The Best Investment Apps for Beginner Investors, According to Experts – New York Magazine

I once believed that, like detached earlobes or the ability to curl one’s tongue, financial know-how is a trait that you are born with. When I learned that is not the case, I hoped that one day I’d just be imbued with financial wisdom, but simply “getting” finances never really happens either. The fact of the matter is that most of us graduate from college with a lot of debt and no handbook for how to make, grow, and manage our money. The world of personal finance is filled with dull jargon — and that’s before you even get to the fine print of terms and fees. Still, I would argue that the hardest part about basic investing is coming to the realization that it is something most people need to educate themselves about. Once you come to that realization, though, there is good news: Basic investing is not that hard.

I make that claim with the disclaimer that I have worked for two of the bigger, newish investing apps (Stash and Qapital) that have arrived on the scene offering to help beginners in the world of money management. But I also make it as someone who majored in creative writing and had no idea about how to put one’s money to work before she started looking into it. Most big banks and brokerages have investing arms and offer their own spiffy apps, but the crop of newish start-ups aim to further simplify socking your funds away, no matter how little (or much) money you start with. To help new investors sort through the options, I spoke to more than a dozen experts — including certified financial planners, journalists, influencers in the personal-finance space, and even some first-time investors — about their favorite investing apps and why they recommend them to beginner investors.

According to Ian Kar, founder of financial-technology research publication Fintech Today, “Learning about what stocks to buy and all the nuances of investing can be daunting for people who aren’t familiar with it (myself included).” But many of these newer services, which are also called “robo-advisers,” will “figure out your risk tolerance and manage your money for you, so they really take the legwork out of the process,” he explains. While they are more recent players in the world of investing, the apps our experts suggest still pack the punch of a lot of fancy brokerages, without the need for a sky-high minimum investment or endless tacked-on fees.

Before we get to the experts’ recommendations, there are two things all potential investors should know about using these or any other services: (1) The money in your investment account is protected by the Securities Investor Protection Corporation (SIPC), which provides insurance that protects your investments up to $500,000 (this also serves as a reminder to always read the fine print and never be afraid to ask questions — it’s your money, after all), and (2) when you withdraw money from an individual brokerage account opened with any service, you’ll have to pay taxes on any gains. And if you withdraw money early from a retirement account, like an IRA, you’ll normally have to pay a hefty penalty. (However, the U.S. government has made an exception to the retirement-account rule for 2020: As part of the CARES Act, individuals who meet certain COVID-19 related criteria are allowed to withdraw up to $100,000 of IRA and 401(k) funds in 2020, penalty free.)

Best investing app for most beginner investors

If you’re looking to start investing but aren’t interested enough (or are too intimidated) to think about buying and selling stocks and would rather just sit back, Betterment offers an easy-to-use interface and smart tools — while requiring no minimum amount of money to invest to start using it and a low annual management fee on your account. These are all reasons that it edged out the other recommendations from our experts, whose collective wisdom about the app makes it seem like the best one for most beginner investors. “To me, Betterment stands out from other robo-advisers,” says Kate Dore, the author of the Nashville-based money blog Cashville Skyline. “I like the goals-based investment tools, reasonable annual fee (.25 percent), no minimums, and automatic tax-loss harvesting and rebalancing.”

Both Dore and Catey Hill, the executive editor of Millie magazine, say that one of the most convenient things about Betterment is its ability to easily create and set financial goals with different strategies on how to get there. “It automatically rebalances your portfolio and has socially responsible investing options, which more investors are getting into these days,” explains Hill. A bonus: Betterment also helps you maximize your tax-deductible charitable giving so you can give more to those in need and less to Uncle Sam. Brittney Burgett, the head of communications at life-insurance start-up Haven Life, is another fan: She started using Betterment in 2006, while in her mid-20s, after paying off her student loans. “I had about $2,000 remaining from a bonus that I had no idea what to do with,” she said. Since she already had a retirement account through her employer, Burgett told us she decided to open an individual brokerage account with Betterment. “Soon after opening my account, I started doing an automatic transfer of $100 per month, which I eventually increased over time,” she said. “Four years later, and after substantial market volatility due to COVID-19, I’m still happy to report that the money in my brokerage account has far outperformed where it would be if it were sitting in a traditional savings account.”

Betterment offers myriad account options, including Roth, traditional, joint, and SEP-IRAs (or Simplified Employee Pension, which is an IRA for self-employed workers), along with different kinds of individual brokerage accounts, plus a helpful blog that further explains its offerings with articles and calculators. The fee structure is pretty straightforward: Betterment annually charges 0.25 percent of your account balance — though accounts with a minimum of $100,000, which qualify for Betterment Premium, are annually charged .40 percent of their balance. Unlike the other apps on this list, Betterment also offers users the chance to talk to actual human advisers. (For accounts with five-digit balances, advice packages start at $199; Betterment Premium offers advisory services as part of its annual fee.)

Best investing app for beginners who want to take baby steps

According to the folks we spoke with, those who just want to dip their toes into the world of investing while going about their daily lives should consider Acorns. “It makes you feel like you are making progress in building a financial foundation, even if the amounts are small,” explains certified financial planner Bobbi Rebell, who hosts the Financial Grownup podcast. If you’ve heard of Acorns, it might be because the app gained praise for being a user-friendly way to invest while you shop: After answering a few questions about your goals and risk levels and connecting the app to your bank account, it can automatically transfer rounded-up “spare change” into one of two Acorns accounts. So if your morning coffee, for example, comes out to $4.25, you can program Acorns to deposit $.75 into an investment account. That account could either be an individual brokerage account (which you can set up for a fee of $1 a month) or a retirement account, like a Roth, traditional, or SEP-IRA (which will cost $3 a month; any retirement account comes with a free individual brokerage account). Acorns also recently introduced Acorns Family, which allows users to open individual brokerage, retirement, and custodial investment accounts you can use to save on behalf of a minor (family accounts cost $5 a month).

Lynnette Khalfani-Cox, CEO and co-founder of the free financial-advice website AskTheMoneyCoach.com, notes that Acorns has a nifty multiplier feature that allows investors to increase the spare change that gets deposited into an investment account. “Let’s say you made a $24.25 purchase — that would normally get rounded up by 75 cents to $25. But with a 5-times multiplier, that 75 cents becomes $3.75.” Another neat feature, according to Rebell, is what Acorns calls Found Money, which can earn you a little more to invest if you shop at retailers affiliated with the app. “For example,” Rebell says, “if you buy something at Sephora, a small percentage of the purchase is put into your investment account.” (There are around 200 such retailers, including Barnes & Noble, Nike, and Walmart, in addition to Sephora.) Like Betterment, Acorns also has a blog that Rebell says provides up-to-the-minute advice on how to save and invest during tumultuous times.

Best investing app for beginners who want to choose their investments

Obsessed with social-media companies? Want to invest in commodities or telecom? Two brand-new, gun-shy investors say they like Stash for its ability to let customers choose investments in order to create a portfolio that reflects their personal interests. Unlike the other apps on this list, Stash lets you choose the individual stocks and funds to add to your portfolio, rather than allowing the app to enter you in its own array of risk-appropriate investments. Stash allows users to choose a wide array of investments, from sensible (international bonds), to do-gooder (combat carbon), to niche interest (corporate cannabis). Another key differentiator: Stash lets you add selected single stocks to your portfolio. Brian McGuinness, a 40-year-old Long Island–based comedian who hosts the Playable Characters podcast, describes himself as an investing newbie who wanted to save money “in case things go bad and the world comes to an end.” He told us he became interested in Stash when he learned he could invest in the business of video games in addition to meat-and-potatoes funds like health care and bonds. “I know nothing about stocks or the index or any of that, but I do know the plus sign means good, and the minus sign means bad,” says McGuinness. “I have mostly plus signs, so that’s good.”

Like some other apps, Stash doesn’t require much from users to get started: All it takes is an initial investment of $1, and customers can automatically set recurring deposits into their accounts.The interface makes the whole thing feel like a fun game,” says writer and Stash user Matthew Ballen. “I like that I could get into the habit of investing with literally just a few dollars.” In addition to individual brokerage and traditional and Roth IRAs, Stash also offers the option for users to set up custodial accounts that help start saving money on behalf of a child (similar to Acorns’ Early accounts). But another feature unique to Stash is the option to earn what it calls “stock-back rewards,” which are kind of like cash back, except you receive fractional shares of stock in publicly traded companies available on the platform. (Note: Stock-back rewards are only available on purchases made with a Stash debit card, which you can get for free after opening an account and functions like any other debit card.) It also has an in-app advice tool that guides your portfolio decisions and helps keep you diversified. Stash charges a $1 monthly fee for individual brokerage accounts, a $3 monthly fee to access Stash Retire (which includes IRAs), and a $9 monthly fee to access Stash Growth (which includes all the aforementioned accounts, as well as two custodial investment accounts for minors).

Best investing app for (advanced) beginners who want to choose their investments

The days of picking up a phone and shouting “Buy 1,000 shares of IBM!” are a thing of the past. That’s in part due to apps like Robinhood, which has altered the entire practice of active investing by making it easy to create an individual brokerage account, pick some stocks (or bonds or crypto or commodities), and just start investing. “Robinhood changed the way we think about investing,” according to John Biggs, a reporter at CoinDesk. “I had an early E-Trade account, and it was similar; you press a button, and you buy your stocks. With Robinhood, the interface makes it so easy it feels almost like a video game.”

But there’s one important distinction between this and Stash, or any of the aforementioned apps: Because Robinhood offers little hand-holding or real guidance to those who’ve never invested before, the experts caution that it may be better for beginners who come to the table with some knowledge of the investing world. While it has a blog, the app will not offer you any insights on strategy or teach you about risk or diversification. (And it’s easy for a newbie to quickly get caught up in — then confused by — the excitement of buying stocks, options, and trading crypto, which is not protected by SIPC, or the ability to buy on margin.) Courtney Richardson, the founder of the Ivy Investor, admits this type of active investing isn’t for everyone, but says that Robinhood is ideal for any beginners drawn to this style of money management. “It has most of the bells and whistles offered by mainstream brokerage firms but with the ease of an app,” she says. It’s also worth noting that Robinhood does not offer retirement accounts — only individual brokerage. There’s no annual or monthly charges or minimum balance; you just need to fund your account to start buying and building a portfolio.

Best investing app for beginners who want more of a luxury experience

Rich Jones, the host of the millennial-focused Paychecks & Balances podcast, told us he is always encouraging his listeners to save for their goals — but never at the expense of investing for their retirement. That’s a big reason he likes Wealthfront, because the app’s sophisticated visual experience basically provides a full snapshot of your financial status from your phone. “I can see my total financial picture and net worth in one place,” he says of the Wealthfront app, which makes it the closest approximation to visiting a private financial adviser (at least among the apps on this list). But Wealthfront is slightly different in that it helps you save for retirement by simultaneously helping you prepare for other big life expenses, making it easier to figure out how you can afford to take a year off to live in Chile while still saving for a down payment on an apartment in Brooklyn. Like some other apps, Wealthfront offers automatic investing and tax-loss harvesting — features that Kar, who is also a fan of the app, says give users “the same advantages rich people get” from their brokerage firms “but through cheaper digital services.”

With Wealthfront, you can open individual and joint brokerage accounts, as well as a variety of retirement accounts including SEP and rollover IRAs. But it also offers the ability to open another account not available via the other apps (as of now): a tax-advantaged 529 college-savings account. The app’s bells and whistles do come at a price: Wealthfront requires a $500 minimum investment to get started (the highest minimum on this list). But once you enroll, its fees are comparable to Betterment (it charges 0.25 percent of your account balance annually).

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