The goal of technological innovation is to make life easier in some way. At its best, technology can take something that was previously complicated, difficult or time-consuming and make it simple.
Many Americans have that view of investing. Young professionals in particular may feel they don’t have enough free time in their busy lives to invest responsibly, so it’s easy for them to develop bad investing habits. Fortunately, there is an entire subsector of the financial industry known as “fintech” that is devoted to creating technology to make investing a breeze.
Buy ETFs the easy way. Stash is a fintech company that developed an app with the goal of making it easy for new investors to dip their toes into investing by starting at the shallow end of the pool. Because Stash charges monthly membership fees as low as $1 rather than commission on individual trades, users can start to get a feel for investing with as little as $5. Stash allows users to buy fractional shares of exchange-traded funds, meaning they can invest even if they don’t have enough cash to afford full shares.
Stash co-founder and CEO Brandon Krieg says the Stash app was designed to help users who have issues with procrastination. Customers using Stash’s auto-stash feature can set up and customize automatic recurring investment deposits, even if the deposits are tiny.
In addition, Stash recommends users stay away from the get-rich-quick trading mentality that is often a pitfall for new investors.
“As a good financial habit to practice, Stash encourages investors to keep their funds invested for the long haul,” Krieg says.
Get some budget discipline. Acorns is a 2012 fintech startup that was created to help customers who struggle with several of the most common investing bad habits. Manning Field, chief commercial officer of Acorns, says the app is for any investor who has problems with budget discipline. It is especially geared toward helping millennials, who make up 75 percent of the company’s 1.6 million customers.
“Young people typically start investing too late, so at Acorns we make big decisions small and make becoming an investor as easy as downloading an app and answering a few questions,” Field says.
The Acorns app links to users’ bank accounts and can automatically round every purchase the customer makes up to the nearest dollar. It then withdraws the spare change and automatically invests it into a portfolio comprised of six diversified ETFs.
For example, when an Acorns user buys a $2.10 cup of coffee, the Acorns app rounds that purchase up to $3 and automatically invests 90 cents on behalf of the user. Field says those small investments can add up for investors who have trouble sticking to an investing routine.
“Our investment philosophy and our actual portfolios have been designed by Nobel Prize winner Dr. Harry Markowitz, so the small investments are put into a portfolio designed to meet the needs of young investors,” Field says.
For investors who are already struggling with bad habits or those who are overwhelmed by the complexity of Wall Street, there have never been more options available to help them achieve their financial goals.
Experienced investors need help, too. Benzinga, the online financial portal, hosts an annual fintech award ceremony in New York. Benzinga CEO Jason Raznick says there are dozens of companies at the event each year with creative ideas about how to make investing easier for even the most experienced traders.
“Companies like LikeFolio are helping investors improve their returns by backing up trading ideas with socially sourced data,” Raznick says. “Chaikin Analytics distills powerful quantitative technology into a tool that traders can use to make stock picks. These kinds of tools are helping traders overcome the temptation to make emotional trades and instead back up their decisions with data.
At one time, the only good solution for poor investing habits was…
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