The following guest post on investing methods was written by Jim Cooper. Jim is a part-time freelance blogger who covers lifestyle, finance, and similar topics.
“Step 1: Open a brokerage account if you have several thousand dollars.”
This is the first line I saw when, some time ago, I somewhat-embarrassingly started googling things like “How do I open a stock portfolio?” Literally speaking, it’s a pretty logical first line in describing the process. But where I was concerned, it was immediately overwhelming. Full disclosure: I wasn’t sure what opening a brokerage account entailed, and I wasn’t sure if I wanted to commit “several thousand dollars” when I was really just looking to get my feet wet.
Let me back up a little bit. I think for the average young person, investing can seem pretty complicated. Not so for this lucky writer. I grew up in a household in which it seemed about as simple as could be. My mother was, for much of my life, a day trader who would sit in her home office listening to people yelling at her on CNBC and glancing at a few different computer monitors making snap buy or sell decisions. To me, it looked pretty straightforward: buy low, sell high, look for recognizable patterns in charts, and hope that the little number showing the change in the overall account for the day is green instead of red.
As it turns out, the average young person’s understanding is far more accurate than my warped and simplified one. Sure, the trading process is more or less what I saw it to be once you’re up and rolling with everything set up. But the part I never really witnessed (or, frankly, thought about) before I started to look into setting up my own portfolio was the logistical side of things. You have to choose a brokerage, set up your trading software, pay fees for transactions, and go about managing all kinds of other not-so-fun details as you go.
Perhaps it was silly of me to only see what was on the surface for all those years watching my mother, but then think about it with regard to other professions. If your parent is a lawyer, do you see the meetings and stacks of paperwork, or do you wonder how he or she went about obtaining PLLC status and renting out office space? If your parent is a teacher, do you envision the actual teaching and grading, or do you picture in-depth lesson planning and meetings with faculty and administrative people to outline a year’s worth of education? I digress. But my point is these things can look a little simpler when you’re close to them but not actually in them yourself.
The point is, I wasn’t quite prepared for the involved process of setting up a trading portfolio through an online broker, even if it’s something that millions of people learn how to deal with. And it turns out I’m not the only one. Having done a little bit more research on the topic, I’ve learned that a lot of so-called “millennials” (yes, I’m one of them) are weary of traditional investments.
What I also discovered is that my fellow millennials have gravitated toward alternatives more suitable to our general preferences as a generation. In a post specifically about how young people are approaching forex, it was mentioned that the availability of financial resources has surged as a result of companies developing new tech-based platforms to appeal to new audiences. In other words, financial apps are getting more popular because they speak the millennial language.
The first app I came across was Acorns, a clever tool that invites its users to experience “micro-investing.” To be perfectly frank, it was the image and interface of the app that drew me in first. Like Monument Valley in gaming, Acorns stood out as a particularly beautiful app that I’d actually enjoy using. Make no mistake, in the age of instant gratification, you can judge a book by its cover; something that looks nice has a better shot at grabbing a young person’s attention, and Acorns looks terrific.
As for what it actually does, it’s kind of like a digital piggy bank that knows how to invest. This app links up to your cards to take small amounts of money (rounding up to the nearest dollar when you make a payment) and then place them into a portfolio that’s already been compiled and is managed by professionals. You can choose from a few different portfolios by risk level and then simply watch your account generate income from your spare change. It’s not going to double your bank account or anything, but it’s completely effortless.
Two other apps that also popped up in my searches were Stash and Robinhood, which do largely the same thing. Basically, these are more hands-on mobile investing tools that actually challenge you to make your own buy and sell decisions. The fun part is that they don’t charge fees for transactions and they’re just a whole lot simpler than going the online broker route. Like Acorns, both are very attractive in a minimalist way, and both are simple to use. Robinhood and Stash offer real and active investing in addition to various tips and tools that can help you to analyze your own performance and learn on the go. So far I’m going with Robinhood, but it’s only because I like the look of it a tiny bit more. Both apps have generated some really positive attention and strong reviews.
Overall, I’d file apps like these under the category of “life hacks” for anyone else, like me, who looks at traditional stock trading and sees something far more complex than it needs to be.