Historically, the world of investments has had a high barrier to entry. Many traditional brokers used to set minimum deposit requirements of $10,000 or more.
After a period of deregulation in the 1970s, discount brokerages started to pop up. However, trading commissions remained high.
With the online boom in the 2000s, another new class of discount brokerage was born. That process has culminated in services that offer commission-free trades on several types of assets.
Finally, the world of investments is open to absolute beginners. So if you’re a stock market noob, here are five investment apps you need to check out today.
If you live in the United States, Robinhood should be at the top of your list. The app is currently going through the process of approval for Australia as well. Other countries are expected to follow in the future.
The service’s commission-free structure lets you invest in stocks, options, ETFs, and cryptocurrencies without paying a fee for each trade. Instead of charging commission, Robinhood makes money through its $6 per month margin and after-hours trading service, called Robinhood Gold.
(Note: If you trade on margin, you are taking a loan from your broker. Beginners should not use this form of investment.)
The downside of the app is the dearth of technical and fundamental analysis tools. Beyond a simple candlestick chart, almost nothing is available.
Thankfully, you can access extensive information about your various positions, and you can create watchlists. Robinhood can also help you complete your annual tax returns.
Beanstox isn’t as well-known as Robinhood, but it’s perfect for new investors all around the world. It lets people from almost anywhere invest in US securities.
Unlike Robinhood, Beanstox does charge commissions. It will cost you $0.0125 per share, with a minimum of $2.99 per transaction. If you plan to actively trade a large number of shares, it is better to join the Beanstox Unlimited plan. It costs $5.99 per month, plus $0.01 per share traded.
Beanstox offers fewer investment vehicles than Robinhood. Stocks will only be available if a) the share price is more than $1, and b) the company either has a market cap of more than $1 billion or has a three-month average daily dollar volume of more than $0.5 million. There are no non-leveraged ETFs and no over the counter (OTC) assets.
The app is fairly unique in the investment world in that you can use credit cards (for a fee) and Western Union (no cost) to fund your account. Both of these methods are considerably cheaper than using wire transfers.
Robinhood and DriveWealth both leave you to your own devices when selecting your investments, but beginners might feel uncomfortable with that level of responsibility.
If you’d like to access the benefits of investing without worrying about choosing your specific holdings, Betterment is a great option.
The app offers a robo-advisor model. When you create your account, you need to tell it about your preferred level of risk, investment objectives, time frames, and other pertinent information. Betterment will then automatically create your portfolio.
Betterment creates all its portfolios using stock and bond ETFs. You won’t find any commodities or other volatile assets available. You can invest in the US, other developed markets like the EU and Japan, and emerging markets like India, Russia, and Thailand.
The app is only available to residents of the United States. It costs 0.25 percent annually (a figure which includes all transaction costs). The fee’s running total is calculated daily.
WealthFront uses the same business model as Betterment. You answer some questions about your goals, and the app advises you about your ideal investment portfolio.
Like Betterment, your scope of possible securities is limited compared to Robinhood and DriveWealth. WealthFront maintains a list of nine primary ETFs and nine secondary ETFs; your portfolio will always consist of some mix of them.
On the upside, the list does include popular Boglehead passive investment funds such as Vanguard’s Total Stock Market (VTI) and FTSE Developed Markets (VEA).
In addition to regular investment plans, WealthFront also offers a traditional IRA, Roth IRA, SEP IRA, and 401(k) rollover for people who want to save for retirement, and 529 College Savings plans for people who are thinking about their kids’ education.
WeathFront charges 0.25 percent per year, charged monthly. You will also be exposed to the ETFs’ expense ratios.
You might be a beginner today, but if you’re serious about your financial future, you need to get your head around the ways markets work. It’s the key to clearing your debt and building your wealth in later life.
Unfortunately, hands-off investment apps like Betterment and WealthFront won’t teach you anything, while services such as Robinhood and DriveWealth are so thin on research tools that you won’t be able to learn much, even if you want to.
If you’re looking for a little bit more from your investment app, we recommend Firstrade. The company accepts customers from around the world and offers commission-free trading on stocks, options, and mutual funds.
Firstrade offers considerably more investment vehicles than the other apps in this list. There are more than 11,000 funds, a huge number of ETFs, and some fixed income products. On the downside, you can only trade securities listed on US exchanges; companies on the London Stock Exchange and Tokyo Stock Exchange are out of reach. Cryptocurrencies are also unavailable.
From a learning standpoint, Firstrade is excellent. The app offers free access to Morningstar’s stock reports and daily market analysis, Briefing.com’s newsletters, and Benzinga. There’s even an extensive in-house library of video training content that’ll teach you the basics of investing, and an impressive amount of text-based content.
There is no minimum deposit to open an account.
Proceed With Caution When Investing
If you use any of the apps we’ve listed, your money is at risk. Investments in securities can go both up and down in value.
You should never invest more than you can afford to lose, and if you’re unsure how to proceed, seek professional financial advice.
If you’d like to stay on top of market news to give yourself a better chance of being a successful investor, check out the best financial websites. It might also be worth honing your skills before using real money by playing a stock market game.