There are pros and cons of investing apps, and while very popular, investors should still exercise caution when considering them.
Investment apps come with definite advantages…but also some unquestionable downsides. When you think about it, an app is essentially a tool. Like any tool, there are things it does well…and things it can’t do at all. And, like any tool, it can even be dangerous if misused.
The first issue: the very accessibility that makes these apps so popular is also what makes them so risky. When you have a tool that provides easy, no-cost trading, it can be extremely tempting to overuse it. Researchers have found that this temptation can lead to overly risky and emotional decision-making, as investors try to chase the latest hot stock or constantly guess what tomorrow will bring.
The result: Pennies saved on fees; fortunes potentially lost on speculation.
The second and biggest issue is that while these apps make it easy to invest, they provide no help with actually reaching your financial goals. No app, no matter how sophisticated, can answer your questions. Especially when you don’t even know the questions to ask.
No app can hold your hand and help you judge between emotion-driving headlines and events that necessitate changes to a portfolio.
No app can help you determine which investments are right for your situation. Just as you can’t hammer nails with a saw, or tighten a bolt with a screwdriver, no app can help you plan for where you want to go and what you need to get there.
Cofounder Alix | Fintech Leader | Advisor | Investor | ex Acorns, JPM
11moCmon Delaware...seriously!?!