Most investors only look at the potential upside when they buy new investments. What you might not consider is investment fees you pay to buy or sell an individual stock or ETF. If you make several trades a month, those fees accumulate quickly and reduce your long-term profit potential. Thankfully, these free investing apps let you invest for free so your portfolio can grow quicker.
Why Investment Fees Matter?
Just a few years ago, free investing apps sounded like a wild fantasy. It’s amazing how the Internet has made investing affordable to everyone. Even though the average trade from a traditional online broker costs $4.95, you can still trade the same stocks and ETFs for free on certain investing apps.
If you make three trades a month at $4.95 per trade, you will spend $15 or $180 a year. While a $4.95 trade fee doesn’t seem like a lot when you’re investing large sums, it’s a different story when you’re only investing $100 or less per stock. A $100 stock investment must appreciate 10% or pay $10 in dividends before you “break even” to recoup your investment costs and realize an actual profit.
Paying these trade fees month in and month out result in a small fortune for the brokerage while requiring your money to work harder to earn more passive income for you.
Skipping the fees is one way you can become a millionaire.
Benefits of Using Free Investing Apps
Free investing apps let you buy and sell investments with ease. Although they might not have as many investment and research options as a traditional brokerage, free trades mean maximum profit potential. After all, if you’re not going to use all the “bells and whistles” your current brokerage offers, why pay high trade fees?
In addition to free trades, you should also look into these additional benefits of using free investing apps.
Buy Partial ETF and Stock Shares
Many of these apps let you buy or sell fractional shares of stocks and ETFs. For example, you can buy $100 of Amazon stock instead of having to save up $1,500 to buy a single share. While you will only own a partial share (.067 shares in this instance), your money is invested instead of sitting on the sidelines.
If you only have small amounts of money to invest each month, you need to work fractional shares to your advantage to buy company stocks and ETFs that you usually can’t afford.
Open an IRA Account to Maximize Savings
Even if you only plan to use this app as a secondary investment account to only trade stocks or ETFs, you can save additional money by opening a tax-advantaged IRA account to help you retire on schedule.
Buy ETFs from Multiple Fund Families
Although the various brokerages have many ETFs that have very similar holdings—index funds for example—you might want to invest in actively managed ETFS or high-dividend ETFs that you can’t get from your brokerage commission-free. With these apps, you can have your pick of every ETF fund family for the same price, free!
Enroll in Automated Investing for Free
Even if you only have $1 to invest each month, you can use one of these apps to invest $X on the same date every month automatically. The app will also rebalance your portfolio so you can stick to your investment goals. When you sell an investment, you might even be able to enjoy tax-loss harvesting to minimize your year-end tax bill.
It’s important to note that not every app offers automated investing or complimentary tax-loss harvesting.
Consider These Free Investing Apps First
Each of the following apps has their strengths and weaknesses so you’ll need to choose the app that best fits your investment goals.
Best for trading Stocks and ETFs
M1 Finance is probably the best all-around free investing app because You can trade over 4,200 stocks and 1,900 ETFs on M1 via their website platform or mobile app.
Other free apps only let you trade a preselected basket of stocks and ETFs. With M1 you can trade virtually any ticker symbol that trades on the NYSE or Nasdaq stock exchanges. You won’t be able to buy international ADR, OTC, or penny stocks.
If you want to invest in brokerage-specific ETFs like Vanguard, Fidelity, and Schwab, you can now buy these various funds without paying transaction funds. If you invest with Schwab but want to buy a Vanguard ETF, you must pay the regular trade commission. That’s a thing of the past with M1 Finance.
Hands-off investors will also want to look at M1’s “Expert Pies” that are let you follow a premade investing strategy like target date funds, socially responsible investing, copying hedge funds, and other customized investing strategies.
Regardless of what you decide to invest in, all of your investments are in a personal pie. You manage each holding based on the percentage of your portfolio. So, if you want to invest in 10 different positions, you can set a target allocation of 10% per holding. As you deposit new cash, M1 will automatically buy shares of stocks that are underperforming so you continuously maintain the 10% target allocation.
Trading Individual Stocks and Options
If you only want to trade stocks, Robinhood might be your favorite app. Robinhood has two “only” rules you must know about:
- You can “only” buy full shares of individual stocks and options
- Robinhood is “only” available on Android and iOS devices
You won’t be able to buy fractional shares of any stocks, but stocks and stock options trade for free. They are also rolling out the brand-new Robinhood Crypto feature so you can trade select cryptocurrencies for free too.
As long as you don’t mind trading stocks exclusively on your mobile device, Robinhood is probably the best option for frequent traders. For an additional monthly fee, you can also get access to extended hours trading.
One potentially large downside of Robinhood is that they don’t offer retirement accounts and your only account option is a taxable brokerage account.
A 100% Free Roboadvisor
WiseBanyan prides itself as being the world’s first free financial advisor. If you want a fully automated micro-investing app and don’t want to pay a monthly account management fee, WiseBanyan invests your money based on your investment objectives in a basket of stock and bond Vanguard and iShares ETFs. And, you only need $1 to make a single trade.
You can create multiple milestone with different portfolio allocations that can be as conservative or aggressive as you choose. Although WiseBanyan is free, you can pay for add-on packages like tax loss harvesting and customized portfolios.
Commission-Free ETFs and Ample Research
TD Ameritrade is a a full service online brokerage, but it can be 100% free if you trade from their extensive list of 300+ commission-free ETFs. They also don’t require a minimum account balance you can open an account with $0 and fund it at your convenience when you choose an ETF you like.
They also have excellent educational and research materials that can help investors of any expertise level. If you decide to dive into active investing later, you can with TD Ameritrade and have all of the best tools at your hands.
Your first $15,000 is managed free with a fully automated platform!
Wealthfront is another fully-automated investing platform that invests your first $15,000 is managed for free! You will need $500 to open an account, but if you want built-in tax optimized investing and real-time human customer service.
Unlike the other automated investing platforms, you can only buy full shares of ETFs and you might not consider this option if you can’t make a full investment each month. If you’re only investing your spare change, consider one of the other recommendations that do offer fractional share investing like WiseBanyan or Betterment.
Trade fractional shares of individual stocks on a dollar basis instead of a percentage of your portfolio
Although it’s not free, Stockpile makes the list because you can trade fractional shares of stocks and ETFs for 99 cents per trade. Stockpile fills the gap between M1 Finance and Robinhood. You might like the prefer the concept of managing an investment portfolio based on dollar amounts instead of percentages, but you want the option of buying fractional shares.
You will need $5 to open an account, but Stockpile also gives you a $5 gift for the stock of your choice, so you basically get to open an account for free.
Another reason to consider Stockpile is to teach your child or teen to begin investing and their user-friendly platform is geared to helping novice investors pick companies they are familiar with. If you need birthday or Christmas gift ideas, parents and adults can also buy children stock gift cards too!
Fully automated investing with financial advisor support
Maybe you want the benefits of automated investing but you’re not ready to ditch your personal adviser. With Betterment, you will have to pay an account management fee starting at 0.25% annually, but you can open an account with $0 and get access to financial advisors.
You can also invest in fractional shares with a minimum $1 deposit. If you want automated investing and automatic tax-loss harvesting and portfolio rebalancing, Betterment is an excellent option.
Invest in peer-to-peer loans as a fixed income alternative
As an alternative to traditional stock and bond investing, you might consider peer-to-peer loans. LendingClub is the largest peer lending platform with historical annual returns ranging between 3% and 8% per year.
Each note costs $25 and you can invest in 36-month and 60-month personal loan applications and collect the monthly interest payments from the borrower. You can choose to reinvest the monthly interest payments in new notes to compound your earnings.
The minimum initial investment amount is $1,000 so LendingClub can adequately diversify your balance across several different loans to ensure you earn a positive return with minimal risk. Because your money can be tied up for up to five years, you should only invest money in LendingClub that you don’t plan on spending in the near future.
For many, LendingClub is an excellent alternative to high-yield savings accounts that earn less than 2% but are a still fine choice to park your liquid cash.
Lending Club offers an automated investing feature at no additional cost and is the easiest way to invest in peer loans. If you have the time and expertise, you can also manually invest in different notes just like you research and pick your own stocks and ETFs.
Because peer investing income is considered ordinary income like your day job, you might consider opening a tax-advantaged IRA to minimize your tax bill. You can always transfer your funds to your current IRA to invest in the market when your investment strategy changes.
Invest in crowdfunded real estate and earn a higher return than public REITs
Fundrise is another alternative investing app that lets you invest in crowdfunded real estate. Like LendingClub, you will only want to invest money that you don’t need immediate access to because you’re investing in private real estate projects through a private REIT (Real Estate Investment Trust).
However, you can earn an annual return between 8% and 12% without the volatility of real estate stocks and ETFs that can be purchased with one of the other free investing apps mentioned here.
The minimum initial investment is $500, but there aren’t any account maintenance fees. You will only have to pay the standard REIT fund fees that are standard with any publicly traded REIT ETF or mutual fund.
The “big name” brokerages like Vanguard, Fidelity, and Schwab receive the most praise for being go-to investing apps, but they don’t always offer the flexibility you’re looking for. If you don’t need the fancy research tools or you don’t want to pay a trade commission for every stock trade, these investing apps can produce the same long-term results at zero cost.
Not Sure How to Start Investing?
I opened up my first investment account back in 2012 after paying off a lot of debt. That account was with Betterment. Since then, I haven’t looked back. I love the simplicity and ease of use they provide. I think their system is good for any type of investor. If you want to get into investing, check out Betterment.