We all know that the secret to becoming a successful investor, you must “buy low and sell high.” But if you’re like most investors, you don’t always know when it’s a good time to buy a particular investment. With the best investing tools, you can easily make sound investments that help you build long-term wealth and minimize your investment risk.
Even professional investors rely on investing tools to determine when to buy (or sell) an investment. The following recommendations can help you create an online investing toolkit to examine your current portfolio and pick future investment winners.
After all, most people don’t become a millionaire through good luck. Whether you’re a DIY investor that wants to begin buying individual stocks or you want to stick with index funds, these investing tools will boost your investing confidence instead of trading on emotion.
Best Investing Tools for Beginners
These tools are going to be for DIY investors that like to make your own investments. Whether you make every investment decision, or you want the help of an online advisor to manage your portfolio, the resources below can benefit any investing strategy.
Motley Fool Stock Advisor
There’s a good chance you’re not a full-time investor, but you don’t want to pay an advisor to manage your account. This is where Motley Fool Stock Advisor comes into the picture. You can get expert investing advice without spending a small fortune to receive it.
Each month, you get two new stock recommendations from brother Tom and David Gardner that you can buy to earn long-term gains. If it looks like one of the recommendations doesn’t look like it’s going to outperform the market for the next three to five years, Stock Advisor tells you when to sell.
With each recommendation, you get a detailed analysis of the potential upside and risks with each stock.
Stock Advisor also makes it easy to buy your first stocks or add to your current portfolio. Their recommendations are broken down into two separate categories:
- Starter Stocks
- Today’s Best Buys
There are 10 starter stock recommendations that Tom and David believe are excellent investments for any portfolio. These are time-proven companies that earn steady returns. Stock Advisor recommends investing in three of these companies first.
After adding a starter stock recommendation, you can choose a Best Buy. These stocks have more growth potential but can be more volatile, so you need to buy and hold for several years to realize their full upside potential.
I subscribe to Stock Advisor and think it’s well worth the $99 annual fee for beginner and experienced investors. It’s arguably my favorite online investing tool because of its large database of research, podcasts, and investing idea articles.
Personal Capital is a free investing tool that you can use to monitor your portfolio performance. They have an extensive investment checkup tool that compares your current portfolio holdings too your target portfolio to determine these two factors:
- Is your portfolio adequately diversified?
- Are you too aggressive or passive for your investing strategy?
This checkup is especially useful when you invest with two different brokerages. For example, my employer’s 401k account is with Vanguard, but my personal investment accounts aren’t. Personal Capital analyzes my holdings with each brokerage to make sure I’m on track. When I need to rebalance my portfolio, Personal Capital quickly tells me where I’m overweight and underweight.
Besides a portfolio checkup, you can also use Personal Capital to track your daily spending and your total net worth. And, you can create savings goals, if you need some digital motivation to stash some cash for your short-term expenses like a family vacation or buying a new car.
Your 401k might be where most of your investment portfolio is located. Blooom performs a free portfolio checkup and can optimize your portfolio to choose the best fund options within your retirement plan.
Maybe you currently invest in a target date retirement fund for its simplicity. This could be the best option in your retirement plan, but you won’t know for sure unless you get a second opinion.
Blooom integrates with the following types of retirement plans:
By using Blooom to manage your retirement account, you can focus on your day job and the folks at Blooom do what they’re best at, investing. If you don’t have the time to manage your portfolio adequately or you tend to invest based on emotions, Blooom can put their expertise to work.
If you’re a fan of index funds and don’t have the time to routinely rebalance your portfolio or adjust your stock to bond allocation, Betterment is one of the most efficient “robo-advisors.”
Betterment is very user-friendly and includes the following features to optimize your investment performance:
- Automatic Rebalancing
- Tax-Loss Harvesting
- Fractional Investing (Can buy partial shares of ETFs so 100% of your money is always invested)
- Tax-Coordinated Investing
Picking the investments with the best income potential is one aspect of being a successful investor, but you don’t want to lose all your investment gains to fees and taxes.
When you have your IRA and taxable brokerage account at Betterment, they will automatically put the higher-taxed assets in your IRA and the lower-taxes investments in your non-retirement account. This strategy minimizes your tax bill so you can invest more of your earnings for more compound interest.
Betterment also offers fractional investing that puts your entire investment to work and your portfolio is instantly diversified. If you were to buy the same ETFs through your regular brokerage, you need enough cash to buy a full share. Either your money sits on the sidelines earning minimal interest or you only buy a single fund which can be especially risky if it only invests in one sector of the market.
Recommended Article: You can also use other free investing apps to maximize your returns too.
There are many reasons to use Investopedia. Beginner investors and experienced investors can use their many educational articles to learn about any investing concept. They also have a free stock simulator that lets you “paper trade” $100,000 to test investing strategies. And, you can also track your portfolio performance and add potential investments to your watchlist too.
Investopedia also offers an online learning academy with video-based courses. Some of the course titles include:
- Investing for Beginners
- Fundamental Analysis
- Become a Day Trader
These courses can be beneficial for beginner investors that are just beginning their investing career and experienced investors that want to expand their skill set and complete advanced trades.
Maybe you like the concept of investing your spare change. Every time you use your credit or debit card, Acorns rounds up the purchase and invests the difference. Although you won’t get rich by using Acorns, you’ll probably invest more in a year than you realize.
When you shop online, you can also get cashback rewards that Acorns will invest in addition to the purchase amount roundup.
Morningstar is the leading research platform for ETFs and mutual funds. A fund’s Morningstar rating is the “gold standard” for most professional and individual investors. You can use Morningstar research to track the following information:
- Performance for the past 10 years
- Top Holdings
- Risk Measurements
- Dividend and Capital Gains Distribution History
Depending on which brokerage you use, you may also be able to access the advanced Morningstar research there too.
Another free resource you can use to get the latest market news and investment opinions is Seeking Alpha.
Personally, I subscribe to the daily Wall Street Breakfast email that includes a summary of the most important headlines and trading news. I scan it to stay abreast with the latest domestic and international financial news that impact the broad market and stocks that I either own or are on my watchlist.
Before researching an investment, you can also read the for and against argument to buy or sell a stock or ETF. This research can also be valuable, so you can decide if the investment is fundamentally sound or faces future challenges that aren’t disclosed in a hot stock tip elsewhere.
Additional Tips to Become a Successful Investor
Having the best investing tools is a huge advantage to be a successful investor, but there are a few other tips you should follow as well to minimize your investment risk.
Always Diversify Your Portfolio
You should always hold a diversified portfolio to limit your downside risk. Nobody can accurately time the market, so you should never put all your eggs in one basket. The best investing strategy is to buy a combination of domestic and international stock and bond investments of different sized companies.
Many brokerages will create target portfolio recommendations for you by taking an investment profile quiz. Or, you can also use the Personal Capital investment checkup tool too.
Once you determine your target portfolio allocation, you can use the above investing tools to find the best investments to fit your portfolio.
Make Regular Investments
Another popular strategy, called dollar cost averaging, is to add small positions to your current holdings each month. You invest the same amount of money each month regardless of the current share price. Dollar cost averaging helps remove the emotion from investing so you don’t try and time the market and maybe never invest at all.
This strategy is easiest with mutual funds in your 401k, but you can also do it with commission-free ETFs in your individual accounts too. Paying a monthly trade commission for several stocks and ETFs can be expensive, and its money that can’t be invested.
When you only have a small amount of money to invest each month, you can use an investing app like M1 Finance or Betterment to buy partial shares of multiple funds without paying a $4.95 commission for each ETF or stock you add to.
Hold Your Investments for At Least a Year (Strategic Asset Allocation)
Most, if not all, of your portfolio should be held in investments that you plan on holding for at least a year. When you sell investments, you’ve owned for at least a year, you qualify for the long-term capital gains tax which means you keep more of your investment income.
More importantly, buying assets you plan to hold for at least three to five years means you’re not trying to time the market. You invest in companies and funds that can provide long-term wealth instead of trying to ride a trend to make a quick buck. If you buy at the peak of a trend, you’re going to earn less than early investors and you can lose money if an unexpected downturn happens.
Being able to buy low and sell high means you need to be prepared to hold an investment for several years before the stock reaches its full earning potential. After all, buying low means you’re investing in a company or fund that’s trading at a discount to its current market value or future market value.
For example, many people thought investing in Apple a decade ago wasn’t the best idea. Ten years later, they were the first company ever to reach a $1 trillion market value.
Past Performance Doesn’t Predict Future Performance
Also, remember that just because a stock has performed well over the recent past doesn’t mean it’s a guaranteed winner for the next 10 years. Therefore, it’s essential to have a diversified portfolio, so you have exposure to every market sector.
Using the market insights provided by investment sites like Stock Advisor help you make informed investing decisions by investing in companies with the potential to outperform for the next three to five years.
Investing can be a reliable way to build long-term wealth if you diversify your portfolio. Using the recommended investing tools gives you an advantage because you can quickly identify the best investment opportunities with the least investment risk.
What investing tools are most important to you? What other investment advice do you practice to become a successful investor?