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 is Business Equity?
Business equity, in layman's terms, is the amount of money the business owners have left over after paying off all debts. As a business owner, you should have a handle on your business equity as part of your overall business plan. It needs to be managed well to ensure the business can grow, survive and become profitable.
Equity in Accounting Terms
Business equity is the measurement of assets (what the business owns) minus liabilities (what the business owes). Equity is used as an indication of how financially healthy your company is. It shows if you have a good mix of capital and other assets versus debt.
Calculating Business Equity
Business equity is calculated on your company's balance sheet. A balance sheet is a financial statement that outlines:
- Total Assets
- Cash or property you can convert into cash within one year (current assets)
- Property, plant, and equipment or other items that require more than one year to sell or otherwise convert into cash (fixed assets)
- Total Liabilities
- Short-term bills such as your annual taxes (current liabilities)
- Long-term bills from larger bank loans (fixed liabilities)
- Shareholders' Equity (aka Business Equity)
- The value of ownership of the company (capital stock)
- Profits that are reinvested into the company (retained earnings)
To calculate business equity, you would use the following accounting equation: Business Equity = Assets - Liabilities
Types of Assets
A company's assets should either be cash or, at some point, convertible into cash. Business assets are commonly made up of different things such as cash, accounts receivables (customer invoices pending payment) and purchased equipment.
Assets can include items that are harder to put a concrete monetary value on since they are not physical items, such as a brand's reputation. These are considered intangible assets. The assets previously listed, such as equipment, are considered tangible (physical) properties.
Depending on your type of business, it will be important to consider both tangible and intangible assets to increase your overall business assets. Intangible assets are generally more important as you start out your business, as cash is normally low. Therefore, many start-ups focus on building a reputable brand name and developing intellectual property.
Building a strong brand will come from having a large and loyal customer base, who advocate for all your products. For example, Apple has one of the strongest brand names in the world. Every time they release a new product, hundreds of thousands of their loyal customers will instantly purchase the product even if there are lower price alternatives.
The value of intellectual property, on the other hand, is measured in trademarks, copyrights and patents. By protecting your technology from being used by another company, you can immediately increase your company's worth.
Types of Liabilities
Liabilities will come in different flavors as you grow your business. In the beginning, your business' largest debts might just be your monthly rent or credit card bills.
As you expand and grow, you might be able to convince banks to provide you with larger loans in exchange for interest payments.
Importance of Business Equity
Similar to personal net worth, business equity is another way to measure the financial success of your business at any given time.
In the first few years, a company's equity is normally zero or in the negative. Negative business equity indicates that you don't have enough to pay off all your bills. Being negative doesn't mean that the company is bankrupt yet ,though, since larger debts are usually not required to be paid off all at once. This gives your business time to earn enough money to pay it off slowly.
For example, prior to opening up a restaurant, the owner may need to make renovations to the building. This will require cash immediately to pay the construction and interior design teams. Therefore, the restaurant owner might take out a $50,000 bank loan. After one year of operations, the owner may still be paying off that initial loan with any business profits earned.
As you grow and expand your business, though, you should aim for positive equity. Prolonged negative equity will signal to potential investors or partners that your business may be trouble. Having negative equity can eventually result in company bankruptcy.
Equity Financing
It might sound counterintuitive to grow by giving out equity, however, it is a common route that start-ups take. The equity referred to here is ownership of the company, not the excess of assets minus liabilities.
Rather than taking out a bank loan, businesses can look to sell shares (ownership) of their company.
Good loans can also be very hard to secure as a new business. Most banks will deem your start-up too risky. Therefore, banks will not want to give your company a long-term loan with low interest rates. Instead, they might only offer a small one-year loan of $10,000 with 10% interest. A loan like this is too expensive for someone starting out, who needs more capital over a longer time to grow.
The sale of company shares will give the business more cash without the financial obligations of monthly loan payments. The value of this financing can usually be a lot larger than what a traditional financial institution would offer. In 2018, the median value of a seed (initial) funding round for start-ups was $2.2 million.
The downside of selling ownership is loss of control over your business. Going forward, decisions and profits will need to be shared with your new co-owners. Shares can always be bought back as well, however usually with higher costs. Therefore, it will be important to determine ahead of time how much control you as a business owner are willing to give up.
The state of your business equity will help determine if your company is moving in the right direction. As you grow, you will need to balance how you increase cash through profits or financing. In the beginning, it will most likely be through financing. Eventually, the company should aim to be profitable in order to ensure positive business equity.