With the evolution of technology, investing in the market has become easier and more accessible. Traditionally, you would have a financial advisor who you would call to make trades on your behalf. Now, if you so choose, can bypass all parties, have direct access to the market, and invest how you see fit. However, the role of a financial advisor is still important and valuable.
One of the most popular ways people are accessing the market is through mobile phone applications. Examples include Robinhood, Stash, and M1 Finance, which allow for simple deposits, withdraws, and investing.
The first benefit to this new wave of investing is the low cost of trading. With Robinhood and M1 Finance, you can trade for free. Even further, with Robinhood, you can trade options for free as well. Free trading is beginning to revolutionize the marketplace, as it is a race to gain the millennial generation’s money. Many people ask, “why trade at $9 a trade when you can do it for free elsewhere.” As we progress, mobile phone apps will continue to put pressure on traditional investing.
Secondly, the benefit is ease of use for people who are new to the market. For example, with Stash, there are pre-determined investment options that are clearly labeled to gain a general understanding of what the investment is gear towards. With M1 Finance, the company allows you to purchase fractional shares of stock. So, for those that can’t afford a share of Amazon traditionally, you can gain exposure using fractional shares.
Now, one of the drawbacks to apps such as Stash or Acorns, is they charge a monthly fee of $1. Now, you may be thinking it’s only a dollar, but let’s break this down for a moment. Say you are only depositing $40 a month into these accounts, if you are being charged one dollar that is 2.5% of your balance. So, a dollar may not seem significant but if you change it to a 2.5% monthly fee, it is more noticeable.
Certainly, mobile investing is not for everyone and you should contact your financial advisor with any questions. Financial technology continues to work in favor of retail investors, allowing for easy access to the markets. As we progress, look for this only to improve and continue to provide more value to investors.