Make Investing Simple Whether you’re putting away your first $1,000 or have been saving for the future for years, you’re going to want to consider investing your funds at some point. Doing so will allow you to maximize returns and exponentially grow your savings. Unfortunately, the investment process can be pretty intimidating, especially if you are starting out on your own. It’s hard to know how to begin, where to invest, how to balance your portfolio and even what sort of fees you should expect to pay along the way. That’s where the convenience and ease of today’s best investment apps can come into play. [youmaylike] What are Investment Apps? Once upon a time, your only choice for investing was to pick up the phone and call your stock broker to initiate a trade. You were charged for the service, either based on commission or as a flat fee per transaction. While stock brokers are still an option, you can take investing into your own hands these days, without ever needing to talk to another human. And it’s all thanks to investment apps and platforms. Today’s apps offer a range of services and features. With them, users can: Research funds and individual stocks. View fees and expenses related to investment choices. Invest funds on the go, and even automate regular contributions. Automatically reinvest earnings on current investments. Adjust portfolio for personal risk tolerance. View performance projections. Choose funds or individual stocks that align with personal beliefs, through portfolios based on socially-responsible missions. The best part? Investing through trusted apps is usually cheaper and faster and you’ll have instant access to your portfolio/reports at any time of day. Not only that, but you’ll also be able to set your investment risk tolerance, rebalance your portfolio and even reinvest earnings automatically. Who are Investment Apps Designed For? Whether you’ve been playing the market for ages or are ready to invest your first $100, the right investment app is worth considering. For those new to the stock market, apps will simplify the process and put the power of investing at your fingertips… literally. From your phone or computer, you can easily see portfolio recommendations based on your own goals, savings plans and even risk tolerances. The right app will tell you upfront how much you can expect to spend in fees throughout the year, and can even allow you to automate many of the more confusing aspects, such as picking well-performing stocks or even rebalancing. While investment apps are ideal for beginners, newbies aren’t the only ones who will see the benefits. Even seasoned investors will find the process easy to use, and may even learn that these platforms can maximize returns (and save them money in fees) along the way. Not to mention, many investment apps offer additional insight into specific funds, so you can choose to invest in companies that align with your own passions and beliefs. Now that you know why you should consider using an investment app for your own savings, let’s take a look at some of the best ones available today. Best Investment Apps Great for Beginners: Acorns Fees and expenses: For investors with less than $1 million invested, fees are between $1-3 per month depending on the account option you choose. Acorns is also free for college students. Beginning investment requirement: At least $5 to start Types of investments available: ETFs (exchange-traded funds) Portfolio options: Conservative, Moderately Conservative, Moderate, Moderately Aggressive, Aggressive Automatic investing?: Yes Automatic reinvesting?: Yes Automatic rebalancing?: Yes If you want an easy, hands-off approach to investing that won’t leave your head spinning, Acorns is a great first choice. This app not only simplifies investing for beginners but allows investors to completely automate the process from start to finish. After connecting the app to your debit card, the app will “round up” each of your daily purchases, putting the savings into an investment holding account. Once you reach the minimum required, Acorns will invest this money on your behalf, based on your account preferences. The app will also reinvest your earnings, as well as rebalance your portfolio when necessary. Great for Truly Free Investing: Robinhood Fees and expenses: Robinhood is a free investment platform in every sense of the word, pledging to never charge company fees or commissions to customers. Beginning investment requirement: You’ll need $2,000 to get started. Types of investments available: ETFs, stocks, cryptocurrency and options. Portfolio options: Interest-based options such as Fashion ETF, Tech ETF and Energy ETF, as well as a standard S&P 500 ETF, all with personal risk tolerance settings. You’ll also find “collections,” which are individual stocks grouped according to specific interests — such as companies with female CEOs or that are in the social media sector. Automatic investing: No. Automatic reinvesting: No. Automatic rebalancing: Yes. A great option for beginners and experienced investors alike, Robinhood makes the process both easy and affordable. How affordable? Well, it’s entirely free. By offering a truly free experience, Robinhood saves investors some serious cash over time. Additionally, the platform makes it easy to choose individual stocks or ETFs based on personal interests. If you want to invest in cryptocurrency or options, you can also do so through Robinhood. One of the biggest limitations of the platform, though, is its automation. While you can set up automatic deposits into your account, you will need to manually invest those funds and then reinvest (or withdraw) your dividends. Stash Fees and expenses: $1 per month fee for those with less than $5,000 invested, or $2 per month for retirement accounts with less than $5,000. For users under 25, fees on retirement accounts are waived. If you have more than $5,000 invested, your fee will be 0.25% annually. Beginning investment requirement: You’ll need at least $5 to begin investing (fractional shares are available) Types of investments available: ETFs (exchange-traded funds) and fractional stock shares Portfolio options: Too many to name, ranging from things you Want (portfolios that are conservative to aggressive mixes), things you Believe (such as groups of companies that believe in clean energy, LGBT rights, etc.), and things you Like (tech, retail and social media companies). Automatic investing: Yes. Automatic reinvesting: No. Automatic rebalancing: No. The closest competitor to Acorns, Stash seeks to make investing easy for everyone, regardless of your goals and passions. They have three account options to choose from, allowing you to manage your investment and retirement accounts, or even a child’s education savings through custodial accounts. With Auto-Stash, you can set any number of automatic investment options and transfers. However, Stash will not rebalance your portfolio for you, nor will they reinvest dividends on your behalf. Wealthfront Fees and expenses: 0.25% annually. Beginning investment requirement: $500 minimum initial investment. Types of investments available: ETFs (exchange-traded funds), individual stocks, retirement accounts (401k, IRA), 529 savings plans and trusts. Portfolio options: 11 asset classes to choose from, including natural resources and real estate. Automatic investing: Yes. Automatic reinvesting: Yes. Automatic rebalancing: Yes. Wealthfront’s investment platform is designed to be friendly for users of all experience levels. If you’re a seasoned investor, you’ll enjoy all of the options available to you, including the ability to manage your retirement accounts, education savings and even non-profits or trusts. If you’re a newbie, their free financial expertise center is the perfect place to learn all about investing and your future. TD Ameritrade Fees and expenses: The managed, automatic portfolio investment option (called Essential Portfolios) is available with a 0.30% advisory fee. Beginning investment requirement: $5,000 minimum for managed portfolios (no minimum requirement for traditional trading). Types of investments available: Stocks, ETFs, options, mutual funds, futures, bonds/CDs, Forex and cryptocurrency. Portfolio options: Essential Portfolios (EP) offer investors a range of options from Conservative to Aggressive, based on your passions, preferences and tolerances. Automatic investing: Yes, with EP. Automatic reinvesting: Yes. Automatic rebalancing: Yes. A more traditional brokerage app, TD Ameritrade is one of the most recognizable names in the industry. You can easily educate yourself on all things financial, thanks to their free videos and posts. If you want a traditional experience, you can choose your trades and pay per transaction. Prefer a more streamlined, automated approach? Opt for their Essential Portfolios, a hands-off investment option (robo-advisor) that charges a flat monthly fee and requires little-to-no oversight from you. Plus, their app makes the investing process easier than ever with a user-friendly interface, price alerts and no minimum to get started. If you prefer a desktop experience, this is also available to you through TD Ameritrade. Bottom Line Getting started with investing can be intimidating. With all of the terminology and account options out there, it’s easy to want to run and hide. Thanks to some of today’s best investment apps, though, you can not only get started with your first portfolio but also watch your money quickly grow… no matter how much of a beginner you may be! It’s important to choose an app that offers you the portfolio options and features you want most, with fees and deposit minimums that match your financial needs. The five apps above are our favorites for beginners, making that first foray into investing easier than ever before. The hardest part will be choosing the one you love most!
How Is Inflation Measured?
You probably already have a basic idea about what inflation is, but have you ever wanted to know more? In this article we’ll cover the basics of inflation: what inflation is, why it’s important, how it affects the economy and financial markets, why you should care about it, and finally, how it is measured and determined year-to-year.
What Is inflation?
Inflation is a general rise in the average price level of goods and services over a period of time. When inflation occurs, your purchasing power, the amount of goods and services that you can purchase with a unit of currency, is reduced.
Inflation is the opposite of deflation. Deflation is when price levels fall instead of rise over time.
It’s important to understand what inflation is and what inflation isn’t.
Avocadoes are popular with millennials these days. But just because more millennials are eating avocado toast and the prices of avocadoes go up, it doesn’t mean it’s because of inflation. Avocadoes are more popular due to shifting consumer tastes. Inflation is when all goods and services get more expensive, not just one or two items.
Why Inflation Is Important and Inflation Causes
Inflation is important because it has a huge effect on the overall economy. It’s the goal of most governments to keep inflation in line.
But, what causes inflation? Inflation happens when the demand for goods and services exceeds the supply. When this happens over time, prices go up.
If the inflation rate is too low it means that consumer demand is dropping. This may signify that there could be a larger problem with the economy. Low inflation encourages consumers to put off purchasing goods and services, doing further harm to the economy. However, low inflation does help lower the cost of borrowing for consumers, as low inflation means the Federal Reserve is less likely to hike interest rates.
On the other end of the spectrum, if inflation is moving up too quickly, it can negatively impact the purchasing power of consumers and also hurt the economy. This is why a country’s central bank will usually aim to keep inflation around a modest 2%.
How Inflation Affects the Economy and Financial Markets
Inflation can affect the economy and financial markets, too.
If inflation is rising too quickly, it’s possible that it could cause a recession. If the economy is growing too quickly it can cause a government’s central bank to raise interest rates by too much, which can cause growth to slow and subsequently cause a recession.
Low inflation generally signifies a healthy economy. When inflation is low, American consumers are encouraged to buy more goods and services. Waiting to purchase something would mean that you’d have to pay more for the same item later on. Low inflation also means it’s more attractive to borrow money, since low inflation and low interest rates usually go hand in hand.
In terms of financial markets, investing in stocks is usually a good way to combat high inflation. That’s because a company’s earnings should theoretically go up at the same pace as inflation. The reverse is also true. During periods of low inflation, investors tend to earn less from stocks, making it a less appealing time for investors.
Why You Should Care and Know About Inflation
You should care and known about inflation because it affects your daily life.
Let’s say you’re an investor. Taxes are an important consideration in investing, but so too is the inflation rate. If you’re only earning 1% interest on your savings account and the inflation rate is 2%, you’re actually losing money once you factor in inflation. (We haven’t even factored in taxes yet either.) That’s why it’s important to consider both taxes and inflation when investing, to determine your real rate of return.
Inflation also tends to have a big impact on those with fixed incomes. For example, people with disabilities and retirees can be negatively affected by inflation. If the prices of goods and services keep going up, while the income of these individuals stays the same, this could result in some difficult decisions for them to make. Individuals on fixed incomes may be forced to cut back on food and other discretionary spending to get by if inflation rises too quickly.
Inflation doesn’t just affect those on fixed incomes. You’ll notice inflation at work when the prices of goods go up at the supermarket, making it more expensive to feed your family.
How Inflation Is Measured and Determined
We already spoke about what inflation is: it’s the increase in price level of goods and services. Inflation is measured by measuring the rate of change in those prices.
The most common way to measure inflation is the Consumer Price Index (or CPI for short). The CPI measures the change in price of a basket of goods and services that the average family consumes.
Inflation is determined year-by-year by looking at the change in the inflation rate this year compared to last year.
The Basics of the Consumer Price Index (CPI)
The CPI is based on the shopping diaries of average Americans. Americans write down what they purchase and how much it costs. This information is then used to figure out how much prices are changing for certain goods and services.
The CPI gives you a better glimpse of how much prices are going up versus just visiting one grocery store. The CPI isn’t just for items you can purchase at the grocery store; it includes other expenses like utility bills, home insurance and gas.
So, how is CPI calculated? The CPI can be calculated in different ways. It can be calculated overall for the U.S. and it can also be calculated city-by-city to give an idea how expensive it is to live in one city relative to another.
When CPI figures are released, they have the overall rate prices have changed and then a core CPI rate. The core CPI rate strips out food and energy because those tend to fluctuate a lot more over time.
When you read about inflation figures in the news, they’re usually talking about the core CPI figures. Nevertheless, the core CPI figure can be deceiving since it includes housing costs, which can vary a lot depending on where you live in the U.S.