Keeping our money in the bank comes natural to most of us, but investing does not. There are reasons why this is the case, such as perceived complexity, lack of understanding, fear of losing money etc. There are few options available currently that allow easy access and reduce complexity while at the same time allow people to get involved in the financial markets for what used to be a high cost exercise.
We often get asked:
‘I want to invest, what should I do?’
Usually, we need to assess whether you find it challenging to save money full stop. Sometimes that is the major issue, and hence at the end of the month there is simply nothing to invest. There have been few innovative approaches at helping people save, and Acorns has achieved a certain level of innovation in this arena. Acorns allows you to start saving by investing “spare change” and let’s you start building your investment account. For example, you buy a coffee that’s $3.50, Acorns’ round-up feature let’s you round that up to $4.00, by investing a small amount –$0.50 into your investment account by way of your linked checking account. A friend who never had an investment account or savings for that matter was able to save $200 within a month by just doing that. Quite impressive. Now there is a psychological effect there too, as once you see your account with at few hundred dollars, you may end up wanting to continue saving by yourself and just putting $200 or $300 in your account in one shot. That has been my experience with people that have an Acorns account.
Another set of people are those who have a full time job and a decent inflow of cash each month:
‘I save money myself and in the end of the month I have few hundred dollars I would like to invest. What should I do?’
You could still stay with Acorns and invest in their platform without using their round-up feature. Also, you may wish to consider Wealthfront and Charles Schwab. By placing your savings in their account you will be able to access diverse global investments. Schwab’s Intelligent Portfolios allow for some autonomy by allowing you to de-select certain investments. To be clear autonomy we speak about here is very limited. For example, in Schwab they will be the ones that replace certain ETFs you de-select with other ETFs that are relatively similar, but you will not be able to express views on certain sectors or have the authority to choose the new ETF.
The next group we come across are people that have invested before, but are interested in what we are doing. Usually their comments are along the lines of:
‘I already have an investment account. I own some stocks, ETFs and some mutual funds. What do you do with your money?’
These are usually people that are more sophisticated and are looking to invest less in global diverse portfolios and more into sectors and single stocks. Single stocks are not our investment of choice as we do not think we have the in-depth knowledge of each company and there may be too many idiosyncratic risks associated with them. However, in the ETF space we like to use our ETF Miner. It utilizes institutional data we get from our partners at Intrinio and First Bridge and we run them through our data processing tool to bring it to our clients in a user friendly streamlined fashion. The ETF Miner currently processes US ETF issuers (around 2,000 of them). To clarify, it only means ETFs are issued by US issuers, but they could be tracking other countries (for example iShares Mexico ETF: EWW). You might have a view and want to invest in an ETF that expresses that view, still in a diversified fashion. For example, Semiconductor ETFs may own multiple stocks of semiconductor companies, rather than putting more of your eggs in one basket and going with a particular semiconductor stock.
With the help of a personal financial advisor, you may find that the ideas noted above could be viable options for you to get involved in stock and bond investing. Depending on where you are in the world of investing, and whether you need help saving money you may want to first get started on the savings track and then proceed from there.