Investing via Smartphone Apps

Smartphones offer easy and instant access to apps that can help you navigate the complex world of investing. However, the variety of financial apps offered to investors can be daunting, especially if you are new to investing. This information will help you understand some options when investing via smartphone apps and highlight things to consider before committing to app-based investing.

Thinking of using a smartphone app for investing?

What kinds of apps are available?

• Buying and selling investments: Trade stocks, bonds, and other investment products.

• Turning daily spending into investing: “Round-up” your daily purchases and take the “spare change” to automatically buy investments for a predetermined portfolio.

• Investing through automatic allocation: Direct a certain percentage of your income to an investment or retirement account.

• Assigning a portion of spending to invest: Monitor your spending and saving habits and assign a percentage of your overall spending to an investment account.

How can using investing apps be helpful?

How can investing apps be problematic?

Things to think about when using investing apps:

• Investing on autopilot: Putting an investment portfolio on cruise control may be attractive to people who think investing is difficult and complex. However, if you don’t pay attention to your investments or the services you are using, you may not be happy in the long run. Also, if you use several different apps, you risk over-complicating your finances.
• Cyber and data security: Read the terms of service and understand how the company will protect your financial data. With any online application, there’s a risk of being hacked. Check consumer reviews and internet searches for information about any data breach the app may have experienced.
• Customer service and access: If you have an issue with your account or the app, you’ll want to be sure that you have access to someone (a live human!) who can help you fix the problem. Be sure you are comfortable with the level of service the app provides, and read customer reviews.
• Fees: People are attracted to these types of services because they offer low-fee alternatives to traditional financial service firms. Being fee conscious is good, but a lower fee structure could mean less service and information. Read the fine print to determine what the total fees are for an account. Over time, these add up and impact your overall returns.
• Investment offerings: If the app is allocating money to investments for you, understand the investment products and track record of the investment management firm overseeing the products. You want to be comfortable with the types of investments an app is putting you into, the risk you are taking, and the fees being charged.

What can I do to avoid possible pitfalls of using financial services apps?

Be cautious, do your research and stay engaged.

Don’t use a smartphone app just because a friend suggests it to you. If you are new to investing, you may find yourself using an app that isn’t suitable for your needs or is fraudulent. Technology can make your investing life easier, but you should monitor and check in on your portfolio regularly. Being an informed investor will help you build the skills and knowledge you need to meet your long-term financial goals.

Your takeaway

Technology is rapidly changing the way we invest and manage our finances. When using online services or apps, be sure to use smartphone apps that you understand and fit your financial needs.

Through my membership with the North American Securities Administration Association (NASAA), Alerts and Advisories project group, we created NASAA's Millennial Money Mission. For more investor insights and advisories visit NASAA.org.