This is Episode 7 of our Financially Boundless Podcast. You can listen to the full-length episode using the player, or read the transcript below the player.
Hi there! Good morning, good afternoon, or good evening, depending on when you’re listening to this podcast. This is another episode of the Financially Boundless Podcast, and it is going to be on the best investing apps of 2019. Plus, as an added bonus, I’m going to go into the best cash back apps and websites to earn you a little bit of money back on your purchases at stores or online.
Let’s get started. I’m going to talk in this podcast mostly about automated investing apps, not self-driven ones. These are apps that automate your investments for you and help you make investments on an auto-pilot basis. They’re not self-driven ones where you go on and buy your own stocks and shares, and you trade on your own on a commission basis. If you want to drive your investments on your own, I truly recommend Ally Bank’s investing product, Ally Invest.
This week, I didn’t take the time to go through and rate the different investment apps. I’m going to let you make the choice because everyone’s investment preferences are different – some people prefer to be more automated, where some people prefer certain features on their investment accounts. I’m going to let you make that choice.
I’m just going to go through a few that are my favorites and that are used in the industry and have good features [on their apps]. Like I said, we’re not making a best of and worst of list today, so you’re free to make that decision for yourself if you want to use one of these accounts.
Betterment touts themselves as simple automated investing. They offer an automated investing account, whether it’s a traditional investment account or a retirement account. There are also now offering a savings account with 2.38% interest, and they have a checking account coming soon. This is really a one-stop shop as far as investing and bank accounts go. They’ve greatly improved over the past few years. They never used to offer checking and savings accounts. It was really a simple investment account, so I really think they’re working on their service offerings and bolstering them quite a bit more.
You can diversify between stocks and bonds and choose your risk level in your investment accounts, and you can open multiple accounts or set multiple goals. You could set a goal for just a safety net or an emergency fund, etc. They’re really goal driven at Betterment: you want to reach a goal on that investment account, and you want to be able to achieve that goal. You can segregate your investment accounts this way so that you’re always achieving your goals.
Another thing Betterment does that I’m happy about is they participate in something called Tax Loss Harvesting. This is the practice of selling an asset that has experienced a loss and replacing that asset or that investment with a similar one. In the end, you’re offsetting taxes on realized capital gains and reducing your tax liability by reducing your investment income. I know that’s a mouthful. So what do I mean by that? The IRS, at tax time, allows you to offset realized capital gains with realized capital losses. So, if you gain something on an investment once you sell that investment, that’s a realized capital gain. If you lose something when you sell an investment, that’s a realized capital loss. Realized capital losses can reduce your taxable income by up to $3,000 per year, so Betterment participates in what they call Tax Loss Harvesting, which is the practice of selling an asset that has experienced a loss and replacing it with something similar so that you minimize the effect of any taxable realized capital gain. Capital gains are taxed a heavy tax rate, so we’d rather not have tons of capital gains come tax time. Betterment can help you with that.
Betterment also includes personal finance advice, although it is a bit automated, and they offer automatic rebalancing to maintain your target allocations when the market causes them to start shifting. This is a standard feature of most automated investment accounts. Additionally, their mobile app for iPhone and Android is really sleek. Their website is very sleek [as well], and their fees are very low.
Betterment’s fees are 0.25% per year on your average balance. That works out to be about $25 a year for every $10,000 invested. There’s no minimum balance to their accounts, which is huge because it allows you to get into investing even if you don’t have that much to invest
On higher balances of $100,000 or more, you’re charged a 0.40% per year on average balance fee. So that works out to about $40 per year for every $10,000. But you have to have at least $100,000 [to invest] to get to that fee level.
You can also elect to have a one-time call with a Certified Financial Planner (CFP). This is going to see you back at least $199 which I think is pretty steep. But some CFPs are already part of the Betterment Advisor Network, so when you’re looking at CFPs, if you’re going with a local one in your area, just ask if they’re part of the Betterment Advisor Network or use the Betterment website to look up professionals that are local to you.
That’s a real quick review of the Betterment accounts. If you need more information on Betterment, go to www.betterment.com.
The next app up on the list is M1 Finance. Truthfully, this is one of my favorite companies and they’re changing the way that people think about investing and the way they invest. Their fees are incredibly low (if there’s any fees at all – I’ll get into that in a second).
M1 Finance uses expertly crafted portfolios (they call them pies, as in pie charts), and they have hundreds of these that allow you to choose how you want to invest your money. You can invest in stocks or mutual funds, or you can invest in both. The website and the app include over 6,000 stocks and funds, and you can purchase any security you’d like regardless of price, because you have the ability on M1 Finance to purchase fractional shares. So, if you can’t afford a whole share of a company like Amazon or Apple because their prices per share are huge, and you might not have that much to invest, you can purchase fractional shares of that company at no extra cost.
They also have plenty of other features that many other finance companies don’t have. They offer the ability to borrow through an M1-branded line of credit, which allows you to borrow up to 35% of your portfolio, even if it’s a retirement portfolio. There’s no paperwork involved, there are no credit checks, you don’t have to deal with any loan officers, and you’re likely not going to get denied because, truthfully, you already have that money – you’re just borrowing it. This is borrowing at a low 4% annual percentage rate, so that’s lower than most car loans and mortgages, and definitely lower than lines of credit and credit cards.
They also offer an M1+ (plus) account; this is a higher tier account. We talked about no fees before, but this is their fee-based account. M1+ is $100 for your first year, which seems huge. But if you divide it up over the year, it’s not much more than some of the other accounts we’re going to talk about. Then, it’s $150 per year thereafter.
This also includes a checking account. Now this checking account you can get for free, but if you do it through them one plus account, you get 1.5% interest back on that checking account, which is huge. Not even the best online banks like Ally or Discover offer anything close to this on a checking account. I have never personally seen a 1.5% interest rate on a checking account. Plus, they offer a debit card that includes 1% cash back on all your purchases. (There are other free accounts online that do this. Discover Bank is one of them. I personally use Discover Bank and love it.)
If you’re getting 1.5% interest back on your checking account and 1% cash back on all your debit card purchases, that’s huge! If you use a checking account and you use your debit card all the time, you can easily make back that $100 or $150 per year fee and make money off the way they’re structuring the accounts. This M1+ account also claims to give you more control over how you invest with access to different trading screens. And, if you decide to go with the M1-branded line of credit, they give you a 0.25% interest rate discount on this as well.
If you’re really using the full suite of M1 products, the M1+ account might be for you. But either way, even if you don’t want to pay for the M1+ account, the M1 investment account is huge to have available for free and their app is great, their website is great, and their support people are great.
Financially Boundless Listener Bonus: Open an account through our link and receive a free $5 deposit in your new Acorns account!
Our next investing up is Acorns. Acorns is also one of my favorite investing apps (I have in Acorns account as well). The biggest feature that Acorns has that nobody else seems to offer is their “round up” feature: this allows you to link a debit card up to your Acorns account to round up your purchases. For example, say I go to the store later today and I buy $24.35 worth of groceries. The remainder of $0.65 on that transaction, Acorns is going to withdraw from my checking account and put in my Acorns investment account. Every purchase I make is rounded up and those fractions of a dollar are put into my Acorns investment account automatically, without any action on my part.
This is a huge feature because I have never found any other investing app or any other investing company that offers this. Now there are some larger banks out there, for example, Bank of America at one point offered something similar where they took these fractions of a dollar from their checking account and put them in your savings account. But I’ve never found a company that does this with investment accounts.
Plus, as an added bonus, Acorns also allows you to multiply these roundup deposits. For example, let’s go back to that $0.65 I just had from grocery shopping before. If I wanted to multiply that two times, Acorns would actually take $1.30 out of my checking account and put it in my Acorns investment account. (It’s an easy way to force yourself to invest and save!)
You can also do one-time deposits, like all the other investment accounts.
Another great feature of Acorns is that they have a pretty robust network of companies that participate in what they call Acorns Found Money. This is where this company will invest an extra percentage of your purchase with Acorns just for shopping at their store.
For example, (not sure if this is still going on) – Sam’s Club would throw $10 into your Acorns account just for opening a membership, and $2.50 in your Acorns account every time you spent $50 or more in their stores. This is on top of your normal roundups, and this doesn’t come out of your accounts. This is on the part of Sam’s Club or the merchant that’s honoring this offer – you’re just getting free money for shopping wherever you normally do. The Acorns Found Money program also has a Google Chrome Extension on your laptop or desktop that will allow you to get a pop up every time a website you’re shopping on will invest with Acorns on your behalf through the Acorns Found Money program. That’s almost unstoppable when you have that extension!
So far, I’ve made Acorns sound really good, so I’m going to give you some cons to Acorns since I’ve given you a lot of pros. On Acorns, you can only choose five pre-created portfolios that are expertly crafted by a Nobel Prize-winning economist. What this means is you don’t have as much freedom over what you’re investing in. These five different portfolios that are based on investment risk only, so they range from conservative to aggressive.
Additionally, Acorns‘ fee structure is very simple, with very small fees. They start with a $1/month account for just a normal investment account. This includes the Round Up feature and the Acorns Found Money program I mentioned before. (If you’re a college student, this account is totally FREE!)
Then, they go to a $2/month if you want the normal account plus a retirement account like an IRA. Their highest level, a $3/month fee, is if you want a normal account, a retirement account, and a checking account. (They also do offer a checking account as well, but it doesn’t have any cash back, and it’s not interest-bearing like we’re talking about at M1 Finance. So, while the fees are low, I don’t feel it’s really worth it, since there are no other advantages to speak of. There are plenty of other checking accounts out there, especially online, that will give you some sort of interest rate or some sort of cash back rate on a free account, and Acorns is charging you an extra $1/month to have a checking account that does none of that.)
The last investing app I want to talk about that is called Stash. It’s a bit more expensive than the others, but it has an award-winning app and was one of the early adopters of what we dub as “robo-investing”. Stash offers regular investment accounts with that Tax Loss Harvesting feature that we talked about at Betterment.
They also offer retirement and custodial accounts for children. They offer a checking account, as well, and this checking account has a cool feature that none of the other investing apps or websites have: it’s called “Stock-Back” which invests in stock when you make purchases with your debit card at that merchant. (For example, if you buy a coffee at Dunkin or Starbucks, they might buy you some fractions of a share at Dunkin or Starbucks, which is really neat. And it’s a way to get you involved in investing at really low levels.)
Stash is the most popular app that we’re talking about. Betterment and M1 Finance fall behind Stash in number of users and amount of money invested.
Their base account fee is $1/month for the regular investment account and the checking account with that cool “Stock-back” feature. Where Stash tries to get you, though: there’s no Tax Loss Harvesting on this investment account at the $1/month fee. For $3/month, that Tax Loss Harvesting gets added on. So really, you’ll want to pay the $3 per month because the Tax Loss Harvesting only betters you and your investments.
Now, the stash account also has $9/month tier, which is fairly expensive in my mind. But if you really want the full Stash suite of products, the $9/month tier lets you get everything. This is a regular investment account with the Tax Loss Harvesting, plus you get two custodial accounts if they’re needed for your children, and the checking account with the “Stock-back” feature. You even get a flashy metal debit card that earns two times the “Stock-back”, and a monthly stock market insights report.
If you’re curious about the Stash app, visit www.stashinvest.com.
If you stuck with me this long, we’re going to go through a little bonus section of the Podcast here where I’m going to talk about a couple of cash back rewards apps for shopping like you normally do. (These cash backups I want to talk about today are just for general shopping – in a future podcast episode, I’m going to talk about the best apps to get cash back on your grocery shopping. That’s a whole other subset category, so I want to dedicate a whole episode to that.)
The best one out there is eBates. eBates offers a certain percentage of cash back at hundreds of thousands of stores. They have a mobile app and a browser extension for most browsers on desktops and laptops. All you do is you click the link to shop through the eBates website, and a tracking cookie will make sure your purchases tracked. This usually works really well. Then, eBates is going to issue those rewards via direct deposit or check. It’s a very simple program. It’s totally free. It’s a great cash back program, especially if you do a lot of online shopping. It’s at www.ebates.com.
Another app that goes with the same concept is Dosh. Dosh has less stores on their app because it is still developing, but sometimes the cashback amounts are better on Dosh, and the stores are generally ones that are not listed on eBates. I really recommend using eBates and Dosh together.
On Dosh, there are no browser extensions, and you can’t use Dosh on your laptop or desktop. Instead, to track that you made the purchase, you add your debit and credit cards to the Dosh app. (It’s a one-way connection so they can only view purchases on your credit card or your debit card but can’t actually do anything with your accounts.) You really don’t have to do anything – you just use your credit and debit cards as you normally would, and Dosh automatically tracks those purchases.
It’s also worth mentioning that while eBates focuses on online shopping only, Dosh will also track your in-store purchases as well. Go to www.dosh.cash if you’re curious about that app.
And we’ll see you next Monday for another Podcast. Have a great week and thanks for becoming Financially Boundless with us!