Investing is one of the smartest things you can do.
Most people work for their money, meaning they trade their time for a salary. Since time is a finite asset, even the most hard-working individuals have a cap on their earning potentials. Unfortunately, a salary alone is unlikely to help you reach your financial goals. Your cash loses about 3% of its value to inflation every year. If you want to stay smart about finances, you need to invest.
Investing can be confusing for a lot of people, but it doesn’t need to be. Simply put, investing is turning money into more money. It’s a way of having your money work for you – and that’s the exciting part!
You don’t need to be the next Warren Buffett to start investing. You just need to educate yourself, get access to the proper resources, and create a plan. Let this article serve as a starting point.
Simple Ways to Invest
You don’t need to spend hours researching the stock market to start putting your capital to work. The rise of technology has fueled the release of many automated, easy-to-use investment tools and apps. You can start using most of these tools in under an hour.
Before we begin, it’s important to have realistic expectations. If you expect to double your money in a year, you’ll need more than a simple app. These apps and services are designed for beginners to dip their feet in investing.
Let’s have a look.
Let’s start with the most obvious investment app – Robinhood. Robinhood is a mobile app that was launched in 2013 and has since attracted hundreds of thousands of investors. While the app is simple and easy-to-use, the biggest appeal is the commission-free trading.
Most online stock brokers charge a small fee to buy and sell stocks. These fees generally range from $3-$8 per trade. Robinhood quickly rose to fame by waiving these fees and allowing their customers to trade for free.
Robinhood’s “commission-free” trading model is particularly attractive to beginner investors who have smaller portfolios. Whereas, a $5 commission may be inconsequential to an investor with a larger portfolio, it can certainly eat into the investment profits of a trader with less than $1,000 to invest.
Robinhood can be a great brokerage for investors starting out with a few grand or less.
Of course, the company won’t tell you which stocks to buy and sell so you’ll still need to do your research. This leads to our next recommendation.
Motley Fool offers a variety of services ranging from news to investment recommendations. Motley Fool has been a reputable company in the investing industry for over 25 years. Their flagship service, the Stock Advisor Program, provides investors with well-researched stock picks every month.
Members of the service are told which stocks to buy, when to buy them, when to cut losses, and when to take profits. In this sense, Motley Fool’s Stock Advisor Program can be a great complement to Robinhood. Motley Fool provides the stock picks and Robinhood allows you to trade them for free. These two services can be used together to create an effective, low-involvement investment strategy.
Note that Motley Fool’s Stock Advisor program is a paid service, but the subscription is fairly priced (less than $10/month on the annual plan).
Wealthfront offers a handful of financial services, but for our purposes we’ll be looking at one of their most compelling offerings.
Wealthfront recently launched their premium savings account service. A premium savings account is simply a savings account with much higher interest. Chances are, your bank pays you close to zero interest on the money that is sitting in your account. Wealthfront is currently offering one of the most competitive interest rates we’ve seen.
At the time of writing, Wealthfront is offering 2.51% interest on money in your savings account. That’s roughly 25x the national average for savings accounts. This means that every $1,000 you invest will generate about $25 in interest every year. While this is far from an exceptional return, it’s worry-free. You can’t lose money in this type of account. Whereas stock investment carries risk (i.e. losing money on dropping stock prices), premium savings accounts do not decrease in value.
Here’s why we like this particular premium savings account:
- FDIC Insured up to $1 million
- 2.51% Interest Rate
- Unlimited, free transfers
- No additional fees
- $1 minimum
Stash is one of the newer companies to arrive in the recent wave of robo-advisory services. A robo-advisory service can be thought of as an automated financial advisor. Generally, financial advisors charge a fee to manage your money, and they do not accept smaller accounts. Robo-advisors democratize the world of financial advisory by offering financial tools to everyone.
Here’s how it works:
You create an account, enter some information about your investment goals, and transfer your funds. The app or service will automatically distribute your funds across investments that make sense for your personal financial goals.
There are plenty of companies that do this but Stash has some unique features:
- Buy Fractional Shares – Normally, you have to buy a minimum of 1 share in a publicly traded company. If you had $100 to invest and wanted to buy AAPL’s stock (currently ~$180/share), you’d be out of luck. Stash fixes this problem by selling fractional shares. You can choose how much you want to spend and which stocks you’d like to spend it on. You could buy $5 worth of AAPL or $500 worth.
- Round Ups – Many new investors struggle with setting money aside. It’s usually more of a psychological resistance than it is a financial restriction. Stash helps make the process painless with their “round up” feature. This tool will automatically round your purchases to the nearest dollar and invest the difference for you. If you spend $4.5 on a cup of coffee, $5 is billed to your card and $0.50 is sent to your Stash account.
Take the Next Step
Ready to get started? Test out one of these services today or browse any of the other services we’ve reviewed on the site. No investing strategy is too small. Taking action is the first step!