Every new investor faces two challenges:
- The barrier to entry being too high
- Not having the slightest idea of what to actually invest in
It’s no secret that investing jargon can sound like a foreign language. This can deter many people from ever taking the time to learn what they actually need to know. On top of that, many brokerages require investors to have minimum balances and automatic deposits that are just too much.
Fortunately, those days are long gone.
Technology has been huge for lowering investment barriers. There are now so many options that are both accessible and easy to understand by everyone.
If you want to skip the review, we honestly don't recommend Stash because of the high fees. Instead, we recommend that investors check out a full-service free solution like TD Ameritrade or Fidelity. Both of these companies offer great apps, no minimum IRAs, and hundreds of commission-free ETFs. Skip to the end of the article to understand why.
If you're looking to Stash because you want to buy fractional shares and don't have a lot of money, check out Stockpile or M1 Finance. Stockpile allows you to buy fractional shares and it makes it really easy to invest. They target investing towards kids and families – that's how easy it is! Plus, you get $5 in free stock for signing up.
M1 Finance is a little more in depth, but allows you to build a portfolio of stocks and ETFs for free – yes free. No fees. This is a great solution for the investor who wants a little more than just buying a stock or mutual fund.
If you want an app-based option, check out these 5 apps that allow you to actually invest for free.
Why Stash Invest?
Stash Invest is an app that launched in 2015 after the founders set out to answer the question: why don’t half of Americans invest?
They kept coming back to one answer. Most people found investing to be unrelatable, expensive and intimidating. (Can you relate?!) From those answers, Stash Invest was born.
The Stash Invest app allows investors to start investing with as little as $5. Not only that, but Stash makes choosing investments extremely simple.
Stash Invest offers 30 different themed investments to choose from which are narrowed down by your risk tolerance and personal preference. Through the app, you can buy additional investments, diversify, and monitor your progress.
They also have low fees at only $1 per month if your account has less than $5,000 or 0.25% per year if your account holds more than $5,000. Plus, Stash Invest is free for the first three months, which gives you time to build up your Stash.
How to Get Started in Five Simple Steps
If you want to get started with Stash Invest, the sign-up process is extremely simple. (After you sign up check the bottom of the post for ways to quickly grow that balance.)
# 1 – Click Here to Get Started
Click here to check out Stash Invest online and get started on your desktop.
Click here to get Stash for free on the App Store, you’ll be directed to the app store and you can download the app to your phone.
# 2 – Fill Out Your Profile
Next you’ll fill out your basic information and answer a couple of questions. These questions will help Stash guide you on making investment decisions. It’s important that you’re honest with these survey questions because they help determine your risk tolerance.
This should only take a couple of minutes.
# 3 – Choose an Investment
Based on the answers you provided, Stash Invest will show you investment options that line up with your risk tolerance (conservative, moderate, or aggressive.) You can click on the different investments to learn more about them. (Don’t worry they’re explained in layman’s terms!)
The great thing about Stash is that they make investing relatable. Instead of crazy names of ETFs and ticker symbols, you invest in “themes” that are based on your wants, beliefs, or likes. We’ll talk more about that below.
# 4 – Link Your Bank Account
Link up the bank account you want to have money withdrawn from to make your investments.
It takes about 2-3 days for the money to transfer into Stash.
# 5 – Confirm Your Identity
Verify your identity, create a four digit pin number and you’re all done.
How To Actually Invest With Stash Invest
Stash does things differently than your traditional investing app or brokerage. Instead of choosing a stock or ticker symbol to invest in, you choose from themed investments. This is a really great way to make investing relatable, while at the same making investing affordable and easy.
For example, if you believe that Americans will spend more on healthcare simply because they are getting older, you could invest in “Live Long & Prosper”. This investment is based on an ETF that invests in U.S. healthcare companies.
Similarly, you could invest in your “wants”. For example, you could want to invest in a piece of Warren Buffett. The “Roll With Buffett” investment features Warren Buffett’s company Berkshire Hathaway.
When you click on an investment you can see the underlying holdings – real companies that you invest in:
Placing an investment is really easy. You just click on the “Add To Portfolio” button and enter how much you want to invest:
What To Do Next
The goal of Stash (and any investment account) is to build your portfolio over time. Stash Invest makes it fun and easy by creating milestones and ways to encourage you to invest more.
Once you make your first investment, you’ll get the milestones based on thresholds:
Stash also tries to show you your potential – by both adding new investments and teaching you the value of investing often.
Over time, you can check in your home screen and see how your portfolio is doing overall.
Stash has a feature called Stash Retire, which is a retirement account option for investors. Stash Retire offers both Traditional and Roth IRAs – and offers the same investment choices you'd find in Stash. You can contribute up to the IRA Contribution Limit in a Stash Retire account.
Stash Retire is slightly more expensive than Stash Invest – it costs $2 per month in fees up to $5,000, then it's 0.25% of the value of your account. You can still start investing with just $5, but that could be quickly eroded by fees if you don't invest more and see investment gains.
On June 20, 2018, Stash announced that it would waive the fees for any Stash members under age 25. This is a great incentive to get people to start investing early without the fees. We appreciate the change, and hope it encourages younger Americans to start investing. However, once you cross age 25, you should probably look for alternative investment providers to avoid the fees.
Stash also recently launched a banking feature on it's app. They offer a waitlist to join their banking program, which offers no minimum checking, zero monthly fees, and access to some ATMs fee free.
Of course, the banking aspect connects seamlessly to Stash Invest, to allow you to manage all your money in one place.
The Cons of Stash Invest
The biggest drawback of Stash is the cost. $1 per month (or 0.25%) may not seem like a lot, but on a small portfolio, the percentage is very high. $1 per month is $12 per year. On a $100 investment that is 12% in investing fees. That's incredibly hard to earn back, and those fees keep coming. That can really kill your portfolio's earning potential.
Let’s look at an example to break it down. If you’re interested in Technology Stocks, you might consider investing in Stash’s Internet Titan’s ETF. This ETF is actually ticker symbol FDN, which is First Trust Dow Jones Internet Index Fund. This ETF has an expense ratio of 0.54% – which is pretty high for a domestic ETF.
If you want to invest in a similar ETF at Fidelity, you’d probably go with FTEC, which is Fidelity MSCI Information Technology Index ETF. It invests in the same companies, and it has an expense ratio of just 0.08%. It’s also commission-free to invest in. The Stash ETF alone is 6.75x more expensive to own than the fund at Fidelity. Plus, you have that $1/mo fee on top of it!
So, if you have a $1,000 investment in this fund, it would cost you (per year):
At Stash: $12 (the $1/mo fee) + $5.40 (the fund’s expense ratio) = $17.40
At Fidelity: $0.80 (the fund’s expense ratio) = $0.80
In percentage terms, your investment would end up costing about 1.74% per year in fees. At Fidelity, it’s just the 0.08%. So, when you add in the monthly fees, it ends up being 21.75x more expensive to invest at Stash than Fidelity!! All those extra fees are doing is hurting your return over time.
You might say, well, I can't invest in fractional shares at Fidelity or another broker – and you are correct. But that small feature isn't worth paying over 21x more.
Our Preferred Alternative To Stash
What I'd honestly recommend is opening an IRA or brokerage account at a mainstream brokerage like TD Ameritrade or Fidelity. What most people don't realize is that you can open an IRA with no minimum, you can get access to hundreds of commission free ETFs, and you have a great app to use. You essentially can build your entire diversified portfolio for free, on an app.
So, instead of paying high fees and investing in their custom ETFs, you simply get a regular “mainstream” account, can invest in the same ETFs, and experience no fees.
The bottom line is that there are a lot cheaper, and better services out there.
Easily Build Your Investments
With Stash, all you need is $5 to make a deposit. This is perfect for anyone getting started. Plus, it’s so easy to understand!
Here are some useful tips for growing your Stash Invest account quickly:
- Add $5 to your account when you skip your morning coffee.
- Add $5 to your account every time you purchase something on sale that you had planned on paying full price for.
- Add $5 to your account every time you receive your paycheck.
- Add $5 to your account for every hour of overtime you work.
- Add half of your side hustle income.
A bunch of $5 investments can add up to something big. If you want to get started investing but haven’t made the plunge, sign up for an account with Stash today.
Stash Invest is a new app that allows investors to start investing with $5, while picking stocks in themed based investments around wants.