How Robinhood, Stash and Mobile Investment Apps Help Small and Newbie Investors
The United States is said to be the wealthiest nation in the world. Not so humble of a brag when the United States personal savings rate is 7.6 %, just above half of what it was in 1960. But there was a bright spot in the midst of the coronavirus pandemic in April of 2020 when the savings rate shot up to a record 33% as Americans stashed cash away like crazy during the initial months of quarantine.
Beyond simply savings, 2020 saw the share of Americans invested in the stock market to continue to hover in the 55% range as it has done consistently since its peak in 2007 at 65%. Approximately one-third of Americans have ramped up their savings at least prior to stimulus check distributions and record level layoffs announced week upon week. Nearly half of America is not invested in the market nor its monstrous recovery since the initial impact of COVID-19 that caused a major market dip in stock market pricing and valuations in 2020.
What’s a person to do in order to get into the market?
Fortunately for many small investors and newbies to investing, mobile personal finance apps like Stash and Robinhood have come along and virtually leveled the playing field. People with little money to invest or little experience in the realm of investing have a lifeline in these mini economic powerhouses of the modern era.
Before the popularization of mobile apps and online trading, stocks and other securities were traded with a phone call to or from a broker with a client. That came with a hefty fee. Then the discount brokerage firms like Fidelity, Schwab and TD Ameritrade duked it out on how to deliver real-time market information and research tools along with online trading at a discounted rate.
Now Robinhood and Stash come along and offer similar trading capability with greater flexibility with little to no cost attached. As a matter of fact, depending on the offer, you could be rewarded with a free share of stock or a cash deposit as incentive for signing up with one of these mobile investment apps. For instance, if you click this link from Stash and sign up, you will receive $20 cash and I will receive $20 as a referral. Deals like this don’t last forever.
The small investor has an opportunity to get a foot in the door with stock ownership through these new age personal finance mobile apps. These mobile apps allow small investors to invest as little as $1 into a stock position that might have them with fractional shares of behemoth stock like Amazon or healthy start on a stake in micro cap stock trading at $5 or below. Schwab and Fidelity have tried to add this feature brokerage customers for in the form of Schwab Stock Slices and Fidelity Fractional Shares.
Mobile finance apps like Stash, Acorns and Robinhood help those with little to no investing experience with educational information. Some apps feature tips and short form articles and blog posts on investing basics as well as videos and e-newsletters with detailed information on a full range of investment strategies and investment options. Snacks Daily is the podcast available from Robinhood that covers a wide array of financial issues in bite-sized portions.
Most of these apps make it easy to inch your way into the market without risking large positions. Not only can you get started with small sums of money but you can continue with recurring investments in either a cash position or a specific security like a stock or exchange traded fund (ETF). These recurring investments can range from $1 to varying maximum amounts and as frequently as daily or weekly based upon each app’s specifications. Most investment options include stocks and ETFs, but some mobile personal finance apps include options and other more complicated trading capabilities.
If you want just a basic introductory level investment account with a solid banking option to go along with it, then you need to look into a choice like Stash. If you want more bells and whistles with options trading and real-time data research and alerts, then Robinhood or similar mobile apps might best fit your taste. Stash charges a monthly fee based on the service plan selected, while Robinhood is totally commission-free investing until you go to use margin-related products and services or sell positions in stock or ETFs. But whatever fees you pay at most mobile investment apps, you are paying way below the traditional market rate in comparison to discount brokerages.
What Stash and Robinhood lack in stock market research tools, they fully make up for with their convenience and unique programs for investors, savers and shoppers. Robinhood recently added cash management to its accounts for those who join the waiting list, but earning a competitive savings rate on uninvested cash seems like a good deal during this day and age.
Stash goes even further with its banking side of the house by giving clients who shop with their Stash debit card stock for where they shop. Yes, Stash’s Stock-Back Rewards program will give you stock for when you shop. Buy groceries and gas at Costco, you get stock in COST. When you shop online at Amazon, you get a piece of AMZN. Although it only works with participating stores and replaces others with an equivalent ETF option, I can attest to the Stock-Back program serving as an added bonus.
With a low threshold for entry into the stock market and little to no fees, today’s mobile finance apps provide both small investors and inexperienced investors with an open and welcoming door to the initial steps of building wealth. A solid investment in a diversified index ETF that covers a large sector of the market such as the Nasdaq 100 or S&P 500 could potentially deliver consistent high levels of return over a longer time horizon of at least 10 years.
Historically, the stock market has a conservative average return of 7% per year. By reinvesting any distributed dividends and capital gains and maximizing dollar cost averaging investment strategies over the long term, almost any investor could at least experience some conservative levels of success.
Getting started does not have to be complicated. Modern day mobile apps like Robinhood and Stash make it easy for investors. Whether you have a little bit of experience or just a little bit of money to invest, mobile investment apps provide a gateway to building wealth for small investors and newbies.