The Pros and Cons of Investment Apps

William Miller |
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Investing your money is easier than ever in this digital age. You no longer have to call or visit a financial planner or stockbroker. Now, most investing can be done online—there are even apps to help you get started. The apps range from those that help you save your spare change to full stock trading apps. But not all investing apps are equal and depending on your goals it might still be a good idea to work with a person instead of an algorithm. 

Here are some pros and cons of investment apps that you should know. 

Pro: Great for Investment Beginners or a “Fun Account”

If you are new to investing or just like having some control over an account, using an app may be the good choice for you. Many apps make it easy to invest and may even show how to diversify your investments.

Some apps involve a hands-off approach where extra money from your bank account or change from your purchases is invested automatically without any extra effort from you (Acorns). Others will provide educational guidance on investing that can be helpful for beginners, that want to have help but still manage their own money (Betterment).

Con: Minimal Personal Financial Advice 

A big con to using investment apps is that you do not have the benefit of working with a person who can provide personalized advice and guidance. Investment software’s do not care about you as an individual, they will help you based on questions you answer in the software. For those who are just starting out, or have very little to invest, this might be okay. But if you are looking to start investing large amounts of money and want that individual attention to detail, it might be better to talk to a financial planner who can help you sort out your goals and start working toward them. 

Pro: Low-Hanging Fruit  

Another pro of using investment apps is that many of them have low minimums and low or no fees. This makes it easy for individuals that are just starting to invest and can also provide a smart way to save and grow your assets with minimal effort. Be sure though to go through the fees.

Con: Fees Can Add Up 

Even if the fees for investment apps seem low, they can add up. When you are thinking about the value you are receiving in return. Flat monthly fees for apps can hurt you more than help you. For instance, if an app has a $1 monthly fee, that may seem low. But compare that cost to an app or investment service that takes a percentage of your assets instead. Let’s say you work with a financial planner and the investment fee is 1% per year. If you invest $100, your asset-based fee would be $1 for the year, but your flat fee would be $12 for the year (12% instead of 1%). Just be sure to compare the value you are receiving to the actual cost you are paying.

Even if you are not ready to start investing, talking with a financial planner can help you figure out what investment strategies work best for you—whether that means using an app or a person. 

 

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax, legal, or investment advice and may not be relied on for purposes of avoiding any federal tax penalties. Individuals are encouraged to seek advice from their accountant, financial planner, and counsel. Neither the information presented, nor any opinion expressed constitutes a representation by WM Wealth Planning as a specific recommendation to the purchase or sale of any securities/investment. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by WM Wealth Planning for educational purposes.*