The number-one question people ask me over the past two and a half months is whether now is a good time to invest. Despite the coronavirus outbreak playing havoc with the stock market, people are hungry for information and opportunities to invest. I would say it’s because of the impact that COVID-19 has had on the stock market that people are so deeply interested in Wall Street recently.
A common belief around investing is that you need to hire someone to help you get started, or you need a lot of money to begin investing. Thanks to many of the newer robo advisors and investing apps that hasn’t been the case for a few years. It’s easier than ever to invest. Many people (including younger investors) are using investing apps to invest during COVID-19.
Why More People Are Using Investing Apps
Investing apps have become wildly popular in the last decade. They fill a huge gap in the investing world. These apps allow you to start investing with small amounts of money directly from your bank accounts.
These platforms have knocked down the traditionally high barrier of brokerage investing minimums. You can trade directly on your phone. This makes access easier than ever before. And these companies have had a huge impact on the industry, with their offer of low or no fees. This caused many traditional brokers to follow suit with zero-commissions on buying stocks and exchange-traded funds (ETFs). We find that Firstrade, Public.com, and E*TRADE give the most value to users.
Investing apps have made investing more accessible, and now COVID-19 has also lowered overall market prices. This makes it somewhat cheaper to buy in. For Millennials and Gen Z, this represents a chance to buy into the stock market for perhaps the first time ever, or at the lowest consistent prices in a decade.
And they’re using investing apps to do it.
Why You Should Use an Investing App
Investing apps make investing easier than ever before, and that’s not hyperbole. Investing has always been a multi-step process. Investors needed to have cash on hand. Then they researched the market via newspapers, spoke to a broker, and arranged a purchase. And finally, they waited for the transaction to go through.
Online investing eliminated some of these steps. But investing apps make it even easier and faster. By downloading an app and answering a few questions about yourself, you can start investing almost immediately. Anyone with any amount of money can use investing apps. And they’ve been embraced especially by younger generations in the last few months.
The Wall Street Journal reported that in the first quarter of 2020, TD Ameritrade reported 608,000 newly opened and funded accounts, while Charles Schwab reported 609,000 new accounts. March 2020 also saw historic market lows and highs, as COVID-19 fears hit markets in the United States and around the world.
4 Apps to Get You Started
If you want to take advantage of zero-commission fees, here is a short overview of the companies that we recommend.
Established in 2008, Betterment offers young investors the chance to open retirement accounts such as IRAs. Betterment is a fiduciary, meaning they are obligated to act in their customer’s best interest. This app has no account minimum. This works great for new investors who may not have a ton to invest with. Their digital account charges just 0.25% as an annual fee.
Wealthfront has also been around since 2008. Wealthfront charges an annual advisory fee of 0.25% on its investment accounts on all assets under management. It requires a $500 minimum investment for index fund investing. The target audience for Wealthfront is new and younger investors, and their platform is easy to navigate.
Acorns allows users to invest their spare change by rounding up purchases to the nearest whole dollar amount. Users link a credit card and checking account, and the spare change is invested. This is called micro-investing and has proven to be extremely popular with newer investors. Users can also invest larger amounts on a regular schedule if they want. This allows users to grow their investments on the platform as their income grows.
Webull is a newer investing app. Another no-fee broker, investors can trade ETFs, stocks, and options for free. Investors can open an IRA or a taxable brokerage account on the platform. Webull is designed for investors with some experience, so first-time investors might not find the tools or the information they will on other platforms.
How Investing Apps Can Help You
Rather than intimidate young investors, the rocky markets seem to have invigorated them. For many Millennials, large student loan debt has been their primary financial focus since graduating college. As Millennials enter their mid- to late-30s, this is the first time many of them are debt-free and now have money to invest. It makes sense that they are turning to low-fee investing apps to try and capitalize on the falling stock market.
Investing apps can make investing feel easier than a traditional brokerage might. These apps are often free or cost very little to use and have a great user experience. The real power in investing apps is that they demystified the investing process. Almost anyone can use an investing app to start their investing journey. By investing at a younger age, investing apps can help them grow wealth over the long term, even if it’s just $10 at a time.
The Age of Investing Apps Is Now
A common piece of investing wisdom says that the longer you can invest in the market, the more likely you are to grow wealth in the market. For the Millennial and Gen Z investors who are flocking to investing apps, right now could be the best moment they’ve ever had to invest. By getting in while the market is at a lower point than it has been for years, they may be able to buy some investment deals they otherwise wouldn’t.
Plus, as younger investors, they have more time to weather future ups and downs in the market. Investing at 27 is very different than investing at 47. A 27-year-old has 32 years before she can take money out of retirement accounts without penalty, meaning she has 32 years to let compound interest work in her favor. A 47-year-old is much closer to retirement and will have to shift to more conservative investments as she ages, making it harder to grow her deposits.
If you’re ready, now is a great time to utilize investing apps in getting into the stock market.