You made it to how to start investing!! You’re here. “Where have we been all your life” you ask??
Right here. Looking at our phones. Swiping left, waiting for you…So now that you’re here, we’re going to go over how to start investing for WEALTH. Right from your smartphone. (In the “Prelude to Investing Money for Beginners” we covered mindful spending and saving wisely: be sure to check that out for some great commentary on how to spend and save to position yourself for some smart investing.)
Our mobile devices have made our world all-around more connected, smaller, closer, and more in-touch: THIS IS A GREAT time to be alive. Great for many reasons: emergencies are handled much quicker thanks to our connectedness (real word, I promise: look it up.) Relationships are easier to have, grow, and maintain. Information is much more widely available. And so are all the ways YOU CAN INVEST ALL YOUR MONEEEYYYY (Oprah Winfrey giveaway voice.)
So, go ahead: pat yourself on the back, celebrate yourself for finding your way here, and make sure you’ve got plenty of memory space on your phone. We’re going to talk about some powerful mobile apps that can get your money invested wisely, all in between checking texts, checking your Facebook, and checking Pinterest. Be sure you follow the golden rule: share and share alike with all your peoples – Thanks. Now let’s start investing for wealth.
Acorns is classified as a “micro-investing” account because it allows you to invest your spare change. They operate via automatic daily, weekly, & monthly investments because every purchase you make becomes an investment with what they call “Round-Ups” meaning they round up your purchases to the nearest dollar and use that difference as the investment. (Read: nothing for you to have to remember to deposit into the investment account — they do that for you.)
Then when your portfolio moves with the market, they rebalance it to stay on track. The account setup takes less than 5 minutes, and you can automatically add money to your diversified portfolio. A diversified portfolio is a portfolio that contains a diverse set of stocks to minimize risk. For example, if a portfolio is solely invested in oil stocks and the oil industry is performing poorly, your investment portfolio does poorly because that’s all you’re invested in – oil stocks.
Acorns mitigates the risk by investing in many types of stocks to dilute the level of risk to avoid the portfolio tanking due to a concentrated investment. The more diversified a portfolio, the less impact a poor performer has on the overall performance of that portfolio. Now you can talk about your diversified portfolio. And talking about your diversified portfolio makes you sound smart. Nice. They offer their debit card, or you can link your current card to your Acorns account, and that’s how they have access to the spare change for the “round-ups.” With the app right on your phone, you can track your portfolio’s performance before scrolling YouTube for panda videos.
More About Acorns
Also, when you shop with one of their 350+ “Found Money” partners, they give bonuses that go into your Acorns Invest account. Translation: shop with their partners, and their partners also chip into your account. Sweet. When investing, higher risk means higher returns: lower risk, lower yields. Acorns has five portfolio types that cover the range of risk levels. Generally speaking, portfolios that are mostly stock come with higher risk compared to portfolios that mostly bond. So naturally, they’ve set-up their five portfolios to span from all stock to all bonds to cover the level of risk you’re willing to take. Easy.
They also offer three types of Individual Retirement Accounts, aka IRA’s. When you’re doing the onboarding, they take care of which of the three accounts you should choose based on the info you’ve provided. The bonus of IRAs is that they can help you save for retirement with tax advantages. You can put money away now for retirement to reduce your current taxable income. And the gains in the account aren’t taxed until withdrawal (be advised to wait until retirement to withdraw or else you’ll be charged taxes and fees.) Next.
Stash is set-up similar to Acorns, but with a simple bonus: a Stash plan includes a bank account with no overdraft fees. Traditional banks make a significant portion of their profits from these fees. Don’t like overdraft fees? Then “like” Stash (insert thumb up emoji.)
Interesting: their Stock-Back™ rewards program invests you in stocks of companies you shop at, and funds back on purchases made with their debit card. If you shop at Apple, you get rewarded with Apple stock in your portfolio. Same with Starbucks. Same with Dunkin’ Donuts. Same with Netflix. Get a large pumpkin spice mocha latte, get some donuts, and Netflix and chill on your MacBook. Your portfolio will be growing in the background.
They too, offer five different types of portfolios, but with different objectives than Acorns. The 2 Stash stock market investing portfolios mainly follow and perform similar to particular exchanges; These exchanges are the S&P500 (US stocks), and the FTSE (pronounced footsie) Global All Cap Index (International stocks). Money never sleeps.
Stash also offers three other portfolios. They offer US Bonds, International Bonds, and a mix of both with currency sprinkled in. How very international. In investing (as in life), it is universal logic that the greater the risk, the higher the reward (or returns). Keep that with you, kids.
Ally offers bank accounts that compound interest daily. The logic: you get more money than if the interest is calculated yearly like most traditional bank accounts — cool beans marinating in awesome sauce.
Investing 101: Interest.
Interest is defined as the cost of money. This means over a set amount of time, a set amount of money accumulates more cash on top of the original amount of money, depending on the time that has passed. Simple interest is calculated only on the principal amount and can be calculated regularly (daily, monthly, quarterly, semiannually, annually, etc.) Sexy. But not super-sexy…
Compound interest is the interest you earn on the interest and is also calculated regularly. Simply put, compound interest is “interest on interest.” SUPER-SEXY: You want this. This means your Ally bank account offers you a little more money to invest due to the higher compounding frequency.
More About Ally
Their portfolio investment offerings are similar to Acorns and Stash in that they offer different types of portfolios – 4 in all. They offer one bond portfolio that is very conservative. Ally also provides one assorted asset portfolio, which can be allocated according to your desired level of risk (made up of domestic and international stocks and bonds). An IRA that offers tax-free benefits but adheres to IRA rules outlined above. And finally, a “Socially Responsible” account is a portfolio invested in companies that are ethically and environmentally conscious. Stay woke.
For the more advanced experienced investors, Ally offers commission-free trading accounts. Again though, this is for more advanced experienced investors: if you want to try it out, be sure to do so with an amount of money you’d be okay living without – you want to account for your trading learning curve.
Ally Bonus: you’ll have plenty of money from all your smart investing, so when you’re ready to get a mortgage for that dream house, Ally offers home loans also. Awesome.
This is a fantastic resource for learning to trade or when you are learning how to start investing: Robinhood provides definitions and examples of popular stock market and trading terms to help you sharpen your knowledge. They offer zero-commission investment options for both your self-managed fund (for experienced investors or people who want to trade actively), exchange-traded funds (aka ETFs), and options. (Options: You have the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date.
The types of options: puts, which is a bet that a stock will fall, or calls, which is a bet that a stock will rise. Deeper waters for more experienced divers, though: if you feel like you still need a floatie, options maybe for later on down the line in your investment life.)
What’s also lovely about Robinhood is that you can get all of your research in one place. There’s access to various information outlets that’ll keep you up on what’s happening in the markets, what’s happening with particular funds, and what’s happening with individual securities. What’s happening this weekend? That’s on you…
Robinhood gives you the chance to get started with little money: particularly, just $1. And how new age is this: Robinhood has access to crypto trading as well. Keep it 2020.
Offers it all. Does it all. Here we go:
- Two types of Checking accounts (a minimum balance account and a no-minimum balance account).
- A savings account (featuring zero fees).
- A line of credit (against your investment portfolio.)
- A brokerage account (for active trading charging zero commissions for stock and ETF trades, and varying fees for mutual funds, options, bonds, and futures trades.)
- A “core portfolios” account (for retirement, and set up according to your desired level of risk.)
- And Roth and traditional IRA accounts (Roth means you can withdraw if you qualify.)
For passive investments, ETrade has plenty of routes as outlined above; And for active traders, the brokerage account is the way to go. As with Robinhood, ETrade has plenty of tools to help research, learn, and understand your investments.
Summing Up How To Start Investing
Above we’ve outlined a handful of mobile apps that make investing easy, but also allow for growth as your experience and circumstances evolve. There are so many ways to start investing and many different types of methods to get excellent returns. The best way to increase your expertise is to be mindful of continually learning. Read, watch, and listen to as much information as you can absorb. The more you learn and know, the more confidently you can start on the path toward investing for wealth. Thanks for being here with us: it’s been a pleasure.
Stay tuned for more…