If you’ve just gotten your first $1,000 that’s free to invest, you might be freaking out a little bit. What are you going to do with that money? And how will you keep it growing so that you can continue to invest more for your future?
Well, $1,000 is a great start, but it’s not a ton of money. That means you can’t spread it out into too many different options. But you can prioritize the best ways to invest that thousand bucks. Here are some of the best ways to invest your first $1,000.
Overview: How and Where to Invest $1000
Paying off debt
Those with high-interest debt
High-yield savings account
Having control over where your money goes
Alternative, long-term investment
Those who don’t need the money right away
Safe investment to balance risk
Use a Micro-Savings app to both save and invest
Those who want to invest while shopping
1. Pay Off Debt
First, if you have high-interest debt, you’re likely best off putting your money towards that. If you’re paying 15% or more interest, you won’t likely be able to put your money towards an investment that out-earns that. So it’s best to pay off that debt.
The general rule of thumb here is that you first put enough money into an employer-sponsored account to get any matching option. Then, you put your money towards high-interest debt until that’s paid off. Once that’s done, you can move on to these other options.
2. Use a High-Yield Savings Account
If you don’t have any money saved for an emergency, put your $1,000 into a high-yield savings account for emergencies. This keeps you from going into more debt if an emergency does arise, so it’s a good idea. Look for a savings account with little to no ongoing fees and as high an APY as possible.
Here are a few of our favorite high-yield savings accounts:
Featured Savings Accounts
3. Put It Into a Tax-Advantaged Account
If you don’t have an employer-sponsored retirement plan, or if you can’t put this $1,000 in there, you should consider making your investment through an IRA. Tax-advantaged investment accounts can boost that amount and grow your money over time. Luckily, some of the options below, including some robo advisors, allow you to invest through an IRA, so you can get both good returns on your investment and tax advantages.
4. Try Your Hand At Investing In Stocks
You don’t want to invest your whole portfolio over time in stocks. But if you’re interested in trying your hand at stock investing, try it through a solid platform like E*TRADE, TD Ameritrade, or Ally Invest. These platforms let you make trades on your own, so you can see what it’s like to build your custom investment portfolio. You can also opt for a semi-robo advisor like M1. This one is free to use and lets you put together your portfolio of ETFs, which tend to be more stable than individual stocks but still give you the feel for putting together your investments.
But if you don’t know what you’re doing or just don’t want to deal with the time and energy it takes to pick good stocks, fear not. One of the best ways to have your money managed for you is by working with a Certified Financial Planner. The problem is, they’re hard to find (good ones, at least).
5. Start a Robo Advisor Account
If you want more handholding or to be hands-off with this starter investment, consider using a robo advisor like Betterment. With a dollar amount on the small side like this, Betterment is probably your best bet. It’ll let you set your investment preferences and forget about managing your account daily.
6. Use a CD For Mid-Term Savings
What if you want to put that $1,000 towards the start of some larger savings goal for the medium-term? Like buying a house or a car? In this case, you might consider putting it into a CD. If you know you won’t need it to be liquid for a set period of time, a CD can get you a good return on your investment without risking your capital as you will with many investing opportunities.
Read more: Best CD Rates
7. Buy a Treasury Security
If you have a higher income tax rate, you might get a better deal from a Treasury security versus a CD. They do tend to have slightly lower rates, but their earnings are exempt from state and local taxes. Before you decide to lock your money up in either option, be sure you do the math to get the best bang for your buck.
8. Put it in your kid’s 529 account
What if you’re already maxing out your retirement accounts or saving as much as you feel like you should? In this case, consider adding that $1,000 to a 529 college savings account for your kid. These accounts act as an IRA for education spending, so they’re a valuable way to save up now for those hefty college expenses you’ll see in the future.
9. Use a Micro-Savings App to Both Save and Invest
Did you know that you don’t even need to wait to accumulate $1,000 to begin investing? Naturally, there’s more you can do with your portfolio if you have that kind of money. But if you have been having difficulty accumulating it, or you have at least $1,000 and want an automated system to increase it, Stash Invest needs to be on your radar.
Stash Invest provides you with a debit card. You can set the card to use round-ups to make regular contributions to your investment account. For example, if you make a purchase for $9.15, your account will be charged the full $10, with $.85 going into your investment account. Multiply that by dozens of transactions per month, and you can easily see $20, $30, $40, or even $50 going into your investment account each month.
Stash Invest even makes investment recommendations for you. You’ll have the option to choose from more than 400 individual stocks and exchange-traded funds. They provide a portfolio model based on your risk tolerance, time horizon, and investment goals. They won’t manage the portfolio for you but will guide you toward creating one that works for you. As much as anything else, Stash Invest is an excellent introduction to self-directed investing, both helping you to accumulate funds for investment and then gradually helping you get your feet wet with managing your portfolio.
Read our full review on Stash Invest.
Start Keeping Track
Whatever you decide to do with that $1,000, be sure you keep the cycle going by keeping track of both your budget and your investments. One way to do this is with Empower, a platform that lets you pull all of your investing and spending data together into a single place. With it, you can watch your original investment grow, but you can also manage your budget to live on less than you earn and invest the rest.
How much interest will I earn on $1k?
To determine the interest you’ll earn on $1k, multiply 1,000 by the rate of return you expect. So, for example, if you expect a 6% rate of return, you’d earn $60 in interest by the end of the year (1,000 x .06 = 60).
How should I invest $1k to make 100k?
To turn $1k into $100k, you expect to 100x your investment. The best way to do this is to start with $1k and continue to invest at regular intervals over time. For example, if you started with $1,000 and invested $200 per month, every month, for 20 years and earned a modest rate of return of 6.5% (compounded monthly), you’d end up with just over $100k.
How can I invest $1k wisely?
To invest $1k wisely, you should open an account with a robo advisor and let them do the work for you. $1k isn’t enough to invest in most mutual funds or even some index funds, but it is enough to start investing with a robo advisor. This way, your investment will be broadly diversified and actively managed on your behalf.
What’s the best way to invest $1k short term?
The best way to invest $1k in the short term is to put it into an ETF or index fund that captures a wide scope of the total stock market (like VTI, for instance). Most brokers will allow you to open an account with $1k, but you might have to search for a fund that will let you buy in for $1k (many require a minimum investment of $2,500, for example). Alternatively, you can put the $1k in a robo-advisor account and let them manage it.
Having $1k to invest is more than many people have. Most Americans don’t have $1,000 to cover an emergency without going into debt. So consider yourself lucky in that sense. That’s why you want to make sure it lasts, and it’s invested wisely.
Related: Savings by Age: How Much to Save in Your 20s, 30s, 40s, and Beyond
Review our advice above, choose a safe, short-term investment, and keep a close eye on it. Your $1,000 investment isn’t going to get you to retirement by itself, but it can serve as a wonderful safety fund and a foundation for a larger portfolio.
Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.
In the past, investing was thought of as something only wealthy people did. And unfortunately, many people used this as an excuse to put off saving for retirement, saying they would do it when they earned more money.
But if you wait to start investing, you lose out on the benefits of compound interest and shortchange your retirement savings. So, it’s best to get started as soon as possible, even if you only have a bit of money to tuck away every month.
One of the easiest ways to invest money is by using micro-investment apps. This article will explain what micro-investing is, how it works, and six micro-investing apps we recommend trying out.
10 Best Micro Investing Apps
Micro-investing apps make it easy to get started with small amounts of money and learn the basics of investing. We’ve compiled a list of the best micro-investing apps on the market today. Whether you’re a beginner or a seasoned investor, you’re sure to find an app that fits your needs and investment goals.
Margin accounts, ETF’s, crypto
Great for beginners!
Robinhood aims to make investing accessible to everyone, which is evident in the fact that the company doesn’t charge any commission or management fees.
In addition, there’s no charge to open a brokerage account, and bank transfers are free as well.
The app is designed for beginners, so there is no confusing terminology, and the interface is easy to use.
Unlike other micro-investing apps, Robinhood lets you trade full stocks and cryptocurrencies like Bitcoin. However, it doesn’t offer mutual funds and bonds.
Check out our in-depth review of Robinhood.
2. Axos Invest (Formerly WiseBanyan)
or goal-based investing
You can get started with Axos Invest (formerly known as WiseBanyan) for just $1. The company doesn’t charge any trading fees for the most basic version. But if you upgrade to one of the premium versions, the company does charge fees.
Axos Invest focuses on goal-based investing, so once you sign up, you’ll be prompted to create your first “Milestone.”
Then, you’ll enter how much you want to save and by what date. From there, Axos Invest recommends how much you should save to reach your goal.
3. SoFi Invest
$0 for Automated Investing
$1 for Active Investing
Active and Hands-Off Investors
SoFi is a well known brand in the personal finance space, and their investing app is another high quality product.
This investment service provides users with the ability to either trade actively or opt for automated trading tools to take care of your account.
SoFi is geared towards trading in fractional shares, which they refer to as “stock bits”. This means the app is a solid choice for those wanting to invest their spare change.
You can also tap into savings accounts or make larger deposits to add more to your investment accounts.
$2 per month
Plynk is designed to guide your learning while you begin to invest. The Plynk app offers investors access to a selection of stocks, ETFs, mutual funds and four cryptocurrencies. And you can start investing with just $1.
One of the best things about Plynk’s platform is the straightforward, easy-to-understand language. You won’t find technical jargon or complex charts and tables.
The Plynk app also allows investors to easily set up dollar-cost averaging, which is an ideal investing technique for many new and experienced investors.
Active traders and investors
Webull is a stock trading app offering free stock trading as well as free trades on ETFs, options and cryptocurrencies.
Webull also allows users to trade fractional shares, making it a great choice for micro investing.
Webull provides users with plenty of powerful tools to assist with in-depth trading analysis, making it a solid option for active and experienced traders. Plus, setting up a Webull account is free and there are no account minimums to worry about.
$1 per month
or tax-advantaged retirement accounts
Stash is another hands-off micro-investing app designed for beginner investors. After you sign up, Stash will ask you a series of questions to determine your tolerance for investment risks. You will be labeled as a conservative, moderate, or aggressive investor.
One of the unique things about Stash is that you can choose the types of companies you want to invest in. So if there is a particular cause or type of company that you’re interested in, you can set that in your investing preferences.
After you’ve chosen the types of companies you’d like to invest in, you’ll set up your “Auto-Stash.” You choose how much you want to invest and how often.
(1-2% markup on crypto)
Public.com is a blend of both investment and social media platforms. It’s designed for younger and socially oriented investors who would like to own fractional shares of stocks and ETFs.
You can share ideas within a community of like-minded investors. You might think of it as a kind of investing social network.
The aim of Public.com is to create an inclusive and educational community focused on stock market trading and investment.
For young investors who wish to align their social and investing preferences, as well as learn from other investors, Public.com is a great option.
Low balance investors
If you’re looking for something a little more hands-on, then Betterment might be a suitable option for you. Betterment gives you the option to work with a financial advisor who can make investing recommendations.
There are two different plans to choose from, and the most basic plan doesn’t require any upfront balance to get started.
Betterment is a great option for anyone who wants an easy investing option while still maintaining a bit of control over their investment portfolio.
9. M1 Finance
M1 Finance might be the best micro investing app for more experienced investors. It is ideal for those looking for customized investment portfolios with some automated options, as well as those looking to set up commission free retirement accounts.
Purchasing fractional shares, setting up recurring deposits and extensive portfolio management options is easy with M1 Finance’s quality app. M1 Finance aims to be a singular personal finance app for building wealth and establishing a diversified portfolio.
Above all, M1 Finance makes investing easy. Simply deposit your funds, set your stock and index selections and use their automated service for commission free trading.
M1 Finance will also automatically rebalance your portfolio in accordance with your stated asset targets, to improve the overall performance of individual stocks.
$1 per month
(e.g., College Students)
If you want a hands-off approach to investing, Acorns will be your best bet. After you sign up, you’ll connect your credit card or debit card to Acorns.
Then, whenever you make a purchase, Acorn rounds it up to the nearest dollar and deposits that “spare change” into your investment account.
For instance, if you make a purchase of $9.67, Acorns will save the additional 33 cents for you. Once your Acorns account reaches $5, the company will invest the money for you.
Acorns also gives you access to a robo-advisor, IRAs, and even a checking account.
What is micro-investing?
According to one survey, more than 47% of Americans are not saving for retirement. When pressed about their decision not to invest, over 34% said they don’t have enough money to invest.
The basic premise behind micro-investing is that you only need a few dollars to start investing. When you use a micro-investing app, you invest in very small increments by buying fractional shares.
With a micro-investing app, you can invest as little as $5. And with micro-investing, you don’t have to know anything about the stock market. The money you save is put in a portfolio of stocks that the company creates for you.
Is micro-investing even worth it?
Micro-investing will not get you rich, and it’s not going to help you fund your retirement goals. For that reason, it’s easy to write micro-investment apps off as not being worth your time.
But every day you put off investing is one less day that your money can grow in the market. So, you can wait until you feel like you have “enough money,” or you can work with what you have today.
Here are just a few benefits of using a micro-investing app:
Invest with very little money: Micro-investing platforms allow you to invest, even if you only have $5 to spare. So if you can skip your morning latte, then you have enough money to give micro-investing a try.
Save it and forget about it: It’s hard to set aside money in a savings account. You know it’s there, and it’s easy to access and spend. With a micro-investing app, it’s easy to save your money and forget about it.
Build positive habits over time: Anytime you’re trying to build a new habit, it’s best to start small. Micro investing allows you to ease into investing, and you can start saving more money when you’re ready.
See also: How to Invest: A Basic Guide to Making Your Money Grow
Pros and Cons of Micro-Investing Apps
While it’s true that micro-investing provides many benefits, they’re not necessarily the right choice for everyone. It’s worthwhile taking the time to understand the all nuances before committing financially.
Using a micro investing app allows you full access to your investment account around-the-clock. You won’t ever have to worry about opening hours or holidays getting in the way of your ability to monitor and manage your funds.
Easy Fractional Investment
Traditional investment in stocks and ETFs requires large amounts of funding, but micro investment means you purchase fractional shares quickly and easily. This means you can begin your investment portfolio with your spare change, rather than hundreds or thousands of dollars.
Low Account Minimums
Another factor which makes micro investment apps attractive are the low account minimums. Most micro-investing apps have $0 minimum balance requirements, so you can begin investing with as little as you wish.
As with traditional investment accounts, legitimate micro-investing platforms will be registered with the U.S. Securities and Exchange Commission. On top of that, all savings and checking accounts with micro investing companies are FDIC insured.
Fees Can Be High
Account fees can vary, so it’s important to watch out for this. Don’t assume that an account with low minimums will also have low fees. If you’re only investing small amounts, paying high fees might not seem like a good deal in the long term.
Limited Investment Choice
Most micro investment apps won’t allow you to handpick the stocks inside your portfolio. While you will have choice regarding which set portfolios you invest in, you’re less likely to be able to pick and choose specific stocks.
Won’t Change Your Retirement Plans
One thing to keep in mind is that using a micro investment app won’t do much to affect your retirement on its own. It’s more about learning good investment habits, and getting familiar with maintaining and growing a portfolio.
Features of the Best Micro-Investing Apps
So, how do you decide which micro investing app is the right one for you? We’ve compiled a list of the most important features below to help you know what to look for. The best micro investment apps will have the following qualities:
Ease of Use
Fundamentally, the best micro investment apps will be easy and intuitive to use. They are often free of the usual clutter and jargon of some traditional brokerage accounts. With simple, easy to navigate interfaces these apps should provide an enjoyable user experience for all.
Low Minimum Investments
Good investing apps should allow you to access the market with just a few dollars. This is possible because they’re designed to allow you to purchase fractional shares of ETFs and other assets. Not all investing apps will come with a low minimum investment, however, so be sure to check if you’re a low budget investor.
The best investing apps will provide users with the chance to invest in diverse portfolios which are automatically generated. Asset allocation and diversification can be challenging even for experienced investors, so this is a great feature of these apps.
When you’re starting out as an investor, the sooner you can learn about diversification the better. And these apps should make it relatively easy for you to both practice and learn about asset diversity.
As most micro investing apps will be marketed to newcomers, education is an important factor. If you’re just starting out with investing, then the best micro investment app for you will likely provide a wealth of educational resources and advice.
Keep in mind, however, that most micro-investing apps won’t offer access to a professional financial advisor.
The best investing apps allow you to easily set up automatic transfers from your bank account to fund your investment account. A recurring transfer can remove some of the human error involved in managing your account and allow you to quickly build up a habit of funding your account.
While some apps are minimalist and simple, others come with the option of additional financial services. In addition to brokerage accounts, some offer access to a savings or checking account, as well as IRA and custodian accounts. Depending on your own financial goals, an app with additional services might be worth the extra fees.
Micro-investing apps make it simple for anyone, even those with just $5 to spare, to begin investing in the stock market. The apps we’ve covered in this article provide a great starting point.
While micro-investing might not cover all your retirement needs, it’s a smart way to begin saving, especially if your budget is tight. The crucial thing is to start investing and gradually increase your contributions over time. This way, you’re setting yourself up for a better financial future.
Frequently Asked Questions
Which micro investing app has the lowest fees?
Among the micro-investing apps listed, Robinhood, Axos Invest, SoFi Invest, Webull, Public, and M1 Finance all offer commission-free trading, which means they do not charge fees for buying or selling stocks and ETFs. So, you can consider any of these apps if you’re looking for a platform with low fees for micro-investing.
Which app is best for small investments?
Choosing the best app depends on your own budget, needs and goals. The market for micro investment apps has grown rapidly, and there are a lot of different options out there.
The list we’ve compiled in this article are our top picks, and are among the best micro investing apps available. These apps make it easy and convenient to begin investing. They also provide various unique features, low fees, good customer support and educational resources.
Who should use micro investing apps?
Micro investing apps are a fantastic way to begin investing small amounts while you learn the ins and outs. But who will benefit the most from using these apps?
Beginner investors: These apps are perfect for young investors and newcomers because you only need a small amount of money to start.
Passive investors: Most of them are actually robo-advisors which invest on your behalf based on your needs and budget. This automated investing allows you to establish a diversified portfolio based on your goals that you can simply set up and forget about, letting it work away in the background.
Emotional investors: Automated investing means you can’t make rash emotional decisions based on market swings. Instead of constantly worrying about market performance, you just invest small amounts and build your portfolio slowly over time.
Can you get rich from micro investing?
Micro investing is primarily a strategy for saving and building wealth gradually over time. While it’s a valuable tool for starting your investment journey with small amounts of money, it’s important to have realistic expectations. It’s unlikely to lead to rapid wealth accumulation or “getting rich” in a short period.
How do I start micro investing?
Investing today is more accessible than ever before. Nevertheless, it still seems an intimidating world for those who have no experience or education. If you don’t know where to start, you can follow these steps to begin investing with confidence:
1. Decide Between DIY or Automated Investing
If you’re not yet comfortable choosing your own investments, and managing your own portfolio, you’ll want to start with robo-advisor investing. It’s totally normal for beginners to feel uncomfortable choosing stock to invest in, and automated investing is the safer option in any case.
2. Identify Your Investment Goals
This is often the hardest step for new investors, but it’s one of the most important. Figuring out your short and long term financial goals will help bring purpose and structure to your investment decisions.
Generally speaking, investing is successful when considered a long term project. You’re much more likely to find success with investments by holding stock long term, rather than trying to figure out when the best time to buy or sell is.
3. Determine Your Monthly Investment
The traditional advice is to save and invest 20% of your monthly income. With the rise of micro investing, however, you don’t even need to invest much to begin with.
It’s important to pick an amount you can reasonably commit to. Of course, you can always change your automatic investment amount, or just add on extra when necessary, but it’s always better to set it and forget it. Even if it’s a small amount, consistency and time and the key ingredients to good investing.
4. Choose an Account That Fits Your Goals
Once you’ve got your budget and goals determined, it’s time to choose a platform to begin investing with.
Keep in mind that you can always switch the platform you use for micro investing, use more than one, or even open a brokerage account. Just make sure to take all fees into account before you sign up and get committed.
Are there any limitations on the types of investments I can make with these apps?
Micro-investing apps typically focus on stocks, ETFs, and sometimes cryptocurrencies. While they offer a wide range of investment options within these categories, they may not provide access to more complex financial instruments like options, futures, or mutual funds.
Most of us have hopes and plans for the future, and they often require a degree of financial success. Whether your aspiration is relatively small and close to home (say, hosting an amazing 30th birthday party for your sweetie at their favorite restaurant) or considerably grander (owning multiple homes and retiring by age 50), it takes planning and discipline to achieve them.
In a nutshell, smart money habits can start you on the path to achieving financial success and realizing your dreams. Adopting small (and repeated) changes in behavior can be one way to start building good financial habits that can last a lifetime.
Read on to learn six of the most important money habits that can help steer you to financial success and realizing your money goals.
Why Good Money Habits Matter
Good money habits can set you up for financial success. They act like guardrails, keeping you moving towards positives (like an impressive retirement fund) and away from potential challenges (say, too much credit card debt). They are, in fact, similar to other wise habits in your life, whether that means eating well, exercising regularly, not staying up too late watching Netflix, or remembering to call your folks often.
Yes, good habits can require some time and energy to establish, and then you likely need to maintain focus to stay on track. Some will become second nature or no-brainers; others may require more ongoing effort. But by sticking with them, good money habits can guide you to help manage your personal finances well, make smart decisions with your funds, and achieve your future goals.
💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.
6 Good Money Habits to Adopt
Here’s a closer look at six key money habits that can help you develop financial success.
1. Set Financial Goals
Formulating your financial goals can be an important step. Goals can guide you as you go about building a financial plan for the years ahead.
One person’s goals might be to pay off their student loans and save for a down payment on a house; another might want to sock away enough cash to start their own business down the road; and yet another might want to achieve a lifestyle where they can pay for their child’s college education and take ski vacations every winter.
Putting pen to paper or opening a document on your laptop can be a helpful way to focus and define specific financial goals to work towards. This can give you clarity and boost your motivation vs. simply saving in the abstract.
Once you have goals in mind, you can begin saving toward them and tracking your progress.
2. Budget Well and Track Your Spending
If you are just winging it in terms of your finances, it’s probably wise to prioritize setting up a budget. The word “budget” can cause a knee-jerk reaction because it smacks of deprivation (as in, no more lattes, ever!) but that’s not what it’s about.
Rather, a budget involves understanding how much money you have coming in and where it’s going (typically towards spending and saving). It can help you be more aware of your finances and balance them, too.
Out of the various techniques, the 50/30/20 budget rule is a popular option. It spells out that 50% of your take-home pay goes towards your needs (housing, food, and healthcare, for instance), 30% towards your wants (dining out, those lattes mentioned above, travel), and 20% towards savings.
There are plenty of other different budgeting methods to try and tools you can use to track your spending, which is an important facet of good budgeting. Your bank may even offer a convenient system for this. By tracking your spending, you can see where you may be spending too much (say, your once-a-week takeout habit has crept up to four times a week), be more mindful with money, and optimize your finances. Perhaps you can put more towards debt payments, for example, than you realized.
It can also be wise to get in the habit of checking in with your money regularly; many people find that a couple of times a week is a good frequency.
💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
3. Consolidate Debt
As you work on your budget, you may want to cultivate another money habit to develop financial success. That involves dealing with debt.
This might mean paying off credit card balances in full and making all other necessary debt payments on time, such as mortgage installments and student loan payments. Calendar reminders can help ensure that all payments get made on time, as can automating your payments (more on that below). It may even help to arrange to have all payments due on the same day. Some lenders are willing to move a monthly due date.
If you have student loan debt, you might look into refinancing options. You might, say, be able to lower your monthly payment, though that could extend the term of your loan and cost you more in interest over the life of the loan. However, doing so may be the right move for some people. (Also keep in mind that if you refinance federal loans as private student loans you will lose access to federal benefits and protections.)
Facing and managing your debt is an important step, regardless of the specific solution you decide upon. It’s a habit that allows you to take control of your money. And it can keep your debt-to-income ratio low, which can be an important factor when you want to borrow money at as low a rate as possible.
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4. Know When to Consider Balance Transfer vs. Personal Loans
Building on the idea of consolidating debt is the next financial habit. This one involves knowing the warning signs when your debt is getting uncomfortably high and then taking steps to rein it in.
Sometimes, the steps above aren’t enough. If that’s the case, it’s wise to consider your options vs. taking a wait and see approach. Currently, credit card interest rates are over 20% which can be hard for some people to pay off.
So if you see your balance rising to a level you are worried about, consider the following options as you take control of your debt:
• You might try a balance-transfer credit card, which can give you a reprieve from high interest accruing for a period of time (often 18 months), allowing you to pay down your debt.
• You might consider taking out a personal loan and using those funds to pay off your credit card debt. The goal here is to have a lower monthly payment on the personal loan than what your credit card bill amounted to.
• Contact a nonprofit credit counseling service, such as the National Foundation for Credit Counseling, or nfcc.org. Getting in this habit before debt gets deeper can help you in the long run.
5. Automate Your Finances
It can be a good idea to save money right after getting paid — before the cash sits in checking long enough to spark the urge to spend it. So why not make it simple and save automatically upfront?
A person interested in saving might begin by automating just one kind of transaction. For example, they may opt to have $50 moved from a checking account to a different savings-oriented account each month. If that money remains unspent each month, those monthly automatic savings would total to $600 at the end of the year.
That could be a good way to start an emergency fund without expending much effort. You can also automate payments of, say, your utilities and housing costs or your car loan. Paying bills on time this way can help build your credit.
There are also numerous ways to automate your investments. A workplace plan, like a 401(k), may already be doing this. For someone who’s on their own, mutual funds can make auto-investment really easy. Alternatively, a robo-advisor service can automatically invest contributions on behalf of the investor. (Note: This automation may be challenging for those paid irregularly, such as freelancers and seasonal workers.)
By embracing automation, you can nail an important money habit. You can pay yourself first and stash cash away in savings. And you can avoid such bad money habits as not saving enough, paying bills late, or forgetting to pay them at all.
Recommended: How to Become Financially Independent
6. Investing Early and Often
“I invested too much money for retirement,” said no one, ever. Arguably, there’s no other financial goal that requires more habitual action — spread over decades — than saving and investing for retirement.
It can be tempting to push off planning for retirement until tomorrow. After all, when someone’s in their 20s or 30s, retirement is likely decades and decades away. Psychologically, it’s simple to presume that it’s just not worth thinking about in the now.
But, for many, retirement can be one of life’s biggest and most important expenses. It can secure your comfortable future. Investing early, often, and wisely, can help accomplish that goal.
Adopting this habit ASAP can be a big help; it allows for more time for money to grow via compounding. Compound returns are earnings on both the original amount invested (the principal) and the money earned via investing (the profit). The more months (or years) a person invests, the higher the potential for profits to compound. Note: It is important to note that all investing carries risk as the stock market can fluctuate.
Being consistent about moving money into your portfolio is important, too. Luckily, there are easy and affordable ways to get started investing. First, open an account, like a brokerage or a retirement account. (Investing in a 401(k) also counts as investing.) Then, investors can purchase investments like stocks and funds to achieve their goals. Or investors can use an automated investing service.
Building good financial habits can be rewarding. There are more technological tools than ever to help with budgeting or expense tracking. From digital apps to automatic investing, building healthy financial habits has never been more accessible.
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As anyone savvy in personal finance knows, it’s never too early or too late to start thinking about retirement. An individual retirement account, or IRA, is a retirement account that allows you to save money for your golden years in a tax-advantaged way.
There are several types of IRAs—Traditional, Roth, SEP, and SIMPLE—with varying rules and benefits. With the right account, you can grow your savings, manage your tax burden, and prepare for a comfortable retirement.
6 Best IRA Accounts
Check out our top 6 picks for 2023‘s best IRA accounts. Let’s examine each one so you can decide quickly and easily which is best for you.
Charles Schwab offers one of the best IRA accounts available thanks to its superior customer service. The company offers 24/7 customer support as well as extensive resources about retirement planning.
Charles Schwab recently eliminated its commissions on stocks, EFT, and options trades. Standard trades are $4.95. So, you can begin investing commission-free, and there’s no account minimum to get started.
The company also offers a robo-advisor called Schwab Intelligent Portfolios. The company will invest your money in up to 20 different asset classes at no annual charge.
This feature alone makes Charles Schwab one of the best options for new investors and anyone who is looking for a low-cost investing option.
Merrill Edge is one of the best brokerages for hands-on investors. The company is owned by Bank of America, so it’s a great option for anyone who is already a customer of the bank.
And this means Merrill Edge customers also have the option to receive in-person customer service. If you live near any of the bank’s locations, you can receive in-person assistance at the bank.
Merrill Edge offers unlimited $0 online stock and ETF trades with no trade or balance minimums. The company also offers mutual funds for $19.95 per purchase, though some mutual funds are available for free.
And the online broker doesn’t have a minimum deposit requirement to open an account. So, it’s an excellent option for new investors and anyone who is looking for in-person customer support.
Betterment works to automate and simplify the investment process and offers traditional, SEP, rollover, and Roth IRAs. This robo-advisor makes managing your IRA extremely hands-off while helping you save money on excessive fees.
What’s the pricing structure like?
You have two levels of service to choose from. The first is the Digital level, which comes with a 0.25% annual fee and no minimum balance. So if your first year’s balance is $5,000 your fee would be $12.50.
Because Betterment is a robo-advisor, it offers automatic rebalancing so that you’re always hitting your target allocations, even with a shifting market.
Their portfolios are globally diversified, and you can adjust your risk tolerance based on your preferences. Plus, Betterment implements automatic tax-loss harvesting to boost your after-tax returns.
Need to talk to a certified financial planner?
No problem, you can chat online with a licensed expert with no limit on the number of questions you ask. If you want even more advice and support, you can upgrade to the Premium level. The annual fee jumps to 0.40%, and you’ll need at least $100,000 to start your retirement account.
But you get holistic advice on all of your financial questions, not just those related to your Betterment investments. So in addition to chatting about retirement, you can also talk to your advisor about joint financial goals with your spouse.
You can also discuss college savings plans for your children, and new and existing investments.
If you’re interested in a “set it and forget it” mentality for your IRA, Betterment certainly provides that option.
Ally Invest is a great option if you’re just starting to build out your IRA rather than rolling over existing funds. It’s also directed to individuals who want to manage their own investments.
There’s no account minimum to get started, and you can choose from multiple types, including Roth, traditional, rollover, SIMPLE, and SEP IRAs.
Account fees are fairly limited as well. You don’t have to pay anything to set up the account, and there’s no minimum account opening, so it’s easy for anyone to start saving. Ally also doesn’t charge an annual fee or an inactivity fee.
There’s a $50 fee if you decide to terminate your IRA account with Ally Invest. If you transfer your funds, you’ll have to pay an additional $50 as a transfer fee — plus the first $50 termination fee. There’s also a $50 conversion fee if you want to change from a traditional IRA to a Roth IRA or the other way around.
If you’re an active trader even with your IRA, then you’ll appreciate Ally’s low trading fees.
Stocks and exchange-traded funds (ETFs) are $4.95 per trade, but you can get that lowered to $3.95 if you trade at least 30 times each quarter or have a balance of $100,000 or more. Options fees start at $4.95 each plus $0.65 per contract, and that price also lowers with heavy quarterly trading activity.
If you don’t want the burden of actively trading your IRA portfolio, then look elsewhere for an IRA account. But if you like handling your investments regularly, then Ally Invest could be a strong contender for your IRA account.
Wealthfront is a robo-advisor that’s growing quickly. Your first $10,000 is managed for free. Thereafter, you’re charged an annual management fee of 0.25%, regardless of how much you have in your account.
You do have to open an IRA with at least $500. The more friends you refer to Wealthfront, the more you access free services, like getting an additional $5,000 managed for free. You can choose from a few different IRA types, including traditional, Roth, SEP, and rollovers.
Where does Wealthfront shine?
The answer is in retirement analytics. Wealthfront has a retirement planning tool called Path. It lets you integrate your various retirement accounts across financial institutions so you can see an accurate and comprehensive picture of your overall retirement plan.
Wealthfront economists use projects for things like inflation and Social Security to help plan for a realistic future.
Considering a major life event or financial change?
Wealthfront’s Path program lets you see potential impacts of these types of scenarios, so you’re not surprised at how your retirement savings are affected. Plus, like other online robo-advisors, all Wealthfront investments provide tax-loss harvesting and portfolio rebalancing.
You don’t have to worry about tracking individual stocks and funds. Instead, you get to invest passively while Wealthfront’s analytics keeps track of your portfolio. With IRA options and other tools at your disposal, Wealthfront is a solid choice for hands-off retirement investing.
E*TRADE offers a ton of financial products, and their IRA offerings are straightforward with low fees.
There’s a great balance of getting access to in-depth research and resources, while also having the option to let E*TRADE take on your account management.
You can choose from a traditional IRA, Roth IRA, rollover IRA, or one-stop rollover IRA. That last one lets you transfer existing IRA funds in a diversified ETF that is managed by professionals.
This adaptive portfolio takes advantage of the automation processes. It requires a $5,000 minimum deposit to get started and comes with an annual advisory fee of 0.30%.
If you’re an avid ETF trader, you can trade for free on more than 100 funds; otherwise, it’s $6.95. Like Ally, that number drops if you make 30 or more quarterly trades, costing just $4.95 per trade at that point.
Stock trades also cost $6.95 each, with the same discount available as ETFs. Fees vary on mutual funds, but E*TRADE offers more than 4,400 no-transaction-fee mutual funds.
If you’re happy working with certain restrictions on the funds you choose, you can get away with a lot of fee-free trading via E*TRADE. Plus, you don’t have to worry about a minimum opening balance for most IRA accounts.
The company has been around for decades and consistently gets strong ratings from external sources, so they have a strong reputation in the industry, which can be comforting for beginning investors.
Understanding Different Types of IRAs
Now that we’ve explored the best IRA accounts of 2023, it’s crucial to understand the differences between the various types of IRAs. Each one comes with distinct advantages and rules tailored to unique financial circumstances and retirement goals.
Whether you’re just starting your retirement journey or you’re well on your way, familiarizing yourself with these options can help you make informed decisions about your future. Here, we delve into Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs.
Traditional IRAs provide a way to save for retirement with tax-deductible contributions. The contributions you make to a traditional IRA may lower your taxable income, meaning you’ll pay less income tax in the year you make the contribution.
You’ll pay taxes on your withdrawals in retirement. This type of IRA might be beneficial if you anticipate being in a lower tax bracket during retirement than you are now.
With Roth IRAs, you make contributions with after-tax dollars. This means you pay income taxes on contributions upfront, but qualified withdrawals in retirement are tax-free. Roth IRAs are attractive if you expect to be in the same or higher tax bracket in retirement.
Additionally, Roth IRAs don’t have required minimum distributions (RMDs) during the owner’s lifetime, a feature that can provide significant tax advantages.
SEP (Simplified Employee Pension) IRAs are for self-employed individuals and small-business owners. They work like a traditional IRA, allowing you to contribute pre-tax money, which grows tax-deferred until you withdraw it in retirement.
SIMPLE (Savings Incentive Match Plan for Employees) IRAs are also for small businesses and self-employed individuals. They offer higher contribution limits than traditional and Roth IRAs but come with mandatory employer contributions.
Criteria for Selecting the Best IRA Accounts
As you embark on IRA investing, there are a few key factors you should consider when selecting the best IRA accounts.
Fees: Look for IRA providers with low or no annual account fees, low expense ratios on mutual funds or exchange-traded funds (ETFs), and no transaction fees. Even small fees can add up over time, eroding your investment returns.
Investment options: The best IRA accounts offer a broad array of investment options, including mutual funds, index funds, ETFs, bonds, and individual stocks. More options mean more opportunities to create a diversified portfolio.
Minimum balance requirement: Some providers require a minimum deposit to open an account, while others don’t have account minimums. This can be a barrier for new investors who want to start small.
Customer support: Excellent customer support can be invaluable, particularly if you’re new to investing. Look for providers that offer easy-to-use platforms, comprehensive educational resources, and responsive support.
Additional services: Some IRA providers also offer services like automated investing, financial planning, and wealth management, which can help you craft and stick to a retirement savings strategy.
Taxation: Understanding how different IRAs are taxed can help you optimize your retirement savings. For instance, traditional IRAs provide a tax deduction on contributions, but you’ll pay taxes upon withdrawal. Roth IRAs, on the other hand, don’t offer a tax deduction on contributions, but the growth and withdrawals are tax-free.
How to Open an IRA Account
Opening an IRA account is a fairly straightforward process, similar to opening a regular savings or brokerage account.
Choose an IRA provider: Decide whether you prefer an online bank, an investment firm, a robo advisor, or a traditional bank for your IRA. Each of these financial institutions offers unique benefits, so choose the one that fits your needs best.
Decide the type of IRA: Choose between a Roth IRA and a Traditional IRA based on your current income, future income predictions, and tax considerations. If you’re self-employed or a small business owner, you might consider a SEP or SIMPLE IRA.
Open an account: Visit your chosen provider’s website and select ‘open an account.’ You’ll need to provide some personal information, including your Social Security number, date of birth, mailing address, and employment information.
Fund your account: Decide how much you want to contribute to your account. Be mindful of the annual IRA contribution limits set by the IRS. You can fund your account through a transfer from a bank account or rollover from another retirement account.
Select your investments: Choose how your money is invested. Depending on the provider, you might be able to choose individual stocks and bonds, or you might select from a list of mutual funds or ETF trades. Some providers also offer target-date funds, which automatically adjust your asset allocation based on your age and retirement timeline.
Set up automatic contributions: If possible, set up automatic contributions to your account. Regular, consistent contributions can help your retirement savings grow over time.
Remember, it’s essential to regularly review your IRA to ensure it aligns with your retirement goals. Over time, you may need to adjust your contributions or rebalance your investment portfolio.
Common Mistakes to Avoid When Investing in an IRA
Procrastinating on opening an account: The sooner you open an IRA and start contributing, the more time your money has to grow. With the power of compounding, even small contributions can grow significantly over time.
Not contributing enough: Try to contribute the maximum amount to your IRA each year to take full advantage of the tax benefits and growth potential. If you can’t afford the max, aim to increase your contributions over time.
Investing in high-fee funds: Fees can eat into your retirement savings. Be sure to understand the expense ratios, management fees, and any transaction fees associated with your investments.
Not considering your tax situation: The tax benefits of Traditional and Roth IRAs are different, so consider your current and future tax situation when choosing an account. If you anticipate being in a higher tax bracket when you retire, a Roth IRA may be a better choice since withdrawals are tax-free.
Ignoring the income limits: Roth IRAs have income limits that can affect your ability to contribute. If you earn too much, you may be unable to contribute directly to a Roth IRA, though you might still be able to contribute to a Traditional IRA or execute a backdoor Roth IRA conversion.
Failing to update your beneficiary designations: Life changes, and so should your beneficiary designations. Make sure to review them regularly, especially after major life events like marriage, divorce, or the birth of a child.
When it comes down to picking your IRA account, two of the most important factors are cost and your preferred management style. The two generally go hand in hand.
Do you want a DIY IRA that lets you do your own trading? You’ll need to compare online brokers and robo-advisors that offer free trades or lower-cost trade fees based on your trading activity.
Prefer a hands-off style? Think about how much money you’re likely to invest in the near term. Then, pick an IRA account that lets you go on autopilot while charging a flat annual fee.
For these types of IRA accounts, you’ll definitely want to dig deeper into how the financial advisors’ portfolios are chosen and whether their investment styles agree with your own.
Having any type of IRA can help you prepare for retirement. You can always transfer or roll over your funds into another IRA. However, choosing the best account in the first place can help prevent unnecessary fees.
And once you’re ready to retire, you’ll have a healthy nest egg helping you to finance your daily expenses.
Frequently Asked Questions
What is the maximum contribution limit for IRAs in 2023?
The maximum contribution limit for IRAs in 2023 stands at $6,500 for individuals who are under 50 years of age, and it’s $7,500 for those who are 50 or older. This represents a $500 increase from the 2022 limits for all age groups. It’s important to remember that these contribution limits apply collectively to your contributions to both traditional and Roth IRAs.
Can I have both a traditional IRA and a Roth IRA?
Yes, you can have both a traditional IRA and a Roth IRA. However, the total amount you can contribute to both accounts combined cannot exceed the annual contribution limit.
What is a backdoor Roth IRA?
A backdoor Roth IRA is a strategy for people whose income exceeds the Roth IRA income limits to still contribute to a Roth IRA. It involves contributing to a traditional IRA and then converting that contribution to a Roth IRA. There may be tax implications with this strategy, so it’s recommended to consult a certified financial planner or tax advisor.
Is the money I contribute to an IRA protected from loss?
No, the money you contribute to an IRA is not protected from loss. The value of your IRA is subject to market fluctuations and the performance of the investments within the account. It’s important to diversify your investments and align them with your risk tolerance and retirement goals.
Can I withdraw money from my IRA before retirement age?
Yes, you can withdraw money from your IRA before reaching retirement age. However, early withdrawals are subject to income tax and potentially a 10% early withdrawal penalty. There are some exceptions to the penalty, such as using the funds for qualified education expenses or a first-time home purchase. Be sure to understand the rules and potential tax implications before making an early withdrawal.
Are there any penalties for not taking distributions from my IRA?
Yes, there are penalties for not taking required minimum distributions (RMDs) from your traditional IRA. The penalty is 50% of the amount you should have withdrawn but didn’t. Roth IRAs, on the other hand, do not require minimum distributions during the owner’s lifetime.
Robo-advisors are becoming increasingly popular, giving everyday people a more cost-effective way to invest at all levels.
Rather than pouring over investment books and blogs, you can choose a robo-advisor that fits with your general risk philosophy, then pay a small percentage of whatever funds you’re able to invest.
You presumably get the returns without having to worry about the daily maintenance of your investments.
FutureAdvisor: Personalized Investment Advice
FutureAdvisor is a relatively new standout in the industry, offering personalized investment advice to help you reach your financial goals. And while touted as a robo-advisor, FutureAdvisor has a real-life team of human investors helping to manage client portfolios. Their investment strategy focuses on the long-term and is based on academic research and historical performance.
This is also a great choice for those who are wary of fintech startups because all FutureAdvisor accounts are held through Fidelity. You get the security of major financial institutions with the technology of a data-driven startup.
You can also take advantage of certain free services with FutureAdvisor. Keep reading to find out more about how you can invest with FutureAdvisor.
How FutureAdvisor Works
To get started with FutureAdvisor, you’ll need at least $10,000 to invest. Right off the bat that can be limiting to some, but they do collectively manage over $900 million at this point. Once you’re ready to start, you can get a free portfolio analysis.
You can link all of your accounts to FutureAdvisor, which then reviews all of your information. Additionally, you’ll add in your financial goals along with your target timeframe. From there, you’ll receive customized recommendations based on modern portfolio theory.
It’s a comprehensive way to figure out how to stay on track throughout your financial journey, especially since it’s looking at all of your actual information. Once you’ve taken advantage of this free service, you can then choose to sign up to have your funds managed through a FutureAdvisor Premium account. This will give you access to a team of financial advisors.
Investments they support include IRAs (traditional, Roth, and SEP) as well as individual and joint taxable accounts. There are only two basic requirements: you must start with at least $10,000 and you have to be between 18 and 68 years old.
This is another place where things differ from your typical robo-advisor. You keep your money with a major brokerage, like Fidelity. FutureAdvisor then manages your funds as a fiduciary.
Tracking Retirement Savings
Want to track your retirement savings?
Log onto your FutureAdvisor dashboard any time of the day to view your total assets. You’ll be able to see exactly how your assets are being managed, which is based on various factors, including:
Portfolio size and holdings
How long you have until retirement
You’ll also receive your “best path” to retirement, along with suggested steps and best practices you can take to optimize your investments.
There are three parts to FutureAdvisor’s fee structure. The first is an annual management fee of 0.50%, which is charged in increments on a quarterly basis. The management fee is charged on the number of assets that FutureAdvisor actually manages.
The next fee is the expense ratio for any funds you’re invested in, like ETFs. ETF expense ratios average around 0.15%. Finally, you’ll be charged a commission anytime a trade is made. It may seem like a lot, but FutureAdvisor manages your investments based on the size of your portfolio. Additionally, FutureAdvisor uses several fee-free funds to save you money.
In total, most accounts average an annual fee of 0.65% on the assets you have managed by FutureAdvisor.
When you’re getting started, you won’t be charged anything if your accounts are already held by Fidelity. It’s also free to transfer accounts from Vanguard. However, most other brokerages and mutual fund companies will charge a transfer fee, ranging between $50 and $100 per account.
It’s also worth noting that there are no fees to cancel your account with them. Since your money is held in a Fidelity account, they simply take themselves off as the account manager and you have control to do whatever you want with the funds. Fees may apply if you want to close your account with Fidelity.
Whether you just want some free retirement advice or a Premium account to grow your investments, FutureAdvisor has plenty to offer investors of all types. Even if you don’t meet the $10,000 minimum balance, there are services you can take advantage of. And if you do decide to have FutureAdvisor manage your accounts, you’ll be happy to know about some of their best features.
We already talked about the free portfolio analysis you can receive from FutureAdvisor, which is a great perk in itself. However, even if you don’t want to sign up for an account and upload your investment information, there are still tons of amazing resources you can take advantage of.
Are you totally new to retirement planning and investing?
FutureAdvisor’s Investing Library
Navigate over to FutureAdvisor’s Investing Library and you’ll find countless guides and articles. If you’re not sure where to begin, pick an overview topic like “How to Start Investing.” There are also guides on how to invest different amounts, like $10,000 or even $500,000 — so no matter what you have, you receive holistic advice about how to effectively manage your savings.
There are also really specific topics, so if you’re looking for a particular how-to guide about something investment-related, you’re likely to find it here. For example, you can read step-by-step on how to open an IRA or dive deeper into the best ways to diversify your portfolio.
FutureAdvisor also has a section of its website devoted to reaching your goals. In addition to direct investment advice, they also talk about things like the cost of housing and healthcare — both of which are extremely relevant in retirement planning. On top of that, they offer 401(k) and529 college savings plan assistance.
Interested in how FutureAdvisor determines its investment strategy?
Check out “Inside the Algorithm,” which is loaded with super-specific articles on their automatic rebalancing strategy, tax-efficiency tactics, stock and bond splits, and more. Again, you don’t even have to create a free account to take advantage of this resource library.
It’s completely available to anyone, and it’s smart to look at before you choose FutureAdvisor for your investments. And the blog is updated regularly so you always know about the company’s latest updates.
FutureAdvisor utilizes a few different strategies to minimize your tax liability. Like most robo-advisors, they’ve integrated automatic tax-loss harvesting to all accounts. It’s particularly helpful, however, if you’re in a higher tax bracket.
So what exactly is tax-loss harvesting?
The process can be quite technical, but basically, tax-loss harvesting involves selling a security that’s had a loss. It’s then replaced with a similar position so that your portfolio is right where it should be. But since you sold the original security at a loss, that amount is used to offset your taxes on both your income and capital gains.
Of course, there are all kinds of rules regulating tax-loss harvesting, which is why it’s helpful to have an automated expert like FutureAdvisor monitoring and executing the process for you.
FutureAdvisor also engages in other tax-efficient strategies. When charging your annual fee, they take this money out of your taxable accounts like a traditional IRA, rather than out of a tax-advantaged account, like a rollover IRA. Over time, that can save you money on the amount of taxable income you have.
Capital Gains and Tax Policy
The company adheres to its own Capital Gains and Tax Policy to help clients save as much as possible on their tax burden. In fact, when you sign up for investment management with FutureAdvisor’s Premium service, you can actually see what your projected tax impact will be before they rebalance your portfolio.
Plus, they continually review your short-term and long-term holdings to best balance your portfolio on a regular basis. Just as they do with all their decisions, FutureAdvisor consistently rebalances your portfolio based on your specific situation.
You can expect your portfolio to be rebalanced between four and six times each year. This is the average amount it takes to maintain your target asset allocation to make sure your investments are staying on track.
Unlike most other robo-advisors, FutureAdvisor doesn’t actually hold your money. Instead, they’ve carved out an agreement with Fidelity. They serve as custodian of your investment accounts, but the money is still held by one of two national brokerages.
The great thing about this is that both options are SIPC insured. While that doesn’t protect your investments against market losses, it does offer certain protections if the brokerage closes for some reason.
Working with Fidelity also means that FutureAdvisor can help you save money by using fee-free or low-cost ETFs.
Fidelity is just shy of that with 91 fee-free ETFs to choose from. Since you pay both an annual management fee and trade commissions with FutureAdvisor, this can really help you save money while optimizing your portfolio.
The partnership between FutureAdvisor and these two brokerages also gives you flexibility. If you change your mind and don’t want to pay for the Premium service anymore, you simply remove FutureAdvisor as the account custodian. Then you still have your money invested in Fidelity and you don’t have to worry about paying any transfer fees or closing fees.
Is FutureAdvisor right for you?
People who currently have investment accounts with Fidelity are automatic candidates for FutureAdvisor, especially if you’ve been considering using a robo-advisor.
If your funds are already housed within one of these two brokerages, it’s extremely simple to get started. And if you decide you don’t like how your funds are managed, you simply remove FutureAdvisor as your custodian and move on — without paying any fees.
Give FutureAdvisor a Test Drive
Really, anyone can test drive FutureAdvisor by signing up for the free analysis and recommendations. You’ll even get reminders about how and when to rebalance your portfolio, you’ll just have to manually do it yourself. Once you’re comfortable with how your investments look, you may decide to sign up for the Premium account so you can invest on autopilot.
Even with these perks, FutureAdvisor’s fees are a bit higher compared to those of other robo-advisors. If cost is your bottom line, you may want to explore other options. But the upside is that your funds are actually kept with extremely reputable brokerages, making FutureAdvisor an interesting hybrid between a traditional financial advisor and fintechs.
Ultimately, your investments should be based on your personal values and strategies. If these align with FutureAdvisor, it’s definitely worth giving them a try, especially if you start with a free account.
If you’re looking for comprehensive financial planning advice, but you don’t want to pay the high fees typically charged by financial advisors, Facet may be exactly the service you’re looking for. They provide all the services of traditional financial planners, but at much lower fees. And they’ll even include investment management in the package. This can be especially beneficial for those with portfolios under $500,000, since traditional financial planners often won’t work with smaller clients.
In this comprehensive Facet review, we’ll break down their comprehensive service offering, and help you decide whether this type of financial planning is right for you.
Based in Baltimore, Facet was launched in 2016, to serve those who are looking for something of a hybrid between automated, online investment platforms (robo advisors) and full-service financial advisors. Instead of focusing only on investment management, they provide holistic financial management, covering all aspects of your financial life.
Also Read: Wealthfront Review – Low Cost Robo Investing and Financial Planning
But rather than charging annual fees based on a percentage of your assets under management, they instead charge a flat annual membership fee.
And unlike robo advisors, where your portfolio is invested on an automated basis with very little direct human contact, you’ll instead work directly with a dedicated Certified Financial Planner™ professional. The CFP® professional will work with you to establish your financial goals, and immediate and future needs, then come up with an action plan to help you get to where you want to go.
Investment management is available and it’s included as part of the basic annual membership fee. For that reason, it’s not possible to do a direct price comparison between Facet and robo advisors, most of whom don’t offer life financial planning advice.
Related: Personal Capital Review – A Free Wealth Management Tool
How Facet Works
When you sign up with Facet you’ll work directly with a dedicated CFP® professional. However, all contact is either by phone, video chat or email. There are no in person meetings, though due to technology that’s becoming increasingly unnecessary.
You don’t need a certain minimum amount of investable funds to work with Facet either. You can work with them even if you don’t have anything to invest. This is unlike traditional financial planning services, which typically require large minimum account balances to provide advice.
All information relating to your financial situation will appear on an intuitive dashboard, enabling you to get a 360° view of your financial life on the platform.
If you do choose the investment management option, one big advantage is that they do provide investment recommendations for employer-sponsored retirement plans, like 401(k)s. They can’t directly manage employer plans, but the advice they provide will help you better manage your plan going forward.
Financial Services Provided by Facet
As you’ll see, Facet goes well beyond simple investment management provided by robo advisors. They provide investment management, but also comprehensive financial planning services, including the following:
Retirement Planning: Your CFP® professional will put together an action plan to help you reach your retirement goals, as well as help you to understand the strategies behind it.
Education Planning: If you have children, they’ll present options to pay for their future education.
Life Planning: Your Facet advisor will help you to plan for what’s most important in your life.
Asset Management: This is the investment management part of the Facet program. It will include constructing a well-diversified portfolio to help you achieve your long-term goals.
Income Tax Planning: This service involves minimizing the impact of taxes while implementing your financial plan and investing activities.
Insurance Planning: If you don’t know a whole lot about insurance, your financial advisor can help. They’ll recommend the best types of plans to provide specific protections you need for yourself and your family.
Estate Planning: Facet will work with your personal attorney to create an estate plan to provide for your loved ones after your death.
Legacy Planning: This involves creating a plan to make provisions for either your family or a favorite charity. It will enable you to structure your finances in such a way that you will be able to provide for the people or organizations you care for most.
Retirement Income: Apart from retirement planning, it’s also important to successfully manage income in retirement. Your financial advisor will take into consideration your income from Social Security and pensions, in creating a distribution plan from your retirement savings.
A Facet CFP® professional can even help you choose your employee benefits and provide assistance in making the right decisions with your company’s stock option plan.
Also Read: Blooom Review – Finally, a Robo-Advisor for Your 401(k)
Facet Investment Strategy
If you sign up for Facet to take advantage of the financial planning services, you’ll also get investment management at no additional cost. Investment funds are managed through four major brokerages, including Fidelity, Charles Schwab, TD Ameritrade, and Apex. There is no minimum initial investment requirement.
Because those are among the largest investment firms in the industry, there’s a good chance you invest with one of them already. But if you don’t, and you want to take advantage of Facet investment management, you’ll need to transfer your current account to one of those four platforms.
Investments will be managed using primarily mutual funds and exchange traded funds (ETFs), though the company does indicate use of individual stocks and bonds are possible on a discretionary basis.
Portfolios are designed based on your personal investment risk tolerance, as well as your time horizon and investment goals. Your portfolio may be constructed based on the following risk levels:
Your portfolio will be fully managed by Facet, including periodic reviews, which will be conducted at least annually. More frequent reviews may take place based on a change in your personal investment objectives, as well as in response to investment market conditions, or upon request.
Other Facet Features and Benefits
Investment accounts that can be managed: Taxable brokerage accounts, and any self-directed retirement plans, including traditional, Roth, rollover, SEP and SIMPLE IRAs, as well as solo 401(k) plans. And though they can’t manage them directly, Facet will provide management assistance with employer-sponsored plans, like 401(k) and 403(b) plans.
Availability: All 50 states, plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
Customer contact: One of the advantages of working with Facet is that you will have a direct line to your dedicated CFP® professional. When you call in, it won’t be to a call-in center. Contact is by phone, videoconference, or email, all of which are available mornings, evenings, and even on weekends.
Fees: Membership fees will vary by the services you need performed, and are not determined by the size of your portfolio.
Prices range from $2,400/year ($167/month) to $8,000/year ($667/month). Most members fall in the middle of that range.
There are no cancellation fees – but any annual fees already paid will not be returned.
How to Sign Up with Facet
To sign up with Facet you’ll start by scheduling a 30-minute introductory call with a dedicated CFP® professional. That person will work with you to determine your needs and goals, as well as your budget for the service.
When you schedule your introductory call, you’ll be required to provide basic information, as well as financial information, such as investment accounts, and to list important financial goals.
If a Facet membership feels right to you and you agree to sign up, you’ll go through Facet’s digital onboarding process which is a guided experience that consolidates all your key information in one place. The full process takes 30 – 45 minutes but you can leave and revisit the process at your convenience. Once the digital onboarding is complete, the first meeting with your planner will be scheduled. They will come to this meeting prepared after reviewing all the information you submitted during the digital onboarding process and can start discussing your financial priorities.
The CFP will create an individually designed financial plan, though the creation of that plan may require several direct sessions to complete. Once again, the fees you’ll pay for that plan will depend on the individual services you want.
The CFP will create an individually designed financial plan, though the creation of that plan may require several direct sessions to complete.
Facet Pros and Con
Flat fee structure — This will work very well for those with larger portfolios.
No minimum to begin investing — There are no upfront fees.
Full service financial planning — Facet takes a holistic view of your entire financial life, rather than focusing exclusively on investment management. Investment management is included in your complete financial planning package.
The company is a fiduciary — This legally requires them to represent your best interests, and not to promote their own products to generate additional income.
Works with major investment brokers — Facet works with four big investment platforms.
Can be pricey — The flat fee structure will be high for those with smaller portfolios.
No face-to-face meetings — All contact is by phone, email or video chat.
Difficult to estimate costs — Since fees are based on the level of service, actual costs can be difficult to determine upfront.
Alternatives to Facet
If you’re interested in what Facet has to offer, but you’d like to check out the competition, we recommend the following financial management services:
Probably the most popular investment platform among robo advisors with personal financial advice is Empower. The platform is free to use, if you’re looking for budgeting tools and limited investment advice. But with a minimum initial investment of $100,000, you can take advantage of Empower Wealth Management, that provides full investment management. And with at least $200,000, you can have regular access to financial advisors. Management fees start at 0.89% for a portfolio up to $1 million, but slide down to 0.49% for portfolios greater than $10 million.
Betterment’s Premium plan works similar to Personal Capital, but at a lower fee. They charge an annual management fee equal to 0.40% of your account balance, and there’s no upfront fee. That means you can have a $250,000 portfolio managed for $1,000 per year. The service provides automated portfolio management (robo advisor), with unlimited access to Betterment certified financial planners. Qualification requires a minimum account balance of $100,000.
But at an even lower fee structure is Vanguard Personal Advisor Services. The minimum required investment is $50,000, and the annual fee is just 0.30%, sliding all the way down to 0.05% for portfolios of $25 million or more. An investor with $250,000 can have his or her portfolio managed for just $750 per year. The service offers unlimited access to personal financial advisors, including a dedicated advisor if your portfolio is $500,000 or more.
Facet vs. Robo Advisor
Those considering Facet might find themselves debating between Facet and a robo advisor for managing their money. The truth is that both types of service have something to offer different customers.
A robo advisor is an algorithm that manages your investments based on a risk tolerance that is set upon signing up for the service. Robo advisors occasionally offer personalized advice, but this often comes with a fee. At best, you’ll have limited access to a financial planner. Fees are usually set based on a percentage of what you invest, plus set fees (although exact details depend on the robo advisor).
Whether or not you want a robo advisor depends on whether you want to take a hands-on or hands-off approach to managing your money. Robo advisors are automated investment strategies, and are therefore a very hands-off approach. Facet allows you more freedom to customize your plan, with real access to human advice, and a fee structure that isn’t only based on how much you invest.
Both types of investment have a lot to offer, so it will depend on the person to decide which is most suited to their personal risk tolerance and investing goals.
What Others are Saying – Facet Reviews
To get a better understanding of what people think about Facet, it helps to look at third-party reviews. Reviews are a great way to get a non-biased perspective of what others are saying about Facet. Prospective clients will be happy to learn that Facet reviews are mostly positive overall.
Better Business Bureau has Facet at an A+ rating. A+ is the highest rating available on BBB’s 100-point rating scale. The rating scale is based on an aggregate of factors, including the business’s complaint history, transparent business practices, time in business, advertising issues, licensing and government actions, and more. An A+ is an encouraging sign for prospective customers of Facet.
Business Insider has also given Facet a positive review. They state that Facet is “best for comprehensive financial advice and those with modest or sizable assets”. Business Insider had overall positive things to say about the service, but also said that those with modest assets or one-off questions may not benefit from Facet. Business Insider gave Facet a rating of 4.6/5.
What is a Certified Financial Planner™ professional, and why is having one so important?
CFP® professionals are required to be certified, and have experience in all aspects of financial planning. Not only can they provide the information you’ll need, but they can recommend third-party sources for additional advice when necessary. A dedicated CFP® professional is part coach, part advocate and all partner. Working with a CFP® professional means you never have to deal with financial concerns alone.
Why is it important that Facet is a Fiduciary?
A fiduciary is a financial professional with a legal and ethical relationship of trust to you as a client. They’re legally required to make financial recommendations in your best interest alone. All Facet CFP® professionals are fiduciaries.
Why do I need Facet when I can just use a robo advisor to manage my portfolio?
Because Facet will provide investment management services, comparable to a robo advisor, but they also work with you to better manage your entire financial life. For example, they can provide investment advice on how to better manage your employer-sponsored retirement plan. They can also work with you in other critical areas of your life, such as insurance, estate planning, and preparing for your children’s college educations.
How does Facet help me manage my employer sponsored retirement plan?
Facet doesn’t directly manage your retirement plan. But they can provide you with advice on portfolio allocation, as well as selecting from the best investment options in your plan. This may include certain funds that will create a more well-balanced portfolio, as well as include investments with lower fees.
How do I know a Facet CFP® professional will work in my best interest?
As fiduciaries, Facet CFP® professionals are legally required to work in the best interest of their clients. Additionally, because Facet charges flat fees, there are no worries associated with CFP® professional giving you bad advice to profit off commissions. Facet also boasts a rigorous recruitment process to vet every person they hire, putting a particular emphasis on kindness and honesty.
Related: How to Evaluate an Investment Portfolio
Is Facet the Right Choice for You?
If you’re looking for an investment advisor, but you also want comprehensive financial advice, schedule your introductory call is worth checking out. They provide professional level financial advice, including retirement planning, estate planning, education planning, and income tax planning for a fraction of what you’ll pay to an independent CFP® professional.
It’s also an excellent choice if you’re not simply looking for the type of automated investment management provided by robo advisors.
However, if you’re mainly interested in investment management, the value of the service may depend primarily on the size of your investment portfolio. For example, if you have a $1 million portfolio under management, and your total annual membership fee is $2,400, the fee will work out to be 0.24%, which is lower than most robo advisors.
But if your portfolio size is $100,000, and you pay the same $2,400 annual membership fee for Facet, it will be the equivalent of a 2.4% annual fee. That’s many times higher than what robo advisors will charge, and even higher than traditional human investment advisors.
However, you also have to consider the value of the financial planning advice being provided. If you’re looking for ongoing financial advice, the Facet fee will be well worth paying. But if you’re looking for one-time advice for very specific areas of financial planning, and mostly interested in ongoing investment management, it may be more cost-effective to invest through a robo advisor, and to get the needed financial planning advice from an independent CFP® professional.
At the end of the day, you need to consider your own financial goals, personal risk tolerance, and what you want from a financial services provider. Only with a proper understanding of these personal preferences can you make the choice that’s right for you.
One of the most powerful financial combinations is the ability to invest and bank through the same financial institution. But J.P. Morgan isn’t just any financial institution. It’s the largest bank in the U.S., and it also offers the ability to engage in self-directed trading–commission-free. There are many brokerage firms you can invest with, but this is the only one with the power of J.P. Morgan behind it!
If you’re already a J.P. Morgan customer or client–either with a deposit account or through one of their many top-of-the-line credit cards–you should know that you can also invest through the company. J.P. Morgan Self-Directed Investing offers commission-free trades for self-directed investors, as well as a low-cost managed portfolio option. You can open an account with no money, and handle all your trading and account monitoring through the mobile app. And if you’re not already a J.P. Morgan customer or client, you may be interested in investing through the largest banking organization in the U.S., with all the advantages and benefits that provides.
What is J. P. Morgan Self-Directed Investing?
J.P. Morgan is the largest bank in the United States and the sixth-largest bank in the world, with assets of nearly $2.7 trillion. Founded all the way back in 1799, the bank currently has more than 5,000 branches operating in 36 states. J.P. Morgan is also one of the leading providers of credit cards.
But while the company is best known as a bank, it’s also one of the largest asset managers in the world. J.P. Morgan’s asset management arm has nearly $3 trillion in assets under management (AUM), while its investment and corporate banking arm has more than $25 trillion in AUM.
Given the company’s experience in managing investments for individual and business clients, as well as its massive banking footprint across the U.S., it’s only natural that J.P. Morgan would eventually roll out a retail brokerage platform for individual investors. That platform is J.P. Morgan Self-Directed Investing. Originally launched as You Invest in 2018, J.P. Morgan Self-Directed Investing is already showing plenty of promise with innovative investment options.
J. P. Morgan Self-Directed Investing Product Features
J. P. Morgan Self-Directed Investing offers two different investment programs. Self-Directed Investing (SDI) is a self-directed investment platform, while SDI portfolios offers several fully managed investment plans for those who want to turn the investing job over to the professionals.
This is the trading account offered by J. P. Morgan. There is no minimum initial investment required to open an account. Available accounts include individual and joint taxable brokerage accounts, and traditional and Roth IRA accounts. There, you can trade individual stocks, exchange-traded funds (ETFs), options, fixed income securities, and mutual funds.
Self-Directed Investing offers commission-free trades in thousands of securities. You can manage your portfolio online or on the go from your mobile device.
The platform also has resource pages that can help with basic investing, investing strategies, planning, and market insights.
This tool helps create an asset allocation based on your investment goals, time horizon, and risk tolerance. This tool requires a minimum account balance of $500. It can be used to select securities within the designated portfolio allocations, and even places trades for you.
Self-Directed Investing Portfolios
If you prefer to have your investment portfolio professionally managed–or if you want to add managed portfolios to your self-directed investing–you can take advantage of SDI Portfolios.
You’ll need a minimum of $500 to open an account, and the account will be managed for a single annual percentage fee, regardless of account size (see J.P. Morgan Self-Directed Investing Pricing & Fees below).
The specific mix in your portfolio will depend on your investor profile, which may be Conservative, Moderate, Growth, or Aggressive. A Conservative portfolio will be more heavily invested in fixed income and cash investments, while Growth and Aggressive will be slanted towards stocks. The Moderate portfolio will use an equal mix of both.
After you open an account, you’ll determine your asset allocation and your portfolio is put in place–it will be rebalanced as necessary. At that point, all you’ll need to do is fund your account, and all aspects of your portfolio will be fully managed for you.
If self-directed investing isn’t for you, you can work with a J.P. Morgan advisor, or schedule a check-up to see if you’re on track to meeting your investment goals.
Self-Directed Investing Portfolios Glide Path
Your portfolio allocation doesn’t remain static. SDI Portfolios employs a Glide Path, adjusting your portfolio as you age. Your portfolio will be gradually reallocated toward a more conservative mix as you approach retirement and have less time available to recover from losses that may occur in a down market.
J. P. Morgan Self-Directed Investing Pricing & Fees
Self-Directed Investing Trade
There are no fees to open and maintain a SDI Trade account. Trading commissions are as follows:
Stocks and ETFs: You’ll have unlimited commission-free trading online with stocks and ETFs. However, if you make representative-assisted trades there is a fee of $25 per trade.
Option: Also commission-free, but there is a charge of $0.65 per contract. And similarly, there will be a $25 commission for any representative-assisted trade.
Mutual funds: Commission-free for online trades, with a $20 per transaction commission if representative-assisted.
Fixed income/bonds: There are no commissions or fees charged for trades of U.S. Treasury bills, notes and bonds, or new issues of corporate bonds, municipal bonds, government agency bonds or brokered certificates of deposit.
However, trading of secondary market corporate bonds, municipal bonds, government agency bonds and brokered CDs have the following fees:
Online – $10 per trade, plus $1 per bond over 10 bonds, up to a maximum of $250.
Representative-assisted – $30 per trade, plus $1 per bond over 10 bonds, up to a maximum of $270.
Self-Directed Investing Portfolios
SDI Portfolios come with a low percentage annual advisory fee of 0.35% of your account balance, paid monthly. There are no other fees involved in the management of your account.
J. P. Morgan Self-Directed Investing Sign-up Bonus
J.P. Morgan is currently offering a bonus of between $50 and $700 if you open an account with at least $5,000. The bonus is structured as follows:
$700 when you fund with $250,000 or more
$325 when you fund with $100,000-$249,999
$150 when you fund with $25,000-$99,999
$50 when you fund with $5,000-$24,999
(All accounts must be funded at these levels in the first 45 days and remain in the account for at least 90 days)
Disclosure: INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
How to Sign Up with J. P. Morgan Self-Directed Investing
To open a SDI account you must be at least 18 years old, have a valid Social Security number, and a U.S. home address. You’ll be asked to provide a valid driver’s license or state-issued ID for identity verification purposes.
You can open the account from YouInvest.com. There you can choose a Self-Directed Investing Trade or Self-Directed Investing Portfolios option, either as a taxable brokerage account or an IRA. If you choose to open a SDI Portfolios account, you’ll need to complete a questionnaire that will help determine your investment goals, time horizon, and risk tolerance.
If you are an existing Chase account holder, much of your application information will be transferred over from in-house records.
When completing the application, you’ll first be asked if you are an existing Chase customer. If you are, you can simply enter your username and password, and your application will be populated from information already on file with Chase.
If you are not an existing Chase customer, you’ll need to complete the online application. You’ll then need to manually supply the following information:
Your full name
Country or citizenship
Date of birth
Social Security number
The type of ID (driver’s license or state-issued ID), as well as the ID number, expiration date, and the issuing state
Your home address
Your email and phone number
Funding your account
You can fund your account either through an existing Chase account or from an external financial institution. If you already have a Chase account, you can transfer funds into your Self-Directed Investing Account by choosing Pay & transfer, then Transfer money.
If you are linking an external account, you can simply choose “Add new external account”, then enter the routing number and personal account number from your institution. You can set up either a one-time transfer or recurring transfers.
J. P. Morgan Self-Directed Investing Security
All investment accounts are protected against broker failure by the Securities Investor Protection Corporation (SIPC). Your account is covered for up to $500,000 in cash and securities, including up to $250,000 in cash.
J. P. Morgan Self-Directed Investing Mobile App
You can invest with SDI using the Chase Mobile App, which is available at The App Store for iOS devices, 11.0 and later. The app is compatible with iPhone, iPad, and iPod touch. Its also available at Google Play for Android devices, 6.0 and up.
You can use the mobile app to manage all your accounts with J.P. Morgan including your Self-Directed Investment accounts. That includes trading securities and funds and taking advantage of all the tools and research information available on the platform.
J. P. Morgan Customer Service
Customer service is available by phone Monday through Friday, from 8:00 am to 7:00 pm, Eastern time. However, you can place online trades anytime between 6:00 am and 2:00 am Eastern time.
Do I need to be an existing Chase account holder to open a Self-Directed Investing account?
No. There is no requirement for you to be a current Chase account to participate in the service, nor is there a requirement for you to open a Chase bank or credit card account as a condition of your SDI account.
Can I open a Self-Directed Investing account in the name of my business?
No. SDI accounts are only available to individuals and joint personal account holders. The platform is not designed for business customers.
I like that Self-Directed Investing offers commission-free trades on stocks, options, and ETFs. But why do they charge such high fees for representative-assisted trades?
The practice of charging fees for trading with live assistance is common in the brokerage industry, even now that most brokers have eliminated commissions for online trades. Self-Directed Investing representative-assisted trade fees are consistent with those charged by other brokerage firms. A major reason brokerage firms are able to offer commission-free trades is because they don’t require assistance from broker employees. Fewer assisted trades means lower payroll costs for the brokerage firm, enabling them to charge no fees for online trades.
If I use the Portfolio Builder, what kind of investments can I hold?
The Portfolio Builder tool enables you to invest through ETFs and stocks. This includes both U.S. and international equities, as well as core fixed income and commodities. However, the tool does not allow mutual funds in the portfolio.
Open to non-Chase customers — Self-Directed Investing is available to both Chase and non-Chase customers and investors.
Commission-free trades — This applies to stocks, ETFs, and options (though like most brokers, there is a per contract fee with options).
Generous sign-up bonus — These range from $50 to $700.
Both self-directed investing or professionally managed — Ability to choose either self-directed investing through Self-Directed Investing Trade or a professionally managed option through SDI Portfolios – or you can use a combination of both.
Tools to help create and manage a portfolio — The Portfolio Builder tool helps create and manage your portfolio, even as a self-directed investor.
Investment options are a bit limited — The platform doesn’t allow you to invest in real estate investment trusts (REITs) or penny stocks (stocks that either aren’t listed on a major exchange and have a price of less than $5).
Limited customer service hours — J.P. Morgan’s customer service live support is limited to business days until 7:00 pm. This is substantially less than the 24/7 customer support available with most major competitors.
High Advisory fee — The advisory fee of 0.35% on SDI Portfolios is higher than the industry average of 0.25% for robo-advisors.
Alternatives to J. P. Morgan Self-Directed Investing
The investment brokerage field is a crowded one, and some of the alternatives you may want to consider include the following:
E*Trade operates similarly to J.P. Morgan Self-Directed Investing in that it has both commission-free self-directed trading, as well as managed portfolio options. But the platform offers a more comprehensive suite of investment tools, and also a wider range of investment options. For example, you can also trade futures and FOREX.
Ally Invest, with both self-directed investing and a managed portfolio option. And just as is the case with J.P. Morgan Self-Directed Investing, you can also take advantage of the banking services and high-yield savings accounts and CDs offered through Ally Bank. Much like E*TRADE, Ally Invest also offers more diverse investment options than J.P. Morgan Self-Directed Investing.
Tied in with TD Bank, TD Ameritrade also enables you to invest where you bank. They similarly offer no commission trading on stocks, ETFs, and options. And like most brokerage firms, they also offer managed portfolio options. Once again, TD Ameritrade offers something that J.P. Morgan Self-Directed Investing doesn’t, and that’s commission-free mutual fund trades. In fact, they offer more than 4,000 no transaction fee mutual funds to choose from.
Is J.P. Morgan Self-Directed Investing for You?
J.P. Morgan Self-Directed Investment will work best for existing customers and clients of J.P. Morgan. If you already have a banking relationship and/or a credit card through the company, investing with them will be a natural choice.
If you’re not an existing J.P. Morgan customer client, or even if you are, you should be aware that this is strictly for self-directed investors. It doesn’t have quite as many investment tools and resources as other major brokerage platforms. For that reason, it’s best suited to self-directed investors who have their own investment resources and tools.
However, the platform was launched less than two years ago and is still evolving. With J.P. Morgan behind it, we can expect better things to come.
If you’re not a self-directed investor, you can still invest through Automated Investing. This is a robo-advisor, and provides all the benefits that come with low-cost, professional investment management. However, the annual advisory fee of 0.35% is higher than the industry standard fee of 0.25%. Those are the fee levels you can expect from popular competitors, like Betterment and Wealthfront.
But if you’re looking to combine investing with banking, there’s no better place to do it than with J.P. Morgan. As the largest bank in the U.S., operating in 36 states–and determined to enter the remaining 14–they offer something for everyone.
J.P. Morgan Self-Directed Investing is a solid investment platform for self-directed investors who have access to a reliable source of investment tools and research. The platform may expand those tools and resources going forward, but they’re not quite there yet. In the meantime, they offer commission-free trades, as well as a managed portfolio option if you’re not quite ready for self-directed trading.
Disclosure: INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Betterment and Betterment are not only two of the most popular robo advisors in the industry, but they may very well be the most innovative in the field. Though they represent two of the first robo advisors, both have built out their platforms and now offer robust portfolio options and other services to their clients.
Though they each have their own nuances–and specializations–you really can’t go wrong with either platform. Each will take complete control of your portfolio, managing every aspect of it for a very low annual fee. When you sign up with either service, your only responsibility will be to fund your account on a regular basis.
But what if you’re either new to robo advisors or you’re considering a switch from another one? If you’re researching robo advisors, the information will inevitably lead to Betterment and Wealthfront. So let’s take a look at the two heavyweights in the robo advisor space and see which might be a better fit for your portfolio. Listen to the Podcast of this Article
Betterment is not only the original robo advisor, but its also the largest independent robo (along with Wealthfront), with $21 billion in assets under management. The company is based in New York City and began operations in 2008.
As a robo advisor, Betterment is an automated, online investment platform that handles all aspects of investment management for you. When you sign up for the service, you complete a questionnaire that will help determine your investment goals, time horizon, and investment risk tolerance. From that information, Betterment creates a portfolio of stocks and bonds to meet your investor profile.
They dont actually invest your money in individual securities, but instead through exchange-traded funds (ETFs), each representing a specific asset class. They can build an entire portfolio for you through about a dozen funds that will give you exposure to the entire global financial markets.
All this is done for a low annual management fee. Your only responsibility will be to fund that your account on a regular basis and let Betterment handle all the management details for you.
Better Business Bureau rates Betterment as A+, which is the highest rating in a range from A+ to F. The company also scores 4.8 stars out of 5 by more than 20,000 users on the App Store, and 4.5 stars out of 5 by more than 4,500 users on Google Play.
Wealthfront is, with Betterment, the largest independent robo advisor, and Betterment’s primary competitor. In fact, with over $24 billion in assets under management, its now slightly larger than Betterment. The company is based in Redwood City, California, and launched operations in 2011.
As a robo advisor, it works much the same as Betterment, creating a portfolio for you based on your answers to a questionnaire when you open your account. Wealthfront will also manage your account using a small number of ETFs spread across various asset classes. But on larger accounts, they’ll also add individual stocks to get greater benefit from tax-loss harvesting.
Like Betterment and virtually all robo advisors, Wealthfronts basic investment strategy is based on Modern Portfolio Theory (MPT), which emphasizes asset allocation over individual security selection.
Similar to Betterment, and really all robo advisors, your account will receive full investment management for a very low annual fee. Your only responsibility will be to fund your account on a regular basis.
Unfortunately, Wealthfront has a Better Business Bureau rating of F, due to unanswered complaints. However, the company gets 4.9 stars out of 5 from more than 9,000 users on the App Store, and 4.8 stars out of 5 by more than 2,700 users on Google Play.
Investment Strategies Betterment vs Wealthfront
Betterment Investment Strategy
Betterment offers two plan levels, Digital and Premium. Premium is available for minimum account balances of $100,000, while Digital is open to all account balances. Like many robo advisors, Betterment has evolved past building and managing a basic portfolio comprised of a mix of stocks and bonds.
For example, if you choose the Premium Plan, you’ll have access to live financial advisors. But there are many other services and plans to choose from.
Read More: Betterment Promotions
Basic portfolio mix
Your portfolio will be invested in as many as six stock asset classes/ETFs and eight bond asset classes/EFTs.
US Total Stock Market
US Value Stocks Large Cap
US Value Stocks Mid Cap
US Value Stocks Small Cap
International Developed Markets Stocks
International Emerging Markets Stocks
US High-quality Bonds
US Municipal Bonds
US Inflation-Protected Bonds
US High-Yield Corporate Bonds
US Short-term Treasury Bonds
US Short-term Investment-Grade Bonds
International Developed Markets Bonds
International Emerging Markets Bonds
Use of value stocks
Notice that three of the six stock asset classes involve value stocks. This is a specialization of Betterment and represents a time-honored stock market investment strategy. Value stocks are investments in companies with stock prices that are low in relation to their competitors by various standard measurements. But the companies are deemed to be fundamentally sound, and therefore likely to outperform the general market once the investment community realizes the true value of the stocks.
In this way, Betterment makes an attempt to outperform the general market, such as the S&P 500 or even some broader indices.
This is another investment strategy Betterment uses with the potential to outperform the general market. This specific portfolio is managed by Goldman Sachs. Smart Beta is a form of active portfolio management, which seeks high-quality companies with low volatility, strong momentum, and good value.
Since its a higher risk/high reward type of investing, it requires a minimum portfolio of $100,000.
Socially responsible investing (SRI)
This is an investment option increasingly being offered by robo advisors. However, with Betterment only a portion of your portfolio will be invested in SRI. They replace the ETFs in the International Emerging Market Stocks and US Value Stocks Large Cap with ETFs that specialize in socially responsible investing in those sectors.
Learn More: The Pros and Cons of Socially Responsible Investing
If you want more control over your investment portfolio, you can choose this option. It allows you to adjust the individual asset class weights in your portfolio allocation. Its also designed for more advanced investors and gives you an opportunity to increase allocations in asset classes you believe are likely to outperform the market.
BlackRock Target Income
For investors looking for income and safety of principal, Betterment offers this portfolio, which consists of 100% of bonds. There is some risk of principal in this portfolio but it’s designed to be minimal. You can even choose the level of risk and return you want. It won’t provide the type of long-term gains you’ll get from a stock portfolio, but it will offer the kind of steady income that will work especially well for retirees.
Tax-loss harvesting is a year-end strategy in which asset classes with losses are sold (and later replaced with comparable ones) to offset gains in winning asset classes. The strategy helps to defer taxable capital gains on growing asset classes.
Betterment makes this strategy available on all account balances. However, it’s only offered on taxable accounts since it’s completely unnecessary for tax-sheltered retirement plans.
Betterment Everyday Cash Reserve
If you’re looking to add a cash option to your investment portfolio, you can do it through Betterment Cash Reserve. The account is eligible for FDIC insurance up to $1 million. The minimum deposit is $10, and offers unlimited transfers, both in and out of your account.
The Betterment Checking account gives you the flexibility to manage your money in a way that best fits your financial goals. You’ll get this account with a debit card and you can use it to pay in person or online. You’ll also get FDIC insurance on your money.
The Betterment Checking account is an innovative way to manage your money. It’s faster, more secure, and requires zero minimum balance requirements. You can now deposit checks using their streamlined mobile app. Just take a picture and deposit checks will be there for you on the other side.
Wealthfront Investment Strategy
Unlike Betterment, Wealthfront has a single plan for all investors, with an annual management fee of 0.25% on all account balances. And like Betterment, Wealthfront has expanded its investment options menu in many different directions.
Basic Portfolio Mix
Wealthfront uses 11 asset classes in the construction of its portfolios, including four stock funds, five bond funds, plus real estate and natural resources.
The allocation looks like this:
Emerging Market Stocks
Treasury Inflation-Protected Securities (TIPS)
Municipal Bonds (on taxable investment accounts only)
U.S. Government Bonds
Emerging Market Bonds
Use of Alternative Investments
Wealthfront includes real estate and natural resources in its portfolio composition. The real estate sector invests in companies that provide exposure to commercial property, apartment complexes, and retail space. Natural resources are held in ETFs representing that sector.
The combination of the two offers a stronger diversification away from a portfolio comprised entirely of stocks and bonds, largely because they offer protection in an inflationary environment. It’s possible for these sectors to perform well when the general financial markets are not.
The Smart Beta option attempts to outperform the general financial markets. The strategy deemphasizes market capitalization in the creation of a portfolio. For example, rather than using the capitalization allocations of certain companies within the S&P 500, the strategy might increase some allocations and decrease others. It’s more of an active investment strategy and requires a minimum investment portfolio of $500,000.
Wealthfront Risk Parity
This is another investment strategy for investors with larger accounts and a greater appetite for risk. Its been shown to provide higher long-term returns, but it may use leverage to increase those returns.
Stock-level Tax-loss Harvesting
Tax-loss harvesting is available on all taxable investment accounts. But Stock-level Tax-loss Harvesting is available to larger accounts to provide more aggressive tax deferral.
This is a fairly complex investment strategy, but it involves the use of individual stocks to take greater advantage of tax-loss harvesting. The use of individual stocks will make it easier to buy and sell securities to minimize capital gains taxes. Depending on the specific plan, the required minimum investment ranges between $100,000 and $500,000.
This is a software-based financial advisory, providing you with financial planning tools. They can help you plan for retirement or saving for the down payment on a house or a college education for one or more of your children. The apps run what-if scenarios, that can make projections based on various savings levels for each of your specific goals.
Though it doesn’t offer live financial advice, the service is free to use.
You can open an interest-bearing cash account with Wealthfront Cash Account with just $1. There’s no market risk, no fees, unlimited free transfers, and your account is FDIC insured for up to $5 million. The account currently pays 4.30% APY and provides a safe, cash investment to go with your stock portfolios.
And now, Wealthfront Cash allows you to get your paycheck up to two days early when you set up a direct deposit. They’ve also implemented the ability for you to invest directly into the market within minutes, straight from your Wealthfront Cash account. That means you can get paid early and immediately invest – giving you about extra days of investing each year.
Read more: Wealthfront Cash Account review
Wealthfront Portfolio Line of Credit
Much like a home equity line of credit, the Wealthfront Portfolio Line of Credit is secured by your investment account. You can borrow up to 30% of the value of your account for any purpose. There’s no prequalification since the line of credit is completely secured by your investment account.
The line of credit is automatic if you have a non-retirement account balance of at least $25,000. You can request funds against the line on your smartphone and receive them in as little as one business day.
Current interest rates paid on the line range between 2.45% and 3.70% APR, depending on the size of your account.
Retirement Planning Betterment vs. Wealthfront
One of the most common uses of robo advisors is the management of retirement accounts. Both Betterment and Wealthfront can manage all types of IRA accounts, similar to the way they do with taxable accounts. But each also offers some level of retirement planning.
Read More: Best Robo Advisors Find out which one matches your investment needs.
Betterment Retirement Planning
Betterment is strong in this category because in addition to their regular portfolios, they also offer income-specific investment options, like their BlackRock Target Income and Everyday Cash Reserve. The Target Income option in particular focuses on maximizing interest income, which is exactly what most people are looking for in retirement.
One of the advantages Betterment offers is that you can connect your 401(k) with your investment account. Betterment cant manage the 401(k) (unless chosen to do so by your employer through their 401(k) management plan), but they can coordinate your Betterment retirement account(s) with the activity in your employer plan.
And of course, if you have at least $100,000 in your Betterment account, you can enroll in the Premium plan and have access to live financial advisors.
But Betterment also offers its Retirement Savings Calculator to help you know if you’re on track for your retirement. By answering just four questions, they’ll be able to determine if your current retirement plan will provide the income you’ll need in retirement, taking your projected Social Security income into consideration. If it isn’t, it’ll let you know how much more you need to invest on a regular basis.
Wealthfront Retirement Planning
You can take advantage of Wealthfront Path to help you with retirement planning. You’ll start by linking your financial accounts so the program can get a better understanding of your finances. Recommendations to help you reach your goals are made based on the amount of regular contributions you’re making and the income you will need in retirement.
Path will analyze your spending patterns, your average annual savings rate, the interest you’re earning on those savings, as well as your investment and retirement contributions. It will also analyze the fees you’re paying on your investment and retirement accounts. Loan accounts are analyzed as well.
The information is assembled, and future projections are made. You’ll be given advice on any needed increases in savings for retirement contributions, as well as asset allocations. And perhaps best of all, since all your financial accounts are linked to the service, it will provide continuous updates on your progress toward your retirement goals.
Betterment Pros & Cons
No minimum initial investment or account balance requirement.
Reduced fee structure on larger account balances.
Use of value stocks seeks to outperform the general market.
Unlimited access to certified financial planners on account balances over $100,000.
Comprehensive retirement planning package.
Limited investment diversification, excluding alternative asset classes, like real estate and natural resources.
The annual management fee rises from 0.25% to 0.40% if you select the Premium plan.
The reduced fee structure on large account balances doesn’t kick in until you reach a minimum of $2 million.
Wealthfront Pros & Cons
Your account includes alternative investments, like real estate and natural resources. This offers greater diversification than a portfolio invested only in stocks and bonds.
The minimum initial investment is just $500. That’s not zero, but it’s an amount most small investors can comfortably start with.
Flat-rate fee of 0.25% on all account balances.
Larger accounts get the benefit of more efficient tax-loss harvesting strategies through Wealthfront Risk Parity.
The Wealthfront Portfolio Line of Credit lets you borrow up to 30% of the value of your non-retirement accounts at very low interest and with no credit check.
There’s no reduced management fee for larger account balances.
The retirement planning tool (Path) is an automated system and does not provide advice from live financial advisors.
Poor rating from the Better Business Bureau.
We’ve covered a lot of territory and details in this side-by-side comparison of Betterment vs Wealthfront. The summary table below should help you to be able to compare the various services each offers with a quick glance.
Minimum initial investment
Digital: $0 Premium: $100,000
Up To 1 Year Free
First $5,000 Managed Free
Digital: 0.25% up to $2 million, then 0.15% above Premium: 0.40% to $2 million, then 0.30%
Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and nonprofit accounts
Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and 529 accounts
Tax-loss harvesting – on taxable accounts only
Available through Smart Beta ($500,000 minimum) and Stock-level Tax-Loss Harvesting ($100,000 minimum)
Smart Beta investing
Yes, minimum $500,000
Interest bearing cash account
Line of credit
Yes, on Premium Plan only
Phone and email, Monday through Friday, 9:00 am to 6:00 pm Eastern time
Phone and email, Monday through Friday, 10:00 am to 8:00 pm Eastern time
You’ve probably already guessed were not declaring a winner between these two popular roboadvisors. Both are first rate and you can’t go wrong with either. More than anything, your decision will likely come down to specific details–what features and benefits one offers that better suits your own personal preferences and investment style.
But one advantage that’s undeniable with both Betterment and Wealthfront is that not only is each a first-rate service, but they provide enough investment options and related services that they can accommodate your growing financial capabilities and needs well into the future.
For example, while you may start out with a basic managed portfolio, you’ll eventually want to get into higher risk/higher reward options as your wealth grows. As well, you’ll like the flexibility of having high-interest cash investment options, as well as low-cost or free financial or retirement advice.
We like both these services and are certain you can’t go wrong with whichever one you choose.
Betterment Cash Reserve Disclosure – Betterment Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients’ funds are deposited into one or more banks (“Program Banks“) where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option.
Funds held in your brokerage accounts are not FDIC‐insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC‐insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details. Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 (or $2,000,000.00 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to four Program Banks). Even if there are more than four Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000.00 (or $2,000,000.00 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC’s Form ADV Part II.
DoughRoller receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. DoughRoller is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.
If you’re new to investing, the idea of getting started can be daunting. After all, you probably don’t have tens of thousands of dollars lying around to build a portfolio and feel like you can’t make much of a difference with the disposable cash you do have.
Luckily, though, you can start your investment journey for a lot less–even if you only have $100 to begin.
The most important part of investing is getting started as early as possible. Rather than waiting until you have a large sum of money saved up, you can get started today and begin growing your savings. Before you know it, you’ll be well on your way to building a healthy portfolio that earns you interest and sets you up for financial success for as little as $100.
Let’s look at a few fun (and low-cost) ways that anyone can start building an investment portfolio today.
Overview: Where and How to Invest $100
High-yield savings accounts
Emergency funds and money that needs to be accessible
Certificates of deposit (CDs)
Those who don’t need to touch their funds right away
Company retirement accounts
Easy contributions, company matching, and investment diversification
On-the-go recommendations that are easy to access and often free
A hands-off approach with a diversified portfolio
High risks but also high rewards
1. Start with High-Interest Savings Accounts
The easiest and most flexible way to begin your investment adventure is actually to start saving your money in a high-yield savings account. While your returns will be more limited than they would be on the stock market, it will also be a safer investment–and you can withdraw your funds at any time without penalty.
If you don’t already have a sufficient emergency savings account established (ideally, six months’ worth of expenses), this is a must. Even if you do have some money saved away, a savings account can be a great way to keep a smaller amount of funds safe and secure, yet accessible.
The savings accounts of today won’t earn you as much as they would have ten or twenty years ago. However, there are some online banks offering as much as 1.80% on high-yield savings accounts right now, and the interest rate climbs all the time. This makes them a great introduction to the world of interest-bearing funds.
Some of our favorite banks for high-yield savings accounts include CIT Bank, Ally Bank, and Capital One 360. All three are online banks, charge no fees for savings accounts, and offer some of the highest interest rates on the market today.
Want to see even more of the best interest rates and the banks offering them? Check out our list here.
2. Earn With A CD
If you want your money to grow a bit more than it would with a high-yield savings account but still need the funds to be secure against market drops, then you can look into a certificate of deposit, or CD. These savings vehicles offer a guaranteed rate of return on your investment in exchange for locking your money away for a specified period of time.
As long as you leave the funds alone until the end of the CD term, you will receive your full investment amount plus the agreed-upon interest. It’s a safe, easy way to earn extra cash on your savings!
CDs come in a number of different flavors. For instance, there are CDs ranging in term from as little as three months to as many as five or six years. The longer the term, the higher interest rate you’ll be offered. Plus, many of them have low minimum deposit requirements, meaning that you can get started even if you only have $100 to tuck away.
As long as you know for certain that you won’t need to withdraw your funds early (which usually involves a painful early-withdrawal penalty), putting cash into a CD is a safe and easy way to invest.
3. Invest in Your Retirement Through Work
Interested in tax-advantaged retirement funds that will help you invest in your future? Then look into starting (and fully funding) an IRA in addition to your 401(k), through your employer.
If your employer offers to match contributions toward your 401(k), you should always take advantage of this. Even if you only contribute enough to collect the full employer match, that’s fine; failing to do so is essentially leaving free money on the table, though. Plus, your 401(k) contributions are tax-deductible and will grow over time, providing you with a healthy retirement nest egg for your future.
IRAs are also excellent long-term investment vehicles, primarily for the tax benefits. If you open a traditional IRA, your contributions will be tax-deductible up to the annual maximum. If you qualify for a Roth IRA, your contributions won’t be tax-deductible now, but your withdrawals will be when the time comes to utilize those funds.
Saving for retirement is the second-most-important priority (behind establishing a healthy emergency savings account). Before worrying about building a stock market investment portfolio, be sure that you are setting your older self up for success.
4. Utilize an Investment App
Ready to dabble in the stock market, but don’t quite know where to start? Or maybe you don’t think that you have enough investable funds to warrant a stock brokerage? Well, then an investment app might be the perfect introduction for you and your money.
There are a number of intro-to-investing apps on the market today, but one of our favorites is called Stash. After answering a few questions to determine your investment style (do you want to be super conservative with your money or risk more in order to potentially make more?), Stash will curate the perfect recommendations for you.
To start using Stash, you only need $5, making it one of the most flexible and affordable investment options around. Plus, if your account balance is below $5,000, your monthly service fee for using the app is a single dollar.
Yep, for only $3, you can get curated investment options as well as a wealth of advice and resources. This makes Stash truly ideal for beginner investors who don’t really know where to start or aren’t ready for a financial advisor just yet.
Sign up for Stash and get a $5 bonus after funding your account with $5.
To read our complete review of Stash and learn more about the app, see our write-up here.
Alternatively, Acorns uses your spare change to make thoughtful investments across a diverse portfolio. It starts the process by siphoning off the change from your spending. If you buy a drink for $4.75, the app pays the vendor the correct amount and puts the remaining $0.25 in an account ready for investing.
The app is essentially a robo-advisor that automatically invests money you wouldn’t otherwise miss. Your portfolio can easily be spread across thousands of individual securities using just a small amount of funds. Read more in our Acorns Review.
Related: The Best Investment Apps
Another app we love is Public. Public is unique because it makes the stock market social. You can follow your friends and other investors and have conversations about companies and trends to build your financial literacy over time. There are even a few famous faces on the app, like Girlboss founder Sophia Amoruso, Adobe Chief Product Officer Scott Belsky, and NBA legend, Shaq.
In addition to the social piece, Public offers fractional shares for thousands of public companies and even popular ETFs from Fidelity and BlackRock. This makes it possible to build a portfolio with just $100, because you can invest with dollar amounts (e.g. $1 worth of Amazon stock, if you like).
Public also has a fun Themes tab where you can discover and learn about companies based on your values and interests. The Growing Diversity theme spotlights companies with high marks for diversity and inclusion. Infinity and Beyond curates companies involved in space travel. Made in the USA spotlights companies who support job creation domestically.
You won’t pay any commissions for standard stock and ETF trades with Public. It’s also one of the first free trading apps to announce that it will no longer participate in payment for order flow (PFOF). This decision removes any conflict of interest from its business model. Public also added an optional Tipping feature on trades and hopes that community support will help to offset the revenue it will lose by forgoing the PFOF model.
Read our review of Public
Related: How to Invest in the Stock Market: A Guide
If you’re looking to diversify your portfolio, you could try Masterworks. Masterworks enables you to buy shares in blue-chip artwork pieces by household names like Van Gogh and Andy Warhol. While the value of art is inherently subjective and therefore a high-risk investment blue-chip works like these have historically outperformed the stock market by a significant margin.
Masterworks looks to buy a new work every 1-2 months, and pieces typically sell after 5-10 years, making it a long-term play. Works can only be sold when all owners agree to do so with no owner permitted a greater than 20 percent share, so as not to give them undue influence. As such, it is an illiquid asset, but long-term value investing is no bad strategy.
Aside from shared ownership of blue-chip art, Masterworks big innovation is using blockchain to both reliably value the art, and maintain accurate ownership records of all pieces. Plus, they’re planning to open a free-to-access gallery where you can visit your investment.
Read our full review of Masterworks or visit Masterworks.
SEE IMPORTANT INFORMATION HERE.
5. Robo-Advisors Might Be the Answer
There is a growing number of robo-advisors on the market today, most of which offer you automated investment options for an affordable price tag. This makes them a great option for beginners or hands-off investors who want their money to grow without constant oversight.
Companies like Betterment offer easy-to-use platforms that make investing as simple as using a savings account. Simply add the money you want to invest (as much or as little as you can afford each month) to your account and watch Betterment work its magic by investing your funds in ETFs (exchange traded funds).
Robo-advisors will help you rebalance your portfolio over time, can reinvest your dividends, and will even help you with tax-loss harvesting. The fees are a bit higher than you would find if you invested your funds directly with a company, but the added expense may be well worth it to you for the convenience of a hands-off approach.
You can also opt for a robo-advisor such as Ally Invest or M1. Ally’s trading platform is free for stocks and ETF’s, and charges less than $10 per trade for mutual funds. With M1, there are no fees to worry about as long as you meet low investment minimums on the platform.
6. Check Out Peer-to-Peer Lending
Looking for a quick return on your funds, whether you’re investing $25 or $2,500? Then look into peer-to-peer lending.
Platforms like Lending Club and Prosper allow approved investors to put up funds in denominations as low as $25. You’ll be able to choose the peer loans that you’re most interested in, lending money directly to borrowers and enjoying return rates ranging from 5% to as high as 33% in some cases.
Peer-to-peer (P2P) lending comes with additional risks, but with great risk comes great rewards namely in the form of interest rates higher than you’re guaranteed to find elsewhere.
Curious how you can grow your investments if you’re starting out with only $100? Here are a few common questions from others who are just as curious.
How much interest will I earn on $100?
It’s impossible to say how much interest you can earn from $100 because there are a few key variables in play. First, it’ll depend on where you put that money — are you investing it in the stock market or letting it sit in a savings account? Then, it’ll depend on the timeframe — are you interested in how much that money will grow in a year or where it’ll stand come retirement? Just for perspective, though: if you had bought $100 worth of Amazon shares in 1997, you’d have enjoyed more than a $120,000 growth in value by 2018. On the other hand, if you put that $100 in a high-yield savings account today, you could earn a few extra bucks by year’s end.
How should I invest $100 to make $10k?
Again, where are you investing and how much risk are you willing to take on? The riskier the investment, the faster and more aggressive the growth. Short of perfectly timing a surprise stock or buying a winning lottery ticket, turning $100 into $10,000 will take some time. If you’re determined to grow a $100 investment to $10,000, though, you may want to consider high-risk stocks or something like peer-to-peer lending.
How can I invest $100 wisely?
The wisest investment is the one you can best live with. If you don’t really have $100 to spare in the first place, investing it in a mutual fund probably isn’t wise. If you can’t afford to lose that money, using a p2p platform to offer loans with it also isn’t wise. If you can comfortably take on that risk, though, go for it. Otherwise, wise investments include savings accounts and CDs, and you’ll want to be sure to calculate how long you realistically want to invest those funds.
What’s the best way to invest $100 short term?
If you need your money available sooner rather than later, you’ll be trading off growth for convenience. With that said, short-term investments may be the best choice for those who just want to earn a little extra money and then have their funds available when they need them. This means putting it away in a CD with a smaller time frame or letting it grow in a savings account.
Investing doesn’t only mean spending tens of thousands of dollars on stocks and building a Wall Street portfolio. It simply means making your money work for you, and you can get started for as little as a few bucks.
There are plenty of options to begin building your first portfolio, letting your money earn interest and grow over time. Whether you choose a high-yield savings account or go the high-risk/high-return route of the stock market, the important thing is to start early.
Also read: What to Do with Your Money When Interest Rates Are Low
Be sure to also watch your progress over time, too, and revisit whether you are making efforts in the right places. No, you don’t need to watch your investments daily or obsess over normal market fluctuations. However, using a platform like Empower to track not only your investments and savings accounts but overall net worth can be invaluable along the way.
Robo-advisors have barely been around for 10 years, but in the past couple of years several have been steadily expanding their investment menus, and even offering valuable add-on services. One of the leaders in this regard is Wealthfront. The robo-advisor has been growing its investment capability in every direction but is now even offering financial planning. The platform now bills itself as offering High-Interest Cash, Financial Planning & Robo-Investing for Millennials. If you’re looking for more than just investing, Wealthfront has it. And as has become their trademark, it’s all available at a low cost.
What is Wealthfront?
Based in Palo Alto, California, and founded in 2011, Wealthfront has about $25 billion in assets under management. It’s the second-largest independent robo-advisor, after Betterment. And while dozens of robo-advisors have arrived in recent years, Wealthfront stands out as one of the very best. There isn’t any one thing Wealthfront does especially well, but many. And they’re adding to their menu of services all the time.
Their primary business of course is automated online investing. You can open an account with as little as $500, and the platform will design a portfolio for you, then manage it continuously. Your money will be invested in a globally diversified portfolio of ETFs–just like most other robo-advisors. But Wealthfront takes it a step further, and also adds real estate and natural resources.
Like other robo-advisors, Wealthfront uses Modern Portfolio Theory (MPT) in the creation of portfolios. They first determine your investment goals, time horizon, and risk tolerance, then build a portfolio designed to work within those parameters. MPT emphasizes proper asset allocation to both maximize returns, and minimize losses.
But in a major departure from other robo-advisors, Wealthfront now offers the ability to customize your portfolio and get access to a variety of investment methodologies and portfolios, including Smart Beta, Risk Parity and Stock-Level Tax-Loss Harvesting. And more recently, they’ve also stepped into the financial planning arena. They now offer several financial planning packages, customized to very specific needs, including retirement planning and college planning.
If you haven’t checked out Wealthfront in the past year or so, you definitely need to give it a second look. This is a robo-advisor platform where things are happening–fast!
How Wealthfront Works
When you sign up with Wealthfront, they first have you complete a questionnaire. Your answers will determine your investment goals, time horizon, and risk tolerance. A portfolio invested in multiple asset classes will be constructed, with an exchange-traded fund (ETF) representing each.
The advantage of ETFs is that they are low-cost, and enable the platform to expose your portfolio to literally hundreds of different companies in each asset class. With your portfolio invested in multiple asset classes, it will literally contain the stocks and bonds of thousands of companies and institutions, both here in the U.S. and abroad.
Wealthfront offers tax-loss harvesting on all portfolio levels. But they’ve also added portfolio options for larger investors, that include stocks as well as ETFs. The inclusion of stocks gives Wealthfront the ability to be more precise and aggressive with tax-loss harvesting.
Each portfolio also comes with periodic rebalancing, to maintain target asset allocations, as well as automatic dividend reinvestment. As is typical with robo-advisors, all you need to do is fund your account–Wealthfront handles 100% of the investment management for you.
More recently, Wealthfront has also added external account support. The platform can now incorporate investment accounts that are not directly managed by the robo-advisor. This will provide a high-altitude view of your entire financial situation, helping you explore what’s possible and providing guidance to optimize your finances.
And much like many large investment brokers, Wealthfront now offers a portfolio line of credit. It’s available only to investors with $25,000 or more in a taxable account, but if you qualify you can borrow money against your investment account and set your own repayment terms in the process
Wealthfront Features and Benefits
Minimum initial investment: $500
Account types offered: Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and 529 college accounts
Account access: Available in web and mobile apps. Compatible with Android devices (5.0 and up), and available for download at Google Play. Also compatible with iOS (11.0 and later) devices at The App Store. Compatible with iPhone, iPad and iPod touch devices.
Account custodian: Account funds are held in a brokerage account in your name through Wealthfront Brokerage Corporation, which has partnered with RBC Correspondent Services for clearing functions, such as trade settlement. IRA accounts are held with Forge Trust.
Customer service: Available by phone and email, Monday through Friday, from 7:00 AM to 5:00 PM, Pacific time.
Wealthfront security: Your funds invested with Wealthfront are covered by SIPC, which insures your account against broker failure for up to $500,000 in cash and securities, including up to $250,000 in cash.
Wealthfront uses third-party providers to maintain secure, read-only links to your account. The providers specialize in tracking financial data, as well as employ robust, bank-grade security, and in general, they follow data protection best practices. In addition, Wealthfront does not store your account password.
Wealthfront Investment Methodology
For regular investment accounts, Wealthfront constructs portfolios from a combination of 10 different specific asset classes. This includes four stock funds, four bond funds, a real estate fund, and a natural resources fund.
Each portfolio will contain various allocations of each asset class, based on your investor profile as determined by your answers to the questionnaire. The one exception is municipal bonds. That allocation will appear only in taxable accounts. IRAs don’t include them since the accounts are already tax-sheltered.
Notice in the table below that most asset classes have two ETFs listed. This is part of Wealthfront’s tax-loss harvesting strategy. In each case, the two ETFs are very similar. To facilitate tax-loss harvesting, one fund position will be sold, then the second will be purchased at least 30 days later, to restore the asset class. (We’ll cover tax-loss harvesting in a bit more detail a little further down.)
The ETFs used for each asset class are as follows, as of December 29, 2018:
Specific Asset ClassGeneral Asset ClassPrimary ETFSecondary ETF
Vanguard CRSP US Total Market Index (VTI)
Schwab DJ Broad US Market (SCHB)
Vanguard FTSE Developed All Cap ex-US Index (VEA)
Schwab FTSE Dev ex-US (SCHF)
Vanguard FTSE Emerging Markets All Cap China A Inclusion Index (VWO)
iShares MSCI EM (IEMG)
Vanguard MSCI US REIT (VNQ)
Schwab DJ REIT (SCHH)
State Street S&P Energy Select Sector Index (XLE)
Vanguard MSCI Energy (VDE)
US Government Bonds
Vanguard Barclays Aggregate Bonds (BND)
Vanguard Barclays 5-10 Gov/Credit (BIV)
Schwab Barclays Capital US TIPS (SCHP)
Vanguard Barclays Capital US TIPS 0-5 Years (VTIP)
Municipal Bonds (taxable accounts only)
Vanguard S&P National Municipal (VTEB)
State Street Barclays Capital Municipal (TFI)
Vanguard Dividend Achievers Select (VIG)
Schwab Dow Jones US Dividend 100 (SCHD)
Wealthfront’s historical returns are as follows (through 1/31/2019). But keep in mind these numbers are general. Since the portfolios designed for each investor are unique, your returns will vary.
Specialized Wealthfront Portfolios
As mentioned in the introduction, Wealthfront has rolled out several different investment options, in addition to its regular robo-advisor portfolios. Each represents a specific, and generally more specialized investment strategy, and is typically available to those with larger investment accounts.
Smart Beta: You’ll need at least $500,000 to be eligible for this portfolio. Smart beta departs from traditional index-based investing, which relies on market capitalization. For example, since Apple is one of the most highly capitalized S&P 500 stocks, it has a disproportionate weight in strict S&P 500 index funds. In a smart beta portfolio, the position in Apple will be reduced based on other factors.
In general, under smart beta, the weighing of stocks in the fund uses a variety of factors that are less dependent on market capitalization. There’s some evidence this investment methodology produces higher returns. This portfolio is available at no additional fee.
Wealthfront Risk Parity Fund: This is actually a mutual fund–the first offered by Wealthfront. It involves the use of leverage with some positions within the portfolio. It attempts to achieve higher long-term returns by equalizing the risk contributions of each asset class. It’s based on the Bridgewater Hedge Fund, and requires a minimum of $100,000, with an additional annual fee of 0.25% (0.50% total). This is the only Wealthfront portfolio that charges a fee over and above the regular advisory fee.
Socially responsible investing (SRI): Wealthfront just recently began to offer a specific SRI portfolio option. Once you sign up, you’ll be able to customize your portfolio and add socially responsible ETFs.
Sector-specific ETFs: If you want to invest in a particular portion of the market, such as technology or healthcare, Wealthfront gives you the option to build a portfolio that focuses on certain industries to portions of the stock market.
Customized Wealthfront Portfolios:
Wealthfront also lets investors build their own portfolios, which is somewhat uncommon among robo-advisors.
Most robo-advisors will build your portfolio automatically based on your risk tolerance and goals. If you like that service, Wealthfront can do it. However, more hands-on investors are free to make tweaks to the automatically designed portfolio by adding or removing ETFs.
You can also build a portfolio entirely from scratch if you’d rather. You can choose which ETFs to invest in and how much you want to invest in them. You can then let Wealthfront handle things like rebalancing and tax-loss harvesting while maintaining the portfolio you desire.
Wealthfront Tax-loss Harvesting
If there’s one investment category where Wealthfront stands above other robo-advisors, it’s tax-loss harvesting. Not only do they offer it on all regular taxable accounts (but not IRAs, since they’re already tax-sheltered), but they also offer specialized portfolios that take it to an even higher degree.
Wealthfront starts with a tax location strategy. That involves holding interest and dividend-earning asset classes in IRA accounts, where the predictable returns will be sheltered from income tax. Capital appreciation assets, like stocks, are held in taxable accounts, where they can get the benefit of lower long-term capital gains tax rates.
But for larger portfolios, Wealthfront offers Stock-level Tax-Loss Harvesting. Three specialized portfolios are available, using a mix of both ETFs and individual stocks. The purpose of the stocks is to provide more specific tax-loss harvesting opportunities. For example, it may be more advantageous to sell a handful of stocks to generate tax losses, than to close out an entire ETF.
Given that Wealthfront puts such heavy emphasis on tax-loss harvesting, it’s not surprising they’ve published one of the most respected white papers on the subject on the internet. If you want to know more about this topic, it’s well worth a read. The paper concludes that tax-loss harvesting can significantly increase the return on investment of a typical portfolio.
US Direct Indexing
US Direct Indexing is an enhanced level of tax-loss harvesting that Wealthfront offers to people with account balances exceeding $100,000.
Instead of building a portfolio of ETFs, Wealthfront will use your money to directly purchase shares in 100, 500, or 1,000 US companies. By buying shares in so many companies, Wealthfront can emulate an index fund in your portfolio while owning individual shares in the businesses.
Owning individual shares in hundreds of companies makes tax-loss harvesting easier as it lets Wealthfront’s algorithm trade based on movements in individual stocks rather than in funds. This can increase the number of tax losses that Wealthfront harvests each year, reducing your income tax bill.
Other Wealthfront Features
Wealthfront Cash Account
Wealthfront offers acash account where you can safely and securely store your money for anything–emergencies, a down payment for a home, or to later invest. By working with what they call Program Banks, Wealthfront has quadrupled the normal FDIC insurance on this account, so you’re protected for up to $5 million.
There’s also no market risk since it’s not an investment account and the money isn’t being invested anywhere. You can make as many transfers in and out of the account as you’d like, and it only takes $1 to start.
So what’s the catch?
There really isn’t one. Wealthfront will skim a little off the top to make some money before giving you an industry-leading 4.30% APY, but other than that, you’re just giving them more financial data. Since we’re doing this all the time with technology anyway, it shouldn’t make that big of a difference.
I see no downside, especially if you’re already a client of Wealthfront.
They’re really making a play to be your all-in-one financial services provider, too.
A new feature, just launched, is the ability to use your cash account as a checking account. This includes the ability to access your paycheck up to two days early when you set up a direct deposit. Additionally, you can invest in the market within minutes using your Wealthfront Cash account. Put the two together and you give yourself the ability to invest more than 100 days more in the market. The account also allows you to auto-pay bills and use apps like Venmo and PayPal to send money to friends or family. Account-holders also get a debit card to make purchases and get cash from ATMs. And you can use the account to organize your cash into savings buckets – like an emergency fund, down payment on a house, or other large purchase – and use Wealthfront’s Self-Driving Money offering to automate your savings into those buckets.
If you have cash that’s getting rusty in a traditional bank account and you want to earn more, the Wealthfront Cash Accountis a great place to keep it.
Read more about the cash account in our Wealthfront Cash Account full review.
Wealthfront Portfolio Line of Credit
This feature is available if you have at least $25,000 in your Wealthfront account. It allows you to borrow up to 30% of your account value, and currently charges interest rates between 3.15% and 4.40% APR depending on account size. You can make repayments on your own timetable, since you’re essentially borrowing from yourself. And since the credit line is secured by your account, you don’t need to credit qualify to access it.
Wealthfront Free Financial Planning
This is Wealthfront’s entry into financial planning. But like everything else with Wealthfront, this is an automated service. There are no in-person meetings or phone calls with a certified financial planner. Instead, technology is used to help you explore your financial goals, and to provide guidance to help you reach them. And since the service is technology-based, there is no fee for using it.
The service can be used to help you plan for homeownership, college, early retirement, or even to help you plan to take some time off to travel, like an entire year!
Simply choose your financial objective, enter your financial information, and Wealthfront will direct you on how to plan and prepare.
One of the biggest and largely unrecognized obstacles for most investors is something known as cash drag. That’s when you have too much of your portfolio sitting in cash, which may earn interest, but it doesn’t provide the investment returns you can get in a diversified investment portfolio.
Wealthfront has addressed the cash drag dilemma with their newly released Self-Driving Money features. It’s a free service offered by the robo-advisor that essentially automates your savings strategy. It does this by automatically moving excess cash to help meet your goals, including into investment accounts where it will earn higher returns. And in the process, it eliminates the need to make manual cash transfers, and the judgment needed to decide exactly when to make that happen.
Our vision of Self-Driving Money is going to be a complete game-changer for people’s finances, said Chris Hutchins, Head of Financial Automation at Wealthfront. We want to completely remove the burden of managing your money so you can focus on your career, your family or whatever is most important to you.
You can take advantage of Self-Driving Money from the Wealthfront Cash Account. You’ll set a maximum balance for the connected account, which should be an amount that’s more than you expect to spend or withdraw on a monthly basis.
How It Works
When Wealthfront determines you’re over your maximum balance by at least $100 it will schedule an automatic transfer of the excess cash based on your goals. For example, you can tell Wealthfront you want to save $10,000 in an emergency fund, then max out your Roth IRA, then put the rest toward saving for a down payment on a house. Once you set the strategy, Wealthfront will automate the rest.
And before it happens, you’ll receive an email alert, then always have 24 hours to cancel the transfer if you need to cover unexpected expenses. You’ll also be able to turn on and off your Self-Driving Money plan at any time.
It’s usually possible to set up automated transfers from external accounts into most investment accounts. But what sets Wealthfront apart is the fact that it will make those transfers automatically. They will make sure you always have enough cash to pay your bills, then automatically transfer any excess into your savings buckets or investment accounts to improve the return on your money.
The strategy is designed to optimize your money across spending, savings, and investments, and to make it all flow with no effort on your part. You can simply have your paycheck direct deposited into your external checking account or Wealthfront Cash Account, cover your expected monthly spending, then have excess funds automatically transferred into the Wealthfront account of your choice.
By delivering on its Self-Driving Money vision, Wealthfront is taking the robo-advisor concept to a whole new level. Not only do you not need to concern yourself with managing your investments, but now even funding those investments will happen automatically. The result will be near complete freedom from the financial stresses that plague so many individuals.
Wealthfront has a single fee structure of just 0.25% per year for their advisory fee. That means you can have a $100,000 portfolio managed for just $250, or only a little bit more than $20 per month.
The one exception is the Wealthfront Risk Parity Fund, which has a total fee of 0.50% per year.
How to Sign Up with Wealthfront
To open an account with Wealthfront, you’ll need to be at least 18 years old, and a U.S. citizen.
You’ll need to provide the following information:
Social Security number
Date of birth
As is the case with all investment accounts, you’ll also be required to supply documentation verifying your identity. This is usually accomplished by supplying a driver’s license or other state-issued identification.
As mentioned earlier, you complete a questionnaire that will be used to determine your investment goals, time horizon, and risk tolerance. Your portfolio will be based on your answers to that questionnaire, and will be presented to you upon completion of the questionnaire.
For funding, you can use ACH transfers from a linked bank account. You will also have the option to schedule recurring deposits, on a weekly, biweekly, or monthly basis. The platform can even enable you to set up dollar-cost averaging deposits.
If you already have a brokerage account with another company, Wealthfront makes it easy to transfer your funds to your new account. If you’re invested in ETFs that Wealthfront supports, Wealthfront will assist with an in-kind transfer.
That means that you won’t have to sell your shares before transferring funds, which lets you avoid capital gains taxes that would be triggered by a sale.
Wealthfront’s closest competitor, and the robo-advisor that offers the most comparable services, is Betterment. They also have an annual advisory fee of 0.25%, but require no minimum initial investment. That could make it the perfect robo-advisor for someone with no money, who plans to fund their account with monthly deposits. Read the full Betterment review here.
Related: Wealthfront vs. Betterment
Another alternative is M1. Also a robo-advisor, M1 enables you to invest your money in what they call “pies”. These are miniature investment portfolios comprised of both stocks and ETFs. You can invest in existing pies, or create and populate pies of your own design. Once you invest in one or more pies, the platform will automatically manage it going forward. What’s more, M1 is free to use. Read more about M1 here.
Related: Wealthfront vs. Vanguard
Read More: The Best Robo Advisors – Find out which one matches your investment needs.
Wealthfront Pros and Cons
Investment options: Wealthfront offers more investment options than just about any other robo-advisor, particularly for investors with at least $100,000.
Reasonably priced: The annual fee of 0.25% is extremely reasonable, especially when you consider the degree of sophistication offered by Wealthfront’s investment methodology.
Tax-loss harvesting: This is available on all accounts, and Wealthfront is probably better at this investment strategy than any other robo-advisor.
Portfolio credit line: Gives you the ability to borrow against your portfolio with ease, and represents a form of margin investing.
Financial planning feature: The financial planning service is free to use and is available to all investors.
Limited access for smaller investors: Some of the more advanced investment portfolios and services are available only to investors with $100,000 or more to invest.
$500 minimum initial investment: It’s a minor issue, though some competitors require no funds to open an account.
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Should You Sign Up for Wealthfront?
In a word, absolutely! Wealthfront is one of the very top robo-advisors, and you can’t go wrong with this one. Not only do they offer far more services than most other robo-advisors, but they also allow you to grow along the way. For example, as your account increases in value, you can take advantage of more sophisticated investment strategies, including advanced tax-loss harvesting.
That Wealthfront offers its portfolio line of credit and free financial planning services only makes the platform a bit more attractive, But the real benefit is the actual investment service. Wealthfront’s investment service comes extremely close to that of traditional human investment advisors, but at only a fraction of the annual cost.