Starter friendly investing is a difficult concept if money hasn’t been a passion of yours, like it has for me…
I get that.
There a numerous studies available that suggest the number one reason people don’t invest in the stock or property markets is that they don’t know how. And that’s not a surprise, we aren’t taught these things at school, so it’s not your fault.
The second most common reason is the belief that they don’t have enough money.
Do either of these resonate with you?
I read recently that a New-York City-based financial planner when speaking with the news service CNBC suggested that the average age of a financial adviser is 55.
He went on to say that there are more financial advisors over the sage of 70 than there are under 30.
This is creating a huge gap between the demographics of advisors and new investors who are not comfortable with the ageing advisors…
…and you know my thoughts about advisors anyway.
So what options are available for new investors to get started, even if you only have small amounts of money to begin with?
Here are three starter friendly investing options that can get you started on your smartphone, for $100 or less. A word of caution, these options are great to get started, however they do have relatively high trnsaction costs, so once you have some money growing, move it into a traditional broking account.
Now I will openly declare that I know one of the owners of Stash and have been to their offices in New York to see the great things they are doing.
But having said that, Stash is not currently available to investors outside of the US.
It is however well worth having a look to compare it with the other options I will share below.
Stash is an app that directly targets new investors with low minimums and easy navigation. You simply choose a portfolio according to your interests.
While Robinhood (discussed below) lets you pick and choose the actual company you want to invest in, Stash functions more like an Exchange Traded Fund (ETF) or mutual fund.
Starting with as little as $5, users can pick from a batch of over 30 exchange-traded-funds curated by the company’s investment team.
As of recently, Stash had 850,000 accounts, with half a million investors joining the platform since January.
And get this: Nearly 90% percent of its users are first-time investors, according to Stash.
The founders aim with Stash is to help people who don’t have a lot of money saved to get started, promoting the concept of a weekly plan to add to their account, simply and efficiently.
The fees on these style accounts do encourage a regular savings plan to ensure you are growing your account sufficiently to offset the impact of the monthly fee.
- What: A micro-investment app (iOS and Android) with over 30 ETFs according to industry, sector and risk tolerance.
- How it works: Download the app and choose your investment.
- Minimum investment: $5
- Cost: Fees range from $1 a month for accounts under $5,000 to 0.25% a year.
This is actually a pretty cool tool that takes away the headache of investing and automatically does it for you every time you make a debit or credit card purchase, sort of like a mini robo-advisor of sorts.
Much like Stash, users can choose between six portfolios from conservative (mainly bonds) to aggressive (stocks only).
The money is then parked in various index funds managed by big-name money managers like Vanguard and BlackRock.
Both of these managers have huge portfolios and financial backing, which gives you security that your money is safe.
Effectively, Acorns rounds off customers’ credit or debit card purchases to the nearest dollar and invests the difference into stocks and bonds.
The idea is that while you invest, the loose change goes towards a nice nest egg.
The message from Acorn is that they don’t preach austerity to you the investor, rather they suggest using your regular spending habits as a way to invest at the same time.
That is, have your cup of coffee and invest the spare change to grow your nest egg.
- What: iOS and Android app.
- How it works: Download the app and choose one of six index funds.
- Minimum investment: $5
- Cost: Just like Stash, fees range from $1 a month for accounts under $5,000 to 0.25% a year.
A commission-free investment tool targeting younger investors, this Snoop Dogg-backed app launched in December 2014 to allow “average Joes” and young investors to get into the game.
Traditionally, if you wanted to invest you typically had to call brokers at E*Trade or Charles Schwab, companies that charge $7 to $10 fees per trade. (And those fees add up…quickly.)
Built by a 30-year old, the commission-free app has 2 million users (30’s the average age) with a cool $1.3 billion valuation. According to CEO Vlad Tenev, they’ve saved over $500 million in commissions.
(Here’s a Business Insider tutorial on how you actually use it.)
One of the benefits promoted by Robinhood is that it makes getting into real estate (REITs, short for real estate investment trusts) accessible in the quickest and cheapest way.
If you want to get a fast start, here’s Forbes’ list of nine REITs with yields between 8% and 10%.
- What: A commission-free investment app (iOS and Android).
- How it works: Download and start buying stocks.
- Minimum investment: Whatever stock you want to buy.
- Cost: Free.
Starter Firendly Investing – A Word of Caution
If you do pick the stocks yourself, you have to know which ones to pick—but be careful.
I have written about the best way to select a good stock investment here.
If the work required to select stocks is something you want more assistance with, then you need to grab your free call with me by schedulign a time here.
If you are going to use Robinhood, or have an interest in what others are thinking are good stock investments, here is a list of 10 good newsletters for you to review.
Since I recommend learning to invest yourself, my suggestion would be that you use any of these newsletters as an ‘idea generation source’ that you can then test with your own thoughts.
They will provide good guidance on why and when the editor is recommending a certain investment, which you can learn from over time to become a better investor in your own right.
So now you have some tools to use to get you started.
Since action beats inaction…
…and action is the only thing that will achieve financial freedom.
If you want further assistance to get started, click on the link below for one of my free wealth strategy calls.