When I started investing, there were no apps. It was the late 90s and early 2000s. Practically the stone ages.
I had a Vanguard account, paid gobs of money for trades, and basically kept all my money in various mutual funds.
Back then, you didn't have much of a choice. Trading commissions were expensive and Vanguard let me buy and sell mutual funds for free.
I hadn't discovered E-Trade Financial yet, with their absurdly low trading commissions, but it didn't matter. I didn't trade that much. When I graduated, I discovered TradeKing (now Ally Invest) and their $4.95 stock trade commissions and I was in. There would be a few new entrants over the years, some offering free trades like Zecco, but they would all be acquired or shuttered once they discovered their model was not sustainable.
Today, the landscape is different. We're back in the heydey of financial technology (fintech as it were) and there is a lot of variety.
I want to compare four popular investment apps, head to head, to see which makes sense for you. Personally, our finances are at the point where we have a large portion of it invested in Vanguard mutual funds and dividend growth stocks. We don't have a need to shift to a robo advisor like Betterment, micro-investing apps like Stash and Acorns, or a free trading platform like Robinhood. That's not to say we don't like them, it's just that we have a well-established system in place.
With that in mind, we did take a closer look at each to find out what they do well and why they might be the investing app for you:
Betterment is the largest and perhaps best-known of the independent robo-advisors. And for good reason. They've been one of the industry innovators, and have been a disruptive force in the investment universe. They brought professional investment management down to new and small investors, and at a very affordable rate.
You complete a short questionnaire that determines your risk tolerance, investment goals and time horizon. From that, a portfolio of exchange-traded funds (ETFs) is created to match your investment profile.
Your portfolio is comprised of 13 ETF's, that represent the general market, large-, medium- and small-cap stocks, international stocks, emerging market stocks, and various bond funds. They even offer a value fund that invests in stocks of out-of-favor companies. This is one of the most time-honored ways of making money in stocks, and one used by Warren Buffett.
Creating Investment Goals Feature. Betterment enables you to create customizable subaccounts referred to as goals. You can establish them for retirement savings, emergency savings, or for a medium-term goal, like making a down payment on a house. Each goal-based portfolio has its own portfolio allocation. You can add new goals at any time.
Betterment Fees: Betterment charges a single management fee of 0.25% per year. It's on the lower end of the range for management fees by robo-advisors.
What Betterment Does Well
- With no minimum investment required, and a low fee of 0.25%, it's the perfect investment platform for new and small investors. You can have a $2,000 account managed for just $5 per year.
- Betterment's investment mix includes value stocks, which holds the potential for your portfolio to outperform the market. Most robo-advisors try only to match the market.
- Betterment offers tax-loss harvesting on taxable investment accounts (it doesn't apply to retirement accounts, since tax considerations don't matter).
- RetireGuide. Betterment offers this tool to help you plan for retirement. It's excellent for someone who is new to retirement investing.
- Betterment Advisor Network. If you like a personal touch with your robo-advisor, Betterment provides access to human investment advisor. The advisor is a vetted independent certified financial planner, who can develop a customized, comprehensive financial plan.
What Betterment Could Do Better
About the only weakness in Betterment's program is that they don't offer investments in real estate or commodities. Some robo-advisors have added these sectors for greater diversification. Betterment has not followed suit – yet.
If you'd like to open an account check out the Betterment website.
Stash is also a robo-advisor, but it functions as an investment app for your smart phone. It's actually a micro-savings application, and you can invest with as little as $5.
Much as is the case with Betterment, Stash has you complete a brief questionnaire to determine your risk tolerance. But rather than putting you into a standard portfolio, they instead create it based on 30 different investment themes, built from 40 different ETF's. The themes are very specific, like Clean & Green. which uses a clean energy ETF, and American Innovators Fund, that invests in information technology.
Stash doesn't actually manage your portfolio. Instead, they make investment recommendations and leave it up to you to handle mechanics of investing.
Stash Fees: Like Betterment, Stash charges an annual management fee of 0.25%. That only applies on balances over $5,000. If your account has less, the fee is $1 per month.
What Stash Does Well
- The 30 different investment themes give you an opportunity to choose specific market niches. This not only gives you the ability to invest in what you believe in, but also opens the opportunity to outperform the general market.
- The fee of 0.25% is competitive with other robo-advisors – once you reach the $5,000 threshold.
- You can choose your investments, including individual stocks. This option is generally not available with other robo-advisors.
What Stash Could Do Better
- Stash doesn't handle investment management for you. That means that you will use their recommendations but actually handle the investing work yourself. That will include periodic rebalancing, if you decide that's necessary.
- Since Stash doesn't actually manage your account, the fee you are paying is strictly for investment recommendations.
- The fee structure of $1 per month with an account balance below $5,000 can be prohibitive. For example, if your account has only $100, the annual fee will be $12 – or 12%. It's possible you could lose money on small balance accounts, just due to the fee structure.
If you'd like to open an account check out the Stash website.
AcornsAcorns is similar to Stash as a mobile investment app. But it works with a different spin. Instead of funding your account through bank transfers, you invest using spare change. It's an excellent way for a person who is not a natural saver to begin investing money. You literally accumulate investment capital by your normal spending habits.
The concept works like this: You make a charge for $7.50, and 50 cents is held to be moved into your Acorns account. This process is referred to as Round-Ups. You connect your mobile phone to your bank account and credit cards, and the app automatically invests the change from your purchases. You can set roundups based on the next dollar, or the next $10.
Once the total of your roundups reaches $5, it will be transferred to your Acorns account.
Acorns also determines your investment profile based on a questionnaire. They then recommend up to five different portfolios, each comprised of a mix of six low-cost ETF's. Portfolios range from conservative to aggressive. Your account is fully managed by Acorns.
Acorns Fees: Matching Stash, you pay $1 per month for account balances less than $5,000, and 0.25% per year once your account reaches this threshold.
What Acorns Does Well
- This is the perfect app for a person who has been unable to save and invest money in the past. The savings method is completely passive – you do what you always do, spend money, and the spare change ends up in your investment account.
- There is no minimum account balance required, nor do you need to set up recurring deposits.
- Acorns makes the app available for free for full-time students.
- You do have the option to add recurring deposits if you want to fast-forward your investing.
What Acorns Could Do Better
- The same fee structure problem as with Stash – the fee is excessive on small balance accounts.
- The use of just six ETF's is a little on the light side. Most robo-advisors use only a limited number of ETF's, but usually at least a dozen.
If you'd like to open an account check out the Acorns website.
Robinhood is different from the other apps. It's a brokerage service that offers free trades in stocks, exchange-traded funds and options. It's designed primarily for experienced investors, who are looking for a commission-free trading platform. It does not provide investment recommendations or ongoing investment management. It's strictly about trading.
You can track stocks, and then either purchase them outright or place them on a watchlist to buy at a later date. There is no minimum balance to open or maintain your account. You can also set up automatic transfers between your Robinhood account in your bank account.
Robinhood Fees: There are no fees to use the app and no trading fees.
What Robinhood Does Well
- There are no fees connected with the account, it's a free trading platform.
- It's perfect for active traders, who are looking to eliminate trading costs.
- There are no minimum balance requirements.
What Robinhood Could Do Better
- Despite the lack of fees or a minimum balance, Robin Hood is not suitable for new and small investors. The platform provides no investment recommendations or management.
- It's not a full-service service platform, you can trade only in stocks, ETF's, options and most recently, cryptocurrencies.
If you'd like to open an account check out the Robinhood website.
Which One Is Best?
It depends on what describes you as an investor!
If you are someone who wants to invest and isn't entirely sure how, or you want someone to handle it for you, Betterment is the best one.
If you are experienced and simply want a powerful hassle-free platform that gives you free trades, Robinhood is the best one.
If you want a micro-saving app to help you save more money while adding a bit of investing, Acorns is the best one.
Finally, if you are a novice investor and want a bit of hand-holding as you work your way into the jargony world of investing, Stash is the best one.
As you can see, each one serves a slightly different purpose and so the best one is the best one for you at this moment in your investing life.