If you’re reading this you’ve probably been hearing a lot about passive investing from Youtube videos and social media, but you’re not sure which apps to use to get started.
Well, you came to the right place because we’re ALL about helping people find the best investing apps for their needs.
In this article I’ll give you a breakdown of what passive investing is, why you should consider passive investing, and I’ll show you the Top 3 investment apps for passive investing while I’m at it.
What is passive investing?
Passive investing is an investment strategy where investors typically buy into index funds, rather than picking individual stocks.
Your next question is probably “Uhhhh… what’s an index fund, and how does investing into it make me money exactly?”
An index fund is essentially a fund you can invest into that tracks the performance of a stock market index, like the S&P 500 or Dow Jones Industrial Average.
If you’ve heard the term “Exchange Traded Fund”, or ETF for short, they’re talking about passive investing.
In simple terms, index funds/ ETFs simply keep track of all of the good and bad companies on the stock market and they invest in the best performers while getting rid of holdings from bad performers.
Think of it like having a personal Warren Buffet managing your investments so you don’t have to.
Well… that may be a little disingenuous to make you believe you have the best investor of modern history managing your money… In reality you don’t, BUT nevertheless, passive investing is an EASY and relatively safe way to get involved in the stock market.
Certain investments, like ETFs, have a small fee, known as an expense ratio. This is usually a very small amount, around .03% of your holdings per YEAR, and this fee basically just pays for the management of the fund itself.
Passive investors usually try to find ETFs that have a low expense ratio, that way they maximize their returns, since you can’t take advantage of compounding on money you pay out, but don’t be alarmed, this is all common practice in the ETF world.
Why should I start passive investing?
If you’re asking yourself this question, GOOD…
You should always be skeptical and try to think for yourself BEFORE investing into the stock market.
For all you know, I’m the owner of the biggest passive investing firm in the world and just want to take your money… (hint:I’m not)
Look… I’m not a financial advisor or the owner of an investment firm, I’m not trying to take your money, I don’t care if you start passively investing or not, BUT what I DO want to do is help you figure out if passive investing is the right strategy for you.
So with that being said, passive investing may be for you if:
I don’t expect you to believe some random blogger’s views about investing. Do the research yourself.
You’ll find that some of the largest investment funds in the world rely on passive investing.
It’s widely understood in the finance world that only a minority of active managers outperform the market and that paying a human to manage your investments incurs more fees than having a robo-advisor managing your money for you.
If you don’t believe me, read the wiki about active management.
Anyway, if you’ve done your research and have decided that you’re still interested in passive investing, let’s get into the Top 3 investment apps for passive investors, that way you can get started.
Acorns is pretty much as passive as you can get.
If you’re looking for an almost completely hands-off investing experience, Acorns should definitely be the investment app you use.
How it works is – you sign up, answer a few questions about your income and risk tolerance, then you set up regular automatic deposits (if you want to), and let Acorns take it from there.
That’s pretty much it… No picking stocks… No looking at boring charts that you don’t understand.
They even have a “Round-up” feature where Acorns can round up your debit card purchases to the nearest dollar and invest that money for you.
Acorns is really amazing, and is the epitome of passive investing. PLUS they’ll even match your first $5 deposit if you’re a new user.
Investing apps with robo-advisors, like Acorns, are pretty much the gold-standard when it comes to passive investing, simply because they make it SO easy for beginners to start investing.
Acorns isn’t 100% free like some other investing apps, but their price schedule is very simple, and let’s be honest, $1-$3 per month isn’t unreasonable for a good service.
The $3 per month option will give you access to retirement accounts, which have better tax advantages, and you’ll get access to an Acorns checking account that will set aside extra money for you to invest when you use it at certain places, similar to a cashback program.
Overall, Acorns is affordable and a great passive investment app, so it gets the #1 spot.
#2 M1 Finance
The #2 investment app for passive investing is an app named M1 Finance.
M1 Finance is a robo-advisor service that allows you to arrange your investments into “pies” and set up regular automatic deposits into your investing account, which will be automatically split up and invested proportionally into your pies.
You control the percentage that each investment represents in your pie, and you can also share or copy other people’s pies.
M1 Finance offers fractional shares, so you don’t have to worry about not being able to afford whole shares of a stock or ETF, which fits in really nicely with the passive nature of the app.
M1 Finance fees
M1 Finance DOESN’T charge you any kind of monthly fee, unless you sign up for M1 Plus, which costs $99.99 per year for the first year, and $125 per year after the first year.
I don’t see any reason to sign up for M1 Plus though, their free service is amazing as-is.
M1 Finance DOES have a minimum deposit of $100 to open an account, and they WILL charge you a fee if your account drops below $20 and is inactive for 90+ days.
Here’s a link to the M1 Finance fees, if you want to take a closer look.
Keep in mind: Even though M1 Finance is free, you’ll still be required to pay the expense ratio for any ETFs you purchase, but if you only invest in regular equities you won’t have to pay anything at all, other than the associated taxes.
Stash is my favorite investing app to use, but in the spirit of honesty, I have to rank it #3 in this list.
Acorns is simply the most passive you can get and deserves to be #1 for this list, and the only reason I’m not ranking Stash higher than M1 Finance is because Stash has monthly fees.
Unlike M1 Finance though, you can get started investing with Stash with only $5, which is really nice if you just want to try the app out.
Stash has pretty much the same features as the other passive investment apps, like Round ups, automatic regular deposits, it can automatically invest your money, as well as fractional shares to make life easier for you.
Stash has 3 different monthly plans for investors, ranging from $1 per month to up to $9 per month. These fees don’t include the expense ratios for ETFs you decide to purchase, so be aware of that.
The beginner plan is great, so I wouldn’t bother with the other plans unless you’re planning on using this as a retirement account, in which case you should consider using one of the upgraded plans to take advantage of the tax breaks.
Overall, Stash is a wonderful app with a great selection of ETFs and stocks to choose from in that will take care of your passive investing needs, so check it out!
Well… that’s it for our Top 3 list of passive investment apps. If you found this article helpful, PLEASE return the favor and share it by clicking the social media buttons below. It helps us more than you know.
I appreciate you, thank you for reading, and have a wonderful day!