5 Guidelines to Pick the Right Investment App for You

The pool of investors is larger than it has ever been.

Several trends have given rise to a new generation of first-time investors. Those factors include more free time during the pandemic, disposable income from government assistance, and the sudden availability of trading via mobile phone apps.

These have led to an explosion of new investors and DIY investors, including millions of people who have signed up for RobinHood, Stash or one of the many other options now available for easy investing through your smartphone.

And for good reason, as the stock market continues to be the safest and best way to grow wealth over the long-term. The stock market proved its resiliency yet again during the pandemic, with a quick rebound and record growth since.

If you’re considering the start of your own investing, how do you choose what app is best for you?

Let’s dig in.

What Are Your Goals?

Before you hit download on Stash, Mint or Robinhood, you should ask yourself what exactly you hope to accomplish with your investing, said Matt Choi, founder of Certus Trading, which offers educational courses to traders.

Are you trying to build wealth for retirement? Are you trying to help build wealth to buy a house? Or are you just looking to try out investing as a hobby?

“Don’t buy an app and start trading unless you know why you’re doing it,” said Matt Choi. “While it might sound like fun to start trading immediately, you need to know that there are no safety nets if you’re doing this on your own, and you can lose a lot of money very easily if you don’t know what you’re doing and you’re not paying attention.”

Look into insurance and security

You will want to research the basics of personal identity protections before handing over all your financial data.

So what to look for exactly? Well, check to see if the app you’re considering uses two-factor authentication and has other security practices in place to guard against breaches, said Trina Patel, financial advice manager at Albert, a mobile banking, savings and investing app.

Patel also suggests checking what kind of insurance the apps have in place. For example, for a banking-related app, make sure that the financial institution backing the app is insured by the Federal Deposit Insurance Corporation. If so, then you can trust that up to $250,000 of your deposited money will be protected if the bank fails.

Even with that backing, apps like RobinHood have their dangers, according to Tara Falcone, a financial planner and analyst and the founder of financial education company ReisUP.

“Apps like that, especially ones that are reducing trading costs, or in this case having zero commission trades, are great from an accessibility standpoint,” Falcone said. “One thing that has previously kept a lot of small investors out of the investing game is the fact that they had to pay a broker. However, I do think that targeting the millennial generation, which is very instant-gratification driven, can be a little dangerous when you’re considering the mix of investments and different investment strategies that are available through an app like Robinhood versus through another fintech app such as Acorns or Stash.”

Read the reviews

This should be a no-brainer, but many of us forget the value of researching the many platforms that offer reviews for apps, especially investing apps.

Don’t end your research with reviews on Google, Facebook, or Yahoo, either. Try to read articles about each app and its products, as well as the customer reviews.

“There’s so many new tools out there, I think it makes sense to do a little research and maybe talk to some people who’ve used it in the past,” said Ben Carlson, director of institutional asset management at Ritholtz Wealth Management.

There are tons of great tools for investing and learning about investing, Matt Choi said. It’s a positive thing that we live in a time when the stock market has become so easily accessible to so many people.

“But if you want to be successful, then don’t forget to do your homework,” Choi said.