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!
What Can You Afford?
Debt is an unfortunate reality for the majority of Americans.
Some people think debt is always bad. They’ll repeat mantras like “there’s no such thing as good debt,” likely remembering their days of struggling with student loan or credit card debt.
But these folks are short-sighted. The important thing to remember is debt is a tool that can be effectively used to your advantage. Borrowing $30,000 to spend on an education that will increase your earning power by $15,000 per year is a fantastic investment, even if it takes years to pay it back. So is buying a sensible car so you can get to work or getting a mortgage to protect yourself from greedy landlords raising rents in a hot housing market.
There are two important things to remember when taking out debt. The first is to always use debt to buy assets, not liabilities. Borrowing to buy a house or finance an education is fine. Using credit cards to finance a vacation or some other consumable isn’t a good idea. Second, make sure you have a good idea of what you’re signing up for. Think about your new potential debt critically before signing up. Can you really afford it? Is it really necessary?
We can help with that second part. We’ve created a loan calculator you’re going to want to consult before signing on the dotted line. Let’s take a closer look at how it works as well as some general tips for getting out of debt as quickly as possible.
The Loan Calculator
This calculator will break down what your loan payment will be, but you’ll need to provide it with the following inputs first:
Loan Amount
This doesn’t need much explanation. This is the amount you’re going to borrow. Make sure you add any loan fees (if applicable) to the face value of your loan.
Interest Rate
Another simple category. This will be prominently displayed on any loan agreement.
It’s fine to input an estimated interest rate if you’ve just begun the process of shopping for a mortgage or car loan. A little online research will reveal what the going rates are for each type of loan.
Loan Period
This is also called the amortization period. It’s how long the loan will take to be paid back. Car loans will typically stretch for anywhere from three to seven years, while mortgages are a 15- to 30-year commitment.
And that’s it. The calculator will take these variables and use them to determine your loan payment. Feel free to play around; you’ll see how extending the loan period will make a loan more affordable. But remember, doing that will increase the total interest cost of the loan.
Next we’ll take a look at different types of loans you might get, and what you’ll need to know before agreeing to the commitment.
Types of Loans
A loan can be arranged on any asset, provided you have a lender and a borrower agree to terms. But ultimately they boil down to two different kinds: installment and revolving loans.
We’ll start with an installment, or fixed, loan. This is your standard loan where a borrower takes a fixed amount and slowly pays it off over a period of time at a fixed payment plan. The banking industry refers to these as installment loans.
A car loan is an installment loan. So are student loans. A mortgage is as well, although the payment could fluctuate if you’ve taken out a variable rate mortgage. Those mortgages aren’t so common nowadays, since they didn’t tend to work out so well for borrowers in 2006-08. Most borrowers prefer the security of a fixed monthly payment.
Typically, a standard installment loan will never stretch out for longer than the life of the underlying asset. This means that a car loan must be paid off relatively quickly, since the lender doesn’t want a borrower to continue paying something off after it has become worthless. An education or a house are both assets that can last decades, so banks allow borrowers to pay them back slowly. These loans also tend to have lower interest rates because they’re backed by secure assets.
Compare that to a payday loan, a short-term loan that only lasts a couple of weeks. Payday loans come with the highest interest rates of all because they’re given to folks with poor credit who have just admitted to having money management problems. You’re looking at interest rates of 25% over just a week or two. It’s best to avoid payday loans at all costs.
Next, let's talk about revolving loans, flexible loans that can fluctuate depending on how much the debtor needs to borrow. The two main types of revolving loans are credit cards and lines of credit.
A revolving loan will give the borrower the flexibility to borrow up to a predetermined limit with interest being charged on just the balance owing. Repayment terms will be more flexible as well, with a borrower being allowed to pay as little as a small monthly minimum or a maximum of the entire balance.
Revolving loans can be secured against assets. Home owners commonly take out lines of credit that are secured by the equity in their property to pay for home improvements or to just consolidate other bills. These special lines of credit — which are called home equity lines of credit (or HELOCs) — are offered at similar rates to mortgages since they’re secured by the value of the home.
Unsecured lines of credit exist, but most folks access revolving credit through credit cards. An unsecured loan doesn’t have any specific asset a lender can seize if the borrower stops paying. These loans are only secured by the general credit worthiness of the borrower. This works most of the time, since the majority of people don’t default on debts unless they have no other choice.
Credit cards are extremely flexible and offer a low, mandatory monthly payment. Borrowers pay for this privilege through high interest rates on any outstanding balance. Credit card interest will set you back anywhere from 1-3% per month.
Remember, credit cards aren’t secured by anything physical. If you stop paying your credit card, the bank is going to have to do some work to get you to pay. Interest rates charged to credit card borrowers reflect that risk.
Picking a Lender
Many borrowers are so worried they’ll get denied a loan (despite excellent credit) that they take the first offer put in front of them. Many banks count on this when applicants want a mortgage or car loan. A little negotiation can go a long way.
It’s amazing how threatening to walk away from a loan will get a lender to lower their interest rate. Even a reduction of half a percent can mean a lot of money over the life of a loan, especially when we’re talking long-term mortgages.
It also makes a ton of sense to shop a few different lenders before making a big purchase. Leverage each lender against the previous one until you come up with the best rate. A mortgage broker can help with this when buying a house, especially if you don’t have the time nor the ambition to talk to a few different lenders.
Interest rates aren’t everything, however. You’ll also want the flexibility to make extra payments on a loan if you’re serious about slaying debt quickly. Sometimes a bank will give borrowers the lowest rate but will lock them into a contract that won’t give any flexibility.
Paying back a loan early can result in some serious savings. Say you borrow $30,000 over a five-year term at 5% interest. If you take all five years to pay back the loan, you’re looking at interest costs of almost $4,000. But if the same loan is paid back in three years, the total cost of borrowing is just over $2,300.
Who couldn’t use an extra $1,700? That’s how much you can save paying back a loan early.
Don’t forget about other factors when choosing your lender. Some banks offer excellent customer service. Others might offer free banking packages for borrowers. These perks matter, especially for somebody with good credit who is likely receiving similar offers from every lender.
Getting out of Debt
It doesn’t matter if you’re wallowing in debt or have a relatively clean personal balance sheet, it’s still a good idea to get out of debt as quickly as possible. You want to be earning interest, not paying it.
Good debt habits mirror good personal finance habits. To get out of debt quickly you’ll need to free up cash dedicated to other expenses and funnel it toward clearing up loans. This means spending less on everything, especially the big three expenses of housing, transportation and food.
One way to minimize your debt before you even start is to reduce the amount you borrow in the first place. If your bank tells you a $30,000 car loan won’t stretch your budget, opt for a $20,000 loan instead. Do the same thing with your mortgage. You’ll free up hundreds of dollars each month, which can then be thrown at the loan to pay it down all the faster.
Many people have had success using the snowball method to get rid of debt. You tackle the smallest debt first, throwing as much as possible toward it while making minimum payments on your other debts. Once the lowest balance is eliminated, move to the next lowest.
The snowball method gives borrowers psychological victories, which will encourage them to keep going. And it frees up having to make so many minimum payments. But it doesn’t factor in interest rates charged. You’ll want to do the math and maybe alter the snowball method a little before starting.
Improving your credit score is another way you’ll spend less on loans over the long-term and get out of debt faster.
While the exact formula used to determine your credit score is a tightly guarded secret, there are easy moves you can take to improve your score. You’ll want to clear up any accounts that are delinquent. Reducing your current debt-to-available-debt ratio on your credit cards will also help. Applications for new credit will also reduce your score, so keep those to a minimum.
Ultimately, getting a good credit score comes down to paying your bills on time. As long as you keep your creditors happy, it’ll be reflected in your score.
Smart borrowers can also refinance debt to lessen the pressure.
Say you’re struggling with credit card debt, but still have a good credit score. You could apply for a debt consolidation loan at a much lower interest rate, which would immediately decrease your monthly payments. When done right, a debt consolidation loan will save you thousands in interest.
Many credit cards love these types of borrowers, and will offer low-interest balance transfers to entice them to switch card providers. I’d caution people to be careful before accepting one of these offers, however. Once the initial grace period runs out, you’ll be right back to the same high-interest situation with this new card. You’ll want to make sure a serious dent is made to that balance while the rate charged is low.
Ultimately, getting out of debt won’t be easy. It’ll require months — if not years — of sacrifice.
The Bottom Line
Debt gets a bad rap, especially from people who have struggled with it. Some of these naysayers go as far as calling debt “evil” and proclaiming there’s no such thing as good debt.
I disagree. Avoiding debt is a good idea, especially high interest rates offered by credit cards or payday loans. But when used intelligently, debt is a tool that can better your life in so many ways.
There’s nothing wrong with financing big ticket items like a house, car or your education, provided these are done responsibly. Keep your payments low and you’ll be fine.
This calculator will help you use debt better, and the tips provided will allow you to get out of debt quickly, minimizing the total interest.