Intern introduces investing app
As is my occasional habit, I ask one of our interns to write an article. This week’s comes from Kody Nix. Kody is a Personal Financial Planning major at Texas Tech. Many in my industry consider Tech the Cadillac program in training future folks in the financial planning industry (and Tech doesn’t argue the point). So heeeere’s Kody… --Gary
By Kody Nix
College is a time to meet new people and try new things. When first getting to know new people, there are two questions I’m guaranteed to be asked. First: “Where are you from?” Followed by, “What is your major?” Most people have a general idea of where Wichita Falls is, but rarely do I run into someone who knows what it means to major in Personal Financial Planning. After I begin throwing around the terms insurance, investments, retirement, and credit,many people want to know how to start investing.
So where do you begin? Most of the people I’m talking to are either in their late teens or early twenties. For the most part, these are students who have little money to pay for the fees and costs associated with building a portfolio, so going to a financial advisor is not really an option for them. What most college students do have, though, is a smart phone and some sort of debit or credit card. With advances in technology, a smart phone and checking account are all you need to get started.
For example, Acorns, an app available to both Apple and Android users, isone of many investment apps available that make it easy for beginners who are new to the investment world. Starting at $1 per month,the app syncs with your bank account and will round up your purchases and invest the spare change for you. For example, if you spend$8.25 on lunch, Acorns will round that up to $9 and add the 75 cents to your Acorns account. Once you have $5 worth of round-ups, the app will transfer $5 from your checking account and invest it for you. There are no minimum distributions, no commission fees, and no penalties associated with Acorns. The app also allows for lump-sum and recurring deposits.
The app isn’t the perfect investment solution, though. One drawback: you can only invest intotaxable accounts. The app currently does not support investing in tax advantage or retirement accounts. In addition, if you’re only investing round-ups there is a possibility that the $1 taken out every month could be a large chunk of your savings, especially in the beginning when you aren’t investing much. Also, if a young person lets the balance of their synced bank account fall to zero, a $5 transfer could mean an overdraft fee. Lastly, like any other investment tool, there is a possibility to lose your money. Although the portfolios were developed with the help of Dr. Harry Markowitz, a Noble Prize-winning economist and founder of the modern portfolio theory, there are no guarantees with any investment product.
Even so, for students and others looking for an easy way to start saving and investing, there’s an app for that. Find the one that works best for you and get to saving.
This article was published in the Times Record News "Your Money" column on July 26, 2015.