Investing Young, With Little Income

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Are you young with little money to invest? There’s a way to start your investment portfolio with little income. The sooner you can start investing for the future the better your future will be. Thankfully with today’s technology, you can open an online portfolio through a robo-advisor with minimal fees and maintenance. There are over 20 robo advisors on the market, so choosing one may seem overwhelming. On top of that you still have the option of working with a live financial advisor. So deciding between all these options can be hard and where do you start?

I spent the last week doing some basic research to help you understand the benefits, cons and perspective.

Price: $299 startup fee and $19.99 a month for access to tools and reviews
Account Minimum: N/A

Benefits:

  • Creation of an actual personalized financial plan for cheap
  • Financial planner access 24/7 via email
  • Online tools and reviews of financial services for guidance

Cons:

  • They don’t manage your investments, they just create a plan
  • No live trusted person that you know personally to talk over financial choices with

Bottom Line:

 If you’re looking for a cheap financial plan that will give you the basics of what you need Learnvest may be right for you. The lack of investment management and accountability of some to help you stick to your plan worries me as you will be paying for something that is not helping you as much as it should.

Price: $0-$10k=.35% of AUM* │ $10k-$100k=.25% of AUM │ $100k+=.15% of AUM
Account Minimum: $0

Benefits:

  •   Better than the DIY Investor as they have selected funds based on your goal and risk tolerance
  • Asset allocation according to the investor preferences
  • Provide withdrawal strategies for retirement

Cons:

  • They do not create a financial plan for your investing goals
  • Their goal planning isn’t very structured so it could leave a lot of room to miss the target in the end if you are not very self-disciplined

Bottom Line:

If you are looking for a good way to easily invest with some basic investment guidance on risk tolerance and diversification Betterment is a good way to go. I have suggested this to some friends that simply want to start out investing to saving for a house and retirement.

*AUM=Assets Under Management which is the amount of investments the advisor manages for you

Price: Free unless you have them manage your investments then it is .5% of AUM
Account Minimum $10,000.00

Benefits:

  • They will give you suggestions on your current investments just syncing your existing accounts with their software for free
  • Suggestions are based around your goals that you tell them
  • They also offer free retirement advice

Cons:

  • Limited on the advice since it is based on algorithms
  • There is no planning aspect just management

Bottom Line:

Future Advisor will be great to help you if you are willing to take the time to read their advice and take the action steps they suggest. It is time consuming to do this on your own and when I synced my accounts I actually ignored their emails because I just got tired of them.

Price: $1 per month up to $5000k, after $5000k it is a AUM of .25%
Account Minimum: $5

Benefits:

  • Minimum investment of $5
  • Funds are suggested based on your risk tolerance and interests
  • Dollar Cost Averaging is a major tool they use

Cons:

  • No actual guidance towards your goals
  • No retirement account options

Bottom Line:

I think Stash is great if you will regularly make yourself invest on a monthly basis as that is kind of what this is structured around being able to invest a small amount on a regular basis. There is not a lot of guidance though and I know that I want my money to be working towards something not just investing to invest.

 

Price: $1 per month up to $5000k, after $5000k it is a AUM of .25%
Account Minimum: $5.00

Benefits:

  • 5 portfolio choices based on risk tolerance from conservative to aggressive
  • Investment is based on the type of goal you have (long term, short term, children, major purchase)
  • Automatic investing, they round up your daily transactions and invest the extra $0.25 on a $2.75 transaction

Cons:

  • The fees can be a little expensive, if you’re investing $12.50 a month you’re paying 8% to acorns just for investing and no financial plan or financial caregiver
  • Your budgeting becomes a little more difficult as you have to take into account your rounding up

Bottom Line:

Acorns is a great idea but I think from a practically speaking view point will ultimately cost more than what is provided and will cause budgeting problems. I would prefer to go with the approach of paying yourself first so you know how much you are saving and then budget your expenses. If your saving while you go through the month you may end up over budget from time to time as the rounding up of the cents can build up to a problem.

Price: First $10,000 managed for free │.25% of AUM after $10,000
Account Minimum: $500

Benefits:

  • Many account options with easy setup.
  • Create a portfolio around your risk tolerance
  • Looks for ways to maximize your investments and minimize your taxes

Cons:

  • Not a financial caregiver in the sense that they create a plan and help you reach your goals
  • Don’t ask the life questions that help you realize what your goals are

Bottom Line:

Wealth front is very similar to Betterment except I feel that Betterment does a better job in the advising part, trying to help you save for the big goals in life. Wealthfront helps you invest but does not help you understand the purpose behind your investment other than retirement vs a general investment account.

These online advisors all have the same goal to help millennialls start investing and create good savings habits today so that 20 years from now you have a nice nest egg. My problem with robo-advisors is that most of them are not going to be able to help you figure out your goals in life, how to save for those goals and ultimately be that financial caregiver that most of us need. We all need someone who is a trusted caregiver looking out for us and our family. In the end they are robots not consultants. 

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Steven LaFleur attended college at the University of Nebraska-Lincoln where he majored in finance. After college, he worked in his family’s business. After three years Steven decided it was time to pursue his passion; helping and educating younger generations on money, planning, and finances. Steven is now a financial advisor at True Measure Wealth Management in Omaha, NE. Steven and his wife Kelly have two daughters who keep them busy at all times of the day. Steven enjoys skiing in the mountains and also biking and golfing during the non-snowy months. As a junior advisor, he’s passionate about helping the younger generations plan for their future. For more of Steven’s insights subscribe below.