Smartphone Investing: The Dos and Don'ts

These days, we use our phones for almost everything. Entertainment, shopping, banking – and now we can add investing to the ever-growing list. But how do we know which apps are safe to use? And what are some of the pros and cons of using your smartphone to make investments?

What are investment apps?

Investment apps, just like regular apps, can be downloaded onto your mobile device. They provide a platform that allows users to manage their investments, buy and sell individual stocks, buy into mutual funds, and even contribute to tax-advantaged retirement accounts.

Although there are several apps out there to choose from, they usually fall into two main categories: apps that let you invest in funds, and apps that let you trade stocks. The former will usually emphasize long-term growth and may include features that allow you to automatically deposit money into diversified funds. Stock trading apps only allow you to buy and sell individual stocks. Some platforms support riskier investment practices, including options and margin trading. Above all, you should make sure the app you choose to download is legitimate and certified by the FCA.

How do they work?

Once an investment app is downloaded, the set-up is relatively straight forward. You’ll typically need to provide personal information such as your name, address, or ID number. You will also be prompted to link your bank account in order to facilitate the transfer of funds.

Pros and Cons of Investment Apps

As with anything regarding finance, it is important to know the benefits and drawbacks of these products before starting to use them.

Pros

Highly accessible

These apps are designed to be easy to use, no matter your financial background, with interfaces specifically engineered to make investing simple. Daily, weekly, and monthly deposit options can allow users to put their investments on autopilot, while spare change deposits provide a straightforward way to start building a nest egg.

Affordable

Many investment apps have small minimum deposits and low fees. Most spare-change investment apps charge a nominal fee per month for their basic services, and slightly higher for premium subscriptions that typically include tax-deferred retirement accounts and other benefits. Apps that let you trade individual stocks are almost always commission-free, though some may require a minimum deposit.

Cons

May be dangerous for new investors

The low barriers to entry that make individual stock trading apps so appealing to new investors may also encourage ill-advised trading habits and levels of risk they are unprepared for. Some apps do not require any prior authorisation process for users to gain access to high-risk investment practices, meaning the potential for loss can be significant.

May encourage frequent deposits

Because you have the ability to make a deposit or trade at any time, you could end up making deposits too frequently. Before investing, you should consider how much money you are realistically able to invest and decide on a figure that makes sense.

Fees can eat away at small accounts

Many spare-change investment apps charge between £1 and £3 per month, which may not sound like a lot, but it can add up in the long run and these “low” monthly fees may actually cancel out any profit you make. It is always important to closely check the fees you’re paying against the amount you’re willing to invest.

Investing responsibly and consulting a financial advisor

Investment apps can be great tools for responsible investors who know the risks and rewards of using them. However, before you start using one of these apps, it is strongly advised that you educate yourself, especially if you are young and new to it. It is always prudent to seek out a professional, chartered Financial Adviser to provide guidance on investing – whether you then choose to use an app to facilitate it.

If you would like to talk to a member of the team here at gpfm, please don’t hesitate to get in touch over email at enquiries@gpfm.co.uk or call 01992500261. 

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested.  

About gpfm

gpfm are an independent financial planning company dedicated to the provision of personal, professional, and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.