If you are already aware that investing is the best way to create a stable financial future, but are unsure of where to begin, this article is for you. Many people need to learn the basics of investing and are intrigued with the idea of investing apps.
If you’re a beginner investor looking for some tips on where to invest your money, you’ve come to the right place. This article is meant to serve as a guide for beginners who are interested in investing. It outlines what one needs to know in order to get started in investing. Let’s jump right in.
What Is Investing?
Putting money into something with the intention of making more money from it in the future is investing. Growth investments are for investors who want to make money from their investment, and defensive investments are for investors who want to protect their money.
Growth investing involves increasing your wealth through capital appreciation. This can be achieved using short-term or long-term strategies. Investing in growth stocks is like going on the offensive to increase your net worth. These are Woodford’s preferred investments Growth investments typically take the form of property or securities, with shares in individual companies being the most common. This is the type of investment that Woodford prefers.
It is generally a good idea to invest when you are young and can tolerate more risk. In this way, you will be able to manage the stock market’s highs and lows because, ideally, you will also be in your highest earning years.
Growth investors seek to generate capital gains by investing in stocks that are expected to grow at a rate above the market average, while defensive investors seek to protect their capital by investing in relatively safe stocks. An investment strategy that is focused on defense can help to keep your money safe during times of economic decline, such as the current situation with the coronavirus pandemic.
Some investors wonder if it is a good idea to invest in things like cash, gold, or government bonds. These types of investments are defensive because they provide stability during volatile market conditions but don’t offer much capital growth.
In the end, new investors should have a diverse investment portfolio with both conservative and growth investments. By investing in a portfolio with a good amount of defensive protection, you will be less likely to sell during volatile times.
Investment Strategies For Beginners
It is important to have an investment strategy before investing so you can manage and grow your portfolio. You can either manage your investments yourself by purchasing individual stocks as an equity investor, or you could leverage a more structured plan around mutual funds, which are managed by professionals.
There’s a greater chance of things going wrong if you manage your own investments, and you’re also likely to get lower returns. One study shows that, on average, the unmanaged S&P 500 Index gained 7.81% per year from 1990 to 2010. During the same time period, the average equity investor earned an annual return of just 3.49%.
The performance of investors was mostly affected by their inability to manage funds effectively on their own. To be certain you are making the best moves when investing, you would need to study the markets, learn chart patterns and know the ins and outs of all the companies you invest in. This would require a lot of time.
Our own very contrarian view of investing for beginners is to start with the end in mind. If you are looking to invest to become financially free, then find people who are indeed that already and replicate their investment strategies.
For us, we found a group of people just like that and utilize turnkey real estate and infinite banking strategies and are replicating their success.
How To Start Investing Without Much Money
Investing can seem like a distant goal if you are just barely earning enough to get by. It is possible to invest even if you are not rich or well-off financially. Anyone can do it. The quicker you start, the more successful the outcome will be in the end.
Mutual Funds, Index Funds, And ETFs
There are three types of investments in the stock market: ETFs, mutual funds, and index funds. These diverse options make them ideal for long-term investors.
Mutual funds are created when multiple investors pool their money together. This pool of money is then used to purchase bonds, stocks, and securities.
These funds can be either passively or actively invested. Passive funds are those that track a market-weighted portfolio and do not require any manual intervention. Active accounts are managed by financial professionals who are dedicated to their job.
Here are three types of mutual funds to consider.
1. Open-end Fund (OEF)
Open-end funds have no limit on the number of shares that can be offered. They are bought and sold on a rolling basis.
The price of shares in a fund is determined by the value of each of the securities it contains. These shares are bought and sold to investors from within the fund. You can figure out the price of the fund by dividing the market value of the fund’s assets by the number of shares that the investors own.
2. Closed-end Fund (CEF)
A closed-end fund has a set number of shares that are traded by investors on an exchange. The funds are created when the company offers its shares to the public for the first time. Open-end funds and closed-end funds are similar in that their value is based on the net asset value (NAV). However, their price is governed by supply and demand.
Open-end mutual funds are the more widely used option by investors, largely because they come with more flexibility for purchasing shares. Open-end funds can be bought directly from the fund company.
3. Unit Investment Trusts (UIT)
UITs are only created for a set amount of time and are not adjustable securities. UITs are exchange-traded, and sold through brokerage firms. They also don’t have a board of directors.
There are two types of UITs:
Bond trusts make monthly payments to investors until the first bond matures, at which point the funds are distributed to the investors. The process of liquidating bonds continues until all bonds are liquidated.
Stock trusts are investment vehicles that provide dividend income and capital appreciation for a specific period of time.
An index fund is a type of mutual fund that passively tracks a market index. There are various types of index funds, which may be built around different criteria, such as companies that pay high dividends, or by certain industries or company size.
Instead of trying to beat the market, index funds track it. Rather, they are designed to track the market. Index funds can have varying levels of volatility. Although they may have some ups and downs, overall, they are seen as being a safe and cost-effective investment over the long term.
Exchange-Traded Funds (ETFs)
An ETF is a type of investment fund that is similar to a mutual fund, but which is traded on a stock exchange.
ETFs can be either actively or passively managed. Active management typically results in higher fees for investors and generally underperforms compared to passive strategies over time.
Many investors favor passive ETFs because they have low expense ratios and don’t have to pay broker commissions. Exchange traded funds are usually seen as being less of a risk, because they are spread out over many different investments and can be tailored to focus on a particular industry.
Overall, ETFs are a solid choice for beginning investors.
The 6 Best Investment Apps for Beginners
The best investment apps for beginners have low fees and offer access to the types of accounts and investment products beginners care about most. When choosing an app, you should pick one that reflects your investment style and provides the resources you need to reach your financial goals. This might include features like educational guides and/or courses, human advisor access, and strong customer support.
Best Overall: SoFi
SoFi is one of the best options for beginners due to its easy-to-use platform and low prices. You can start investing with SoFi for as little as $1, and there are no commissions for trades or any recurring account fees. The SoFi automated investing product, where your ETFs are all picked and managed for you, is free to use.
The app organizes stocks and ETFs by category, making it easy to find investment opportunities. Although it lacks extensive investment research, there is still enough information to get you started and help you make trading decisions. Some of the things you can do on the app include trading cryptocurrency, reading investment education articles, and more. SoFi charges 1.25% more for cryptocurrency transactions.
SoFi offers benefits outside of the app, such as complimentary financial planning sessions for all members. If you become a certified financial planner, you will be able to work with other certified financial planners to help people achieve their financial goals. SoFi is a good place to begin if you are a novice and need guidance in assembling an investment plan.
Best for Automated Investing: Acorns
Acorns is an app designed for people who know they should be investing their money, but don’t have the time or desire to do it themselves. For only $3 per month, Acorns will manage everything for you. This company offers a variety of ways to save money automatically, including investing spare change from transactions, transferring money automatically into a savings account, saving for retirement, and perks from banking. They also have a fully automated investment plan.
Acorns Personal and Acorns Family are two of the platform’s pricing plans that invest your money into a diversified portfolio of ETFs.
The best thing about Acorns is that it is very easy to use. The only downside is that you have to pay a fee, no matter what. This is a more stable way to deductions fees than basing it on assets, which can change in value. The monthly fee will be the same every year. To get extra accounts and services, like investment accounts for kids, you have to pay $5 each month.
Best for Active Trading: TD Ameritrade
If you’re just starting out in the world of investing and trading, TD Ameritrade is a good place to begin. It has no commission fees for stock or ETF trades and offers multiple account platforms that fit various investment styles and goals.
If you are just starting out, you will probably feel most comfortable using the main TD Ameritrade app. As you become more skilled at investing, you can upgrade to using thinkorswim, the best active trading platform from TD Ameritrade. It has tons of useful features for active traders. Although it’s important for beginners to be able to chat with an expert trader inside of thinkorswim, this isn’t the only important feature.
Best for Social Investing: Public.com
When you’re starting off in the stock market, it can be daunting to research and select stocks and other investments by yourself. Public is social media meets brokerage, combining features from networks such as Facebook and Twitter with more traditional brokerage features. An investment app that is easy to use would be good for someone who is new to investing.
The Public feed lets you follow the portfolios of other experts, as well as join live investing events and conversations. You can also create group chats with other users. You can also invest in more than 25 cryptocurrencies, including bitcoin, dogecoin, and ethereum. However, you will be charged an extra 1% or 2% for each cryptocurrency transaction (please note that trading in cryptocurrency is not available to residents of New York, Guam, or the US Virgin Islands).
Fractional shares can be purchased for as little as $5, allowing you to invest in a large number of supported companies without having to pay for a full share. Public has just launched alternative assets on its platform, so you can now buy and sell art, NFTs, collectibles, and more for 2.5% per transaction.
Best for No Commissions: Robinhood
Robinhood is a pioneer in the no-commission brokerage model. The brokerage still charges no commission for stocks, ETFs, options, and cryptocurrencies, making it a good choice for beginner investors. Investors who use Robinhood will not have to pay any fees, though there are premium accounts available with more features for a monthly fee.
Robinhood offers commission-free digital asset trading. Among these are bitcoin, ethereum, dogecoin, litecoin, and more.
Best for Kids: Stockpile
Stockpile does not charge a commission fee for stocks and ETF trades, and it offers some unique features that complement its commission-free structure. The platform also recently launched crypto investing. In addition to allowing fractional share investing, Stockpile also supports the gift of stock through gift cards, making it ideal for younger investors.
If you want to help a child in your life learn about the stock market, Stockpile is a great option. The app makes it easy to gift stock and keep tabs on the account of a minor. The app makes it easy and fun to navigate through different stocks while providing users with mini-lessons on how to invest.
Other Apps We Considered
Webull: Webull is a newer commission-free investment platform. Although it may be more difficult for newer investors, this website offers great prices and investment resources.
Firstrade’s web and desktop investment apps may not be as flashy as some of the other options out there, but its mobile app is straightforward and easy to use. It offers excellent pricing including commission-free mutual fund trades.
Stash is a good choice for novice investors who want to learn about investing and developing the right outlook, but the monthly fees of $1 to $9 deter many people.
How We Determined the Winners
When you are just starting out, it is crucial to choose an investment app that is low-cost and has the features that are most important to you. There is an investment app to suit your needs whether you are aiming to construct a portfolio of funds that generate passive income or an active portfolio of stocks.
Our selections were based on costs and fees, app features, types of accounts available, investment products available, and beginner-friendly features.
Kurt has gone from the financial lows of the ’08 financial crisis to personal financial success. He is a professional real estate investor owning properties in multiple states.
One of his passions is financial education and the pursuit of financial freedom.
You can learn more about Kurt here.