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Today more than ever, it is as easy as going to the Apple or Android Store to download an investing app and start investing for the first time. Endless incentives are provided to users from these investment companies so they can increase assets under management (AUM) on their platform. Often individuals are overwhelmed by the fact that they don’t know how or where to start when it comes to something as important as their money. Most individuals simply contribute to their retirement account or have their money in a money market account, but they don’t actively seek out high yields. Our money is our future and the higher our returns are the more lifestyle we can accept and the less stressed we can be in our later years.
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Numerous investing fintech apps have done a tremendous job introducing younger generations to start investing such as Wealthfront, Betterment, Stash and Robinhood to name a few. The best place to start would be with these apps and to do so for approximately six months to a year or until one understands the fundamentals of investing. The idea behind these apps is that well thought out algorithms actively rebalance one’s portfolio to maintain its respective risk level and equity position. There are dozens of arguments against active versus passive management and this would be classified as passive management (will discuss in another article). Anyways, I strongly urge most individuals to also open a brokerage account once they gain a general understanding of the stock market, bond market, and alternative investments. These apps do a phenomenal job of breaking everything down to the basics, but the investment options aren’t as exhaustive as the brokerage firms such as Vanguard, Fidelity or TD Ameritrade. Also, these firms carry the benefit of an ongoing relationship and have several decade track records of operating at a high level of integrity. Furthermore, the fintech apps do have customer service, but typically it is over email or through chat in the app. Some investing questions should be answered over the phone due to the nature and complexity of certain investing situations. The brokerage firms have teams of subject matter experts in trading, account management, and general guidance. Investing simply isn’t a one brush stroke, rather each investing situation should be handled differently and when receiving guidance, it should be done through a licensed professional, rather than pressing a button on the app of a familiar company one enjoys using its products(e.g. investing in Apple because one enjoys the iPhone). Lastly, many of these investing apps are also relatively new, so we don’t know how these fintech apps will handle the inflows and outflows of AUM in a recession and many of these apps have new investing products created on these platforms with no long track record through vicious volatility. 

Some of the disadvantages of the large brokerage firms are many of the apps aren’t as intuitive as the robo-advising apps, but this is changing, and it is doing so quickly. Another disadvantage of opening a large brokerage account is at first it feels overwhelming the number of investment options one can embark on. While there are dozens of FAQ’s and educational videos, it can be overwhelming being thrown into an open sea with nobody to hold your hand on what is a good, adequate and bad investment even though there is substantial research. As someone in finance, I don’t see many downsides of these large brokerage firms as long as they keep adapting with the changing times. The future of trading is at the palm of our hands, but it is of great importance we still conduct a thorough due diligence process before making any security purchases. Reading a few articles on the iPhone for twenty minutes and then buying one hundred shares of any given stock still doesn’t sit right with me. Investing needs to be done through guidance, deep research and possibly even collaboration. It is hard to do that with a quick and easy click of the button approach. All in all, it is better that we as individuals start investing young through diversification and dollar cost averaging. Whatever platform we decide isn’t permanent, but what is an important decision is to pick one that suits our investment objectives and that is different for everyone. 

-Published 6/30/2019

​Disclaimer:
Nothing stated in this article is a recommendation from Forehand Financial to buy or sell a particular security or asset class. You should wisely consider your tolerance for risk, time horizon, and financial goals before making an investment. With investing, you run the risk of losing money, always read an investment prospectus and make an informed decision before allocating capital to a particular investment.