Millennials in today’s world are bombarded with the financial advice that many of our role models in our parent’s generation did not take. As they currently revers this and save and invest more and more, only 22% of 55+ year old workers have over $250,000 in investments and savings. Interpreting that in my own mind, that means 78% of people at this age are not set to retire comfortably, which is even more once you include the people in the $250,000+ category that have to use that entire balance to support a family for the foreseeable future. And still, as millennials, our lifestyles come into a direct path of criticism that by the age of 28, the majority of us still haven’t started a family and bought a house, living debt free.
The problem with this: student debt has risen an exponential amount, incomparable to that of our parent’s time. It is no longer feasible for the average person who wants to go to college to pay their way through education while excelling and applying all of the material learned from each course. Finding a solid career path without taking the college route is limited, forcing millennials that take this path to become overworked and underpaid, unless having the ability to spin off their own business through the knowledge they’ve learned over 10-15 years. But even with trying to balance student loan debt while enjoying what time you can in your twenties, you don’t have to go towards the extreme of living frugally and putting 80% of your income towards your debt, nor take the approach of pushing off debt and traveling the world because “now is the only time you will have to live your life.” Both of these approaches will leave you regretful at a later age, wishing that you a) had more fun while still saving a bit, or b) wondering how the hell you are going to avoid passing debt onto your kids.
The best solution here is quite simple. Of course, if the job you are currently in offers free education, tuition reimbursement, a 401(k) with or without a match, or a pension plan, these traditional options would lose you money if you weren’t to buy into them. Investing in these should be considered a necessity, and cutting your lifestyle by the negligible amount that it takes to contribute to these will cost you something as small as a night out a month. But, many millennials may not have the ability to contribute to these types of traditional investments in their current situation. Whether you are in college and on a tight budget, just getting out of college and still uncertain on where your career will land, or you are a young professional with a little bit of disposable income that you would like to put to good use, the following can help steer you in the right direction in terms of risking some money now for a solid reward in the future.
Ease of Use: 4/5
Knowledge Needed: 5/5 (none/beginner)
Stash is a new app on the market that allows millennials the ability to invest in a vast array of stocks through fractional shares, allowing you to own parts of companies such as Apple or Verizon Wireless. The app helps direct each user’s choice in stocks towards companies that they believe in, whether through prior knowledge, a movement that they feel strongly in, or their current portfolio and risk profile that they set early on. These categories include investments such as “Roll with Buffett,” “Robots Rising,” “Clean and Green,” and “Data Defenders.” These categories include fractional shares of multiple companies in the respective category, and by purchasing the “security” as the category is called, your stock performs against how all of these companies are performing in the stock market.
The app is highly simple to use. Upon signing up, you must provide a bank account and verify two micro-deposits that usually arrive in less than two days. This verifies that you have set up a valid bank account that may be used for depositing and withdrawing money. The app’s user interface is easy to navigate, and the homepage lays out your current portfolio, comparing your current investments, total return ($ and %), and your cash balance on hand. Discovering a new investment is as simple as browsing the I Want, I Believe, and I Like categories to find something that suits your investment strategy, whether it be short term or long term. Risk level of each security is visually shown, along with the dividend yields, expense ratios, and last price of the security you are viewing. If you do not want to bother yourself with these terms, you can easily skip right past them. At the same point, if you are a beginner and want to learn a bit about the stock market and the terms that go along with it, Stash has a useful built in glossary to help.
Stash allows you to deposit any amount of money on which you would like to into your account. A deposit takes ~3 days to reach your account when it is initiated by the user, which can be quite annoying to the instant gratification model we’re all so used to in America. Each purchase is not initiated until the end of the trading day, although a notification is sent once your purchase of each security has gone through. Withdrawing money is as simple as completing the opposite action of a deposit, and the money will be in your account in a similar time period. This money must be in your cash balance of course. One downfall with Stash is that automatic deposits cannot be set up currently (hopefully this will change in the near future), so you have to manually deposit money every time you wish to do so.
One of the best parts about Stash is that unlike traditional investment and brokerage services, trades are free to initiate. The first three months of each user’s use of the app is fee-free, and after that, the user is charge $1 per month. Once your account reaches $5,000, Stash will charge 0.25% of your account per year. Assuming that you keep contributing money to your account and increase your investments, this is a small price to pay for introducing yourself to the investing world. Once you reach a large amount of money and are comfortable with switching services, this may be a better idea depending on how well your investments are doing and how much control of your investments you would like to have.
Ease of Use: 4/5
Knowledge Needed: 2/5 (You’re making all of your own stock picks without advice)
Robinhood started on iOS before expanding to other platforms, and the app has built quite the community around millennial and independent investing in the stock market. I reviewed the app in more detail and a basic walkthrough of how to use the app here if you are interested. One of the first companies to allow investing in the stock market with a zero-commission trading model, the app offers free stock trading for any amount of money. Not only does this blow companies like e-trade and Scottstrade out of the water with $4.99-$11.99 fees for each trade initiated, the model allows younger people the ability to start investing early on with a smaller amount of money than they used to need.
Robinhood models the same sign up model as Stash. After linking a bank account, micro-deposits must be verified, and each deposit takes ~3 days to reach your account. Although money takes this long to transfer to your account, Robinhood offers automatic deposits, allowing you to take the thought out of creating a cash balance to act on investments when you hear about them. On top of this, an “Instant Transfer” function is in the works and is supposed to come out in the near future (fingers crossed). The app offers almost instant trading, allowing you to browse stocks that you are interested in. Buying shares of companies you are interested in is as easy as entering the amount of shares that you want and swiping straight up to initiate the trade.
For people who have a little bit of knowledge about different types of trading, or for those who learn, limit orders may be easily initiated through the app as well. This is explained in my previous review of the app that is linked above. This adds to the desire of learning more about the stock market while investing at a younger age, although a fair warning: picking individual stocks on your own does require research and a lack of emotion to help the possibility of making your investments profitable. Whether you are interested in day trading or in it for the long run, Robinhood makes both of these options possible.
Robinhood’s fee model by far excels all traditional methods of investing in the stock market. Securities and international market trading costs money, as well as wire transfers and check deposits. Electronic statements cost $0 to receive, although paper copies and confirmations will cost you money. A negligible fee is in place for trading activity of $0.000119 per share. For a starter investor who wants to put a small amount of money aside to diversify their portfolio, Robinhood is a no brainer, especially if you take an interest in the business world and want to invest in certain companies that may score big in the future.
Ease of Use: 5/5
Knowledge Needed: 5/5 (none, advice managed)
Betterment currently manages over $3 Billion with 125,000+ users, making it the largest automated investment service currently on the market. After providing some information about yourself, your lifestyle, and your goals, Betterment invests your money into diversified, low cost ETFs to help you reach the financial goals that you have set for the future.
Betterment is an all around investing model that allows you to not only create savings goals and investments for short, medium, or long term withdrawals, but the company easily allows you to roll over any previous 401(k) and IRA savings that you may have. The system is set up to easily start an IRA if you are interested in taking a traditional route with your savings before diversifying, and the company does a decent job of guiding your investments based on what diversification you want between stocks and bonds, as well as how long you want the money to be in the account with a monetary end goal in mind. There are both a mobile app and web-based site for ease of use, and automatic investments can be set to make saving easier than ever. Money hits your account within the next business day, and withdrawing money is as easy as requesting the funds back into your bank account. This is great if you need to retrieve your money for whatever reason, but if your returns are all negative, it can be a diminishing feeling when you withdrawal $400 of your original $500 with nothing to show for it.
Betterment allows you to adjust your portfolio of each investment as wanted, and the company uses more advanced balancing systems such as tax harvesting to help move your investments along. No previous knowledge of investing is needed, which allows ease of mind for many people. The service is more directed towards long term investing and goals, and the service boasts its ability to help customers reach their investing goals. Many services are offered with the company outside of basic stock investing, which makes the service worthwhile to look at if you want to start investing a little bit of money now to pay off in your future.
Betterment’s fee structure starts off at charging 0.35% of your balance while it remains <$10,000. Fees are reduced above this point, and automatic deposits help lower the cost of using the service to invest your money. Your first month is free with the company, and by inviting friends to use their service, additional time is available. Using this following link gets you not only 6 months free, but also gives me 30 days free. Just a nice thought, of course. Overall, the service is almost mindless and allows you to deposit small amounts of your income with barely noticing, adding up over time with little to no effort.
Ease of Use: ?
Knowledge Needed: 3/5
Prosper is a company specializing in direct, low cost access to high-yield consumer loans from creditworthy borrowers. The company allows you to invest your own, personally saved money to be offered to regular, everyday people that need a loan for whatever the reason may be. The amount of the loan is varied, and the money is loaned out to them in the form of “notes” that you buy, starting at a minimum of $25. Every single user with a minimum of 100 notes ($2,500 minimum investment) has seen a positive return from their investment.
Although I have not started using Prosper yet, this is next on my list. The site’s users see returns of 5-12% on their investments, and the user, you, has the ability to spread their loans over a range of credit rankings and risk profiles. The current 5-7 friends I have talked to that use Prosper to date have all seen positive returns that average ~7%, and as a borrower makes scheduled payments, they are deposited directly into your bank account. The company offers an ID theft guarantee, and their seasoned average return is at 8.89%. If you have a larger amount of money that you are looking for a larger and more reliable return on than investing in the stock market, the peer-to-peer investing service may be right up your alley.
Ease of Use: 3/5
Knowledge Needed: 2/5
If you haven’t heard about Bitcoin, the digitally decentralized currency has taken the internet by storm over the past few years. The decentralized system records each transaction between users on each user’s ledger, and the digital currency is limited to a finite number of 21 million bitcoins. This number isn’t set to be “mined” completely for another 60-100 years, and the value of each bitcoin denomination fluctuates based on the demand for the currency. This ultimately boils down to trust in the system, and although people prefer to invest in the US dollar as it is backed by gold, or gold because it’s a “physical” product, let’s be honest, our world is moving digital.
Although the system of bitcoin and how it came to be is a complicated thing to explain, this wiki will help answer questions if you are interested. The currency started trading at a miniscule amount of pennies, until a spike in recent years raised the price of the Bitcoin to over $1,000. Currently sitting around $450, the currency was originally used for transactions procured on the “dark web,” mostly ranging in illegal activity. Now due to mainstream appearance, the currency is becoming more widely accepted at retailers around the globe, and the system is still nontaxable from a user perspective. The currency was ignored by larger organizations to start, and as more popularity has come up, governments are heavily investing in the currency for diversity and investment reasons. The following banks have already or are set to be invested in Bitcoin by the end of 2016:
One major issue with investing in Bitcoin if you aren’t the most tech-savvy person is that many of the terms can be confusing, deterring people from initial investments. Many websites have tried to curb the knowledge gap of using the currency, protecting your investments in Bitcoin “wallets” or “vaults” that are stored on their own servers. Veteran and tech-savvy users mostly store their bitcoin in their own encrypted files on their computers, using multiple signature keys to gain access to any of the funds. With an hour or two of research, you can have a wallet set up and automatic investment ready to go for yourself.
Coinbase.com offers the ability to link a bank account and buy any amount of Bitcoin wanted, whether manually or on an automatic basis. The price of Bitcoin will fluctuate on a daily basis, but I have grown to build a positive and trustworthy feeling around the currency as it continues to gain global adoption by worldwide organizations. The following link will
Sending bitcoin to another wallet is free, 1% to buy bitcoin or convert to your local currency. By using the following link on Coinbase to start investing in the currency, once you buy $100 in Bitcoin, we both receive $10 of free currency. Coinbase charges a 1% transaction fee for buying Bitcoin with your local currency or transferring Bitcoin into your local currency. All bitcoin transactions between users are free. Bitcoins are currently accepted by large name brands such as Microsoft, Dell, Overstock, NewEgg, and multiple other services that offer airline tickets to gift cards. Bars and hotels have adopted the currency in certain parts of the world, and if you are interested in a select few who have profited majorly from the currency, start off with the Winklevoss Twins. The creator of the currency is still unanimous and has not been found, hoping that this currency system will spread to the people in a truly decentralized system. So far it’s working.
No matter what age you are, it is never too late to start investing. Non-traditional services such as the above are starting to curb the gap for the younger millennial that only has a minimal amount of money to invest, and by starting now, compound interest will do its job. Spare the $5 out of your paycheck that you won’t see leaving your wallet, and you will reap the rewards when you need to withdrawal money for that house in ten years, kid in fifteen, or retirement in 40. Savings accounts generate little to no return on the money that you have worked for, so do the extra research and put your money to work for you. It’s the only way to reach the lofty retirement goals you have set for yourself, your family, and your future kids.