Tools Changing The Landscape For Private Investors
For a lot of people, the idea of independent, private investment seems like a complicated prospect. It’s not necessarily that financial investment itself is too difficult to deal with, or that any particular venture might be too complex; rather, it’s simply that maintaining any sort of strategic portfolio on top of the demands of everyday life can be daunting.
Indeed, this is often the case for those who view private investment strictly in terms of putting money into the stock market to make trades and hope for gains. This sort of activity, if it is to result in any sort of success, requires a great deal of attention and time that most of us are unable to sacrifice as a side venture. For this reason, many private investors who do start portfolios in the stock market often seek advice on which industries and companies might perform well as long-term opportunities. That is, where can they put their money and allow it to sit for a while, rather than monitoring shorter gains and losses on a day-to-day basis?
There are plenty of long-term plays like this to be found in the stock market. The truth is, however, the intended length of an investment is not the only factor that can make stock trading difficult for private investors. Really, it’s a complicated, expensive, and busy world. In order to trade stocks, one has to sacrifice time, commission fees, and ultimately a great deal of money (whether on starting accounts, paying professionals to manage these accounts, etc.). And this is precisely why many private investors today are beginning to take advantage of a number of convenient new tools designed to simplify financial management and help busy individuals look effortlessly toward the long-term.
Here’s a look at some of those tools and how they can help you as a private investor.
Effortless Investing – Acorns
Acorns has become a very popular service, primarily in app form, for providing a sort of streamlined version of stock market investment. Basically, the app offers a few different portfolios, designed in advance, for users to choose from. Once you decide on an investment portfolio that suits your own preferences (as well as how high you want your risk/reward potential to go), the app starts pouring your money into that portfolio—but does so just a few cents at a time. More specifically, the app is designed to tap into your everyday expenses, extracting the change that would round each expense up to the next dollar to invest in your portfolio.
Primarily, the app is designed to simplify the investment process, with a target audience consisting largely of people aged 18 to 30. Business Insider quoted Acorns CEO Walter Cruttenden as saying that he and his company are “hoping by making the amount (of capital needed for investments) smaller, we can get people started earlier.” The comment was made with regard to many young people missing out on years’ worth of compounding investment opportunities simply because they don’t yet have the capital or know-how to invest – and in this sense, for a certain demographic, Acorns could have a significant impact.
The quirky aspect of the app is that once you’re set up, you don’t actually choose all of your own investments, but rather, as mentioned, a pre-arranged portfolio. As the Business Insider article referenced previously also noted, however, the portfolios available (currently, there are six) were designed by Dr. Harry Markowitz, a Nobel prize-winning economist who has written books on portfolios and investment diversification. Markowitz is an Acorns advisor, and certainly lends credibility to the program’s portfolios and investment methods.
Simplified Stock Trading – RobinHood
For those who prefer a more hands-on approach but still appreciate the simplicity that can come with app- or web-based private investing, RobinHood has become a very interesting alternative. Advertised simply as “free stock trading,” the program requires more effort than an option like Acorns, but takes away some of the complexity, and a lot of the fees, of ordinary day trading. Basically, it’s ordinary stock trading without brokerage influence, which means quick, free investments.
The program also has a few special features designed to make things easier, particularly for amateur investors or individuals with limited amounts of time to devote to financial management. For example, RobinHood will alert users before events (such as earnings reports) relevant to their portfolios.
As with Acorns, one of the primary objectives of RobinHood seems to be to simplify the investment process for users. However, for a certain demographic – likely the same young professional group targeted by the creators of Acorns – it could be a true game changer in how and when people invest. The simple fact is, setting up a stock market portfolio and making trades is expensive and complicated for those who have little experience with such practices, and RobinHood eliminates the complexity by combining stock trading with the simplicity users have come to expect from apps.
A review at Investor Junkie clarifies the appeal and potential impact of the app by presenting a chart displaying the per trade commission and minimum deposit for RobinHood (at which both are $0) and a number of competitor trading platforms. However, the same review notes that certain types of transactions – trading options, OTC securities, warrants, and mutual funds specifically – are not yet available on RobinHood. Additionally, the program is currently only available as an iOS app, which naturally limits its user base. Still, young people are using the app, not only to explore and learn investing, but to make trades and manage accounts without costs – which could be a very impactful concept, either if RobinHood continues to grow or if a more dynamic competitor emerges.
Alternative Markets – FXCM
The term “investment” can refer to a nearly limitless range of options, but when it comes to the regular buying and selling resources with the hope of financial gain, it’s important to recognize that the stock market isn’t the only option. And sometimes, various forms of alternative investment, specifically in valuable resources and foreign currency exchanges, can be simpler for private investors with limited time and a long-term outlook. FXCM is a useful tool for such investors in that it combines insights and trading options on a number of these resources, from precious metals like gold and silver to the forex currency markets.
Generally speaking, these markets are often regarded for their potential in long-term investments, as it can take several years for a significant swing in the value of a currency or resource to strengthen the money you put into it. That in and of itself is appealing to many private investors. However, online tools like this one also make the actual method of investment quite appealing, allowing users to buy and sell their resources at low costs, online, 24 hours a day (as opposed to trading stocks only while the markets are open).
This is not an entirely new concept, but it’s certainly one with increasing appeal in a world that revolves more and more around mobile connectivity and the ability to conduct business on-the-go. Even programs like Acorns and RobinHood, while built for convenience, cater to stock markets with inherent restrictions when it comes to when and how transactions can be conducted. A program like FXCM that allows the buying and selling of resources, however, has the distinct advantage of allowing 24/7 trading, which is a more valuable concept today than it was even a few years ago. With people increasingly adjusting to managing finances from smartphones and other devices on-the-go, such a program carries enormous value and potential to change the nature by which you manage an account or investment portfolio. Naturally, the user base is limited to those who do have interest in resource investment; but given that such investments are often recommended at the very least to diversify portfolios,
it’s easy to understand why so many do engage in using this sort of program.
Ultimately it’s important to recognize that each of these options carries risk. But for long-term goals and minimal requirements, they’re all worth a look for a private investor.