primarily include any public traded share valued at below $5.
Real Estate can be said to be the land and buildings on a given property as well as other rights associated with the use of the property like the air rights and underground rights. Real estate can be either commercial if the land, property, and buildings are used for business purposes or residential if they are used to non-business purposes – like building a family home.
REITs are companies that use pooled funds from members to invest in income-generating real estate projects. While a REIT may specialize in one real estate niche, most diversify and invest in as many high-income real estate projects as possible. They are especially interested in commercial real estate projects like warehouses, prime office buildings, residential apartments, hotels, timber yards, and shopping malls.
Asset simply refers to any resource of value or a resource that can be owned and controlled to produce positive value by an individual or business.
A broker is an intermediary to a gainful transaction. It is the individual or business that links sellers and buyers and charges them a fee or earns a commission for the service.
Capital gains refer to the positive change in the price of a capital asset like shares and stock, bonds or a real estate project. It is the difference between the current selling price of the asset and its lower original buying price and it is considered a taxable income.
A hedge fund is an investment vehicle that pools together funds from high net worth individuals and businesses before having professional money managers invest it in highly diversified markets. The difference between mutual and hedge funds is that the later adopts highly complicated portfolios comprised of more high-risk high-return investments both locally and internationally.
An index simply means the measure of change arrived at from monitoring a group of data points. These can be company performance, employment, profitability, or productivity. Observing a stock index, therefore, involves measuring the change in these points of a select group of stocks in a bid to estimate their economic health.
A recession in business refers to business contraction or a sharp decline in economic performance. It is a part of the business cycle and is normally associated with a widespread drop in spending.
Taxable Account refers to any investment account that invests in shares and stocks, bonds and other money market securities. The account is offered by a brokerage company and you are obliged to report and pay taxes on the investment income each year.
A tax-advantaged account refers to savings of investment accounts that enjoy such benefits as a tax exemption or deferred tax payment. Roth IRA and Roth 401K are examples of tax-exempt accounts whose contributions are drawn from after-tax incomes with the yields generated from investing funds therein being tax-exempt. Traditional IRA, 401K plan and college savings, on the other hand, represent tax-deferred accounts. Their contributions are deductible from your current taxable incomes but you get to pay taxes on their accrued incomes.
Yield simply refers to the returns earned on the investment of a particular capital asset. It is the gain an asset owner gets from the utilization of an asset.
A custodial account is any type of account that is held and administered by a responsible person on behalf of another (beneficiary). It may be a bank account, trust fund, brokerage account, savings account held by a parent/guardian/trustee on behalf of a minor with the obligation to pass it to them once they become of age.
An Asset Management Company (AMC) refers to a firm or company that invests and manages funds pooled together by its members. Like mutual or hedge funds, the AMC creates diversified investment portfolios that comprise of shares and stocks, bonds, real estate projects, and other low and high-risk investments.
A registered investment advisor is an investment professional (an individual or firm) that advises high-net-worth (accredited) investors on possible investment opportunities and possibly manages their portfolio.
The fed rate in the United States refers to the interest rate at which banking institutions (commercial banks and credit unions) lend - from their reserve - to other banking institutions. The Federal Reserve Bank sets the rate.
A fixed-income fund refers to any form of investment that earns you fixed returns. Government and corporate bonds are prime examples of fixed income earners.
A fund may refer to the money or assets you have saved in a bank account or invested in a particular project. It may also refer to the collective basket of resources pooled from different clients that are then invested in highly diversified income-generating projects.
Value investing is the art of using fundamental analysis to identify undervalued shares and stocks in the market. It involves buying these shares at the current discounted prices and hoping that a market correction pushes them up to their intrinsic value effectively resulting in massive gains.
Impact investing simply refers to any form of investment made with the aim of realizing financial returns while positively impacting the society, environment or any other aspect of life in the process. Investment in solar projects and green energy, for instance, posts profits and helps conserve the environment.
An investment App is an online-based investment platform accessible through a smartphone application. It lets you save and invest your funds in a preset portfolio that primarily consists of shares and stocks, bonds, ETFs, and currencies based on your risk tolerance.
Real Estate crowdfunding is a platform that mobilizes average investors – mainly through social media and the internet – encourages them to pool funds, and invests them in highly lucrative real estate projects. It can be said to be an online platform that brings together average investors and lets them enjoy real estate projects previously preserved for high net worth and institutional investors.
What is the overall best Investing app of 2019
With such a broad range of apps and brokers to choose from, it is difficult to explicitly name one as the very best of them. After reviewing so many different names and trying their services I found that overall the best platform is Fidelity, this is mainly because of how their platform works perfectly for both experienced and beginner investors. The firm offers a very competitive model that will work for both active and passive investors, allowing them to trade and operate under a single platform.
Should I consider Passive over Active Investing?
One common mistake committed by beginner investors is to choose between the two approaches based on what they believe will generate the most profits and money over their investments. If there is something that the markets have proved and repeated time after time is that a money making mentality is the best way to reach failure and destruction in the markets. Instead of following the money my advise is to choose based on their personality and also their time available. Unless you are going to focus on solely trading, a passive approach would be better as it won't take that much time out of your regular schedule. Please note that modern systems like robo advisors and even algorithms have made active investment even more approachable, but it is still important to keep in mind that there is a high risk associated with some of them due to their high market exposure.
How much time does managing a portfolio take?
Keep in mind that if you only have exposure on one sector and you only own a small number of stocks or assets, then it will only take a relatively small amount of time to actively manage it and rebalance it. Otherwise, if the numbers of any of the elements increase, so will the time required to successfully and profitably run it. One of the key elements of passive investment is that at least a majority of positions are bough with the idea of holding the assets for a long period of time (trades can be exited if conditions change), this allows for the overall experience of managing a passive investment portfolio to be considered straightforward. Unless market conditions are extreme and hard decisions need to be taken actively, then I would venture to say that a privately owned portfolio with a small-medium size can take around 30 to 40 minutes a day to be managed. Please note that this might be time consumed during the day and not a full sitdown of 40 minutes.
What type of asset should I invest my capital?
There are many different types of asset classes that one individual can invest their capital. It is crucial for them to be aware of their goals and also their risk appetite before deciding which one to use and how much of their portfolio to allocate per asset class. Due to their own nature, different asset classes will respond differently to the market environment and to stress. Please note that even though equities offered the highest average reward of the major asset classes, it also offers a higher risk. Don't forget that a company can easily go bankrupt and that shareholders are the last ones to get paid in case of a complete default situation. Take your time to truly understand how each asset class works and also how they would add to your portfolio, in reality, your major goal will always be to deliver a higher alpha at a lower beta of risk.
Is there any way to mitigate risk when investing?
Over the years of my trading and investing career, I've seen many individuals that ended up losing large sums of money because of their approach to managing risk. The Cowboys took unnecessary risks without truly analyzing the consequences, and the risk-averse ones let go of many golden ticket investments in an effort to simply minimize risk. Becoming a successful investor is a synonym of being excellent at managing risk! There are many different strategies and theories behind risk management and how it should be applied to different types of portfolios and asset classes. One of the most common approaches for multi-asset portfolios is to reduce the correlation between sectors, asset classes, and even regions. Imagine owning a portfolio focused solely on stocks of car manufactures in Europe and realizing that the US government will increment taxes over al cars produced outside of the US, I can assure you don't want to be that person. Information and research is bliss for investors, take your time analyzing properly an asset before buying into it. Warren Buffett used to say that no one should buy a stock they wouldn't feel comfortable owning for ten years. Take your time, it is better to make a small group of decisions and purchases than simply buying a little of everything in a portfolio.
What's the best App for any beginner investor?
Even though we crowned Fidelity as the overall best app for any investor, it is important to mention that there are other options that are more suitable for individuals beginning their careers as investors. Depending on your approach to the market and your expectations, brands like Robinhood or M1 Finance may result in a better experience than regular discount brokers. Keep in mind that most brokerage houses offer a very complex approach to the markets as they are intended to be used for active trading as well as investing.