How To Invest Your Money Using Apps

photographed by Kieran Boswell.
Nutmeg, Moneybox, evestor, Wealthify, Plum, Moneyfarm… There are at least a dozen apps competing for your cash.
All you need to do is download the app or go to their website, answer a few questions to assess your attitude to risk and set up a direct debit – which could be for as little as the change from your morning latte – and you can call yourself an investor. Say goodbye to daily newspapers, calls to your broker and thinking you need to amass millions before you can invest.
"We are the digital embodiment of Warren Buffett's investment advice," says Ben Stanway, cofounder of Moneybox. "Buffett always says the best way to invest in the stock market is to invest money every week or month into low cost, diversified equity tracker funds and that’s exactly what Moneybox does."
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Most so-called "robo advisers" operate in a similar way when it comes to putting your money into the stock market. Once they assess your risk level, your money is allocated into a certain portfolio, usually called "cautious", "balanced" or "adventurous". Each portfolio has a mix of low-cost passive funds, which means the funds follow a market like the FTSE 100 up and down over time, rather than trying to outperform it.
But before you choose an app to invest in, Laura Whateley, author of Money: A User’s Guide, recommends setting aside at least £1,000, or three months' worth of expenses, in case you need to access cash quickly. (Investments are designed to be left alone for at least five to 10 years.)
"I think you need to decide from the outset why you are investing in stocks and shares and what for – your 'goals', in financial adviser speak," she says. "Think about what this locked away money is going towards – education for a child? A pension?"
The next step is to compare the market. Nutmeg was first to launch in 2012, and since then a swathe of new investment apps have popped up, all racing towards the same goal – to offer the lowest fees, the widest selection of ISAs and pension products, and the most diversified portfolios. For example, Nutmeg offers a Lifetime ISA, whereas Moneyfarm currently doesn’t. You can get invested for just £1 with evestor, whereas Nutmeg’s minimum is £100. Wealthsimple offers a portfolio for socially responsible investors, avoiding stocks like tobacco and alcohol companies, but only if you have £5,000 to invest.
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You might pick more than one. Nikki Ramskill, founder of the Female Money Doctor blog, puts £25 a month into Plum's "ethical" portfolio and uses the app to save and budget. She also has a general investment account on the Moneybox platform. She recommends investing a maximum of 10% of your income, and saving another 10%.
"Apps can be quite limited if you want to have that flexibility in what you invest in," she says. "But if you’re not very fussed and just want to know the risk level and so on, then it’s probably better to just use an app. I still want to put the majority of my money in something I have control of, and that’s why I have an account with Hargreaves Lansdown too, where I can pick my own investments."
Another way to compare the market is fees, as what you pay can really eat into your returns. Some of the apps offer a fee calculator, showing what you will pay, in pounds and pence, depending on how much you invest. According to the fee calculator on Nutmeg's website, if you invest £1,000 you will pay £4.50 over 12 months – but this doesn't include all fund costs. At Moneyfarm, the annual cost is £11 for the same amount invested, but this figure does include all costs. Websites like Boring Money and the lang cat also offer good comparisons of fees and basic features.
But fees are not the be all and end all.
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"Something that's cheap and unsuitable is still unsuitable – although that isn't a free pass for these apps to charge what they like," says Mark Polson, founder of the lang cat financial consultancy.
So how do you know if it’s suitable for you? Most apps do not offer customised, independent advice, but there are two exceptions. Nutmeg offers tailored financial advice for £350. Evestor currently provides free financial advice but by doing so has found that two-thirds of those potential customers are not ready to invest.
"The reasons vary, but in most cases it’s because they may be better paying off their unsecured debts first, or because they have little or no cash buffer in place," says Anthony Morrow, CEO of evestor. He added that the business is changing next year, dividing those customers who want advice and those who don’t.
But if you’re only investing, say, £20 a month, as Mark Polson says, there is "limited damage you can do".
Limited damage or not, far fewer women use investment apps compared to men. On Nutmeg, just 35% of the investors are women and on Moneybox it’s 30% women.
"Although the investment world has traditionally been dominated by men, and is full of complicated jargon, it is quite easy to get started if you follow some golden rules," advises Whateley.
"I don’t think men know way more about finance than women, but I do think they are less likely to let their lack of knowledge put them off giving it a go anyway, while the women I know tend to think, 'Oh God I don’t understand so I better not take the risk'," she adds.
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One golden rule is to drip-feed money consistently over time, so that you benefit from compound interest (a lovely double whammy effect where you earn interest on top of interest). Another rule is to stay invested. So, the shiny new app is fun to play with, just don’t play with it too much.
"As soon as there is a market dip, many people might want to take their money out," said Ramskill. "It comes down to education and about why you’re using this app in the first place. It’s not designed for you to dip in and out. And if you’ve put money in a pension, like a Lifetime ISA, you can’t take that out again [without paying fees]."
As for the future, the apps all have exciting plans. For example, Nutmeg has just bulked up the number of its portfolios, including 10 for ethically minded investors. Moneybox’s Stanway said he expected their overall fees of 0.45% (plus £1 a month subscription fee) to come down "significantly" over the next few months, as well as launching ethical portfolios and the ability to collect all your old workplace pensions and invest them via the app. At evestor, they plan to shake up the way customers can access financial advice.
Like anything else, it’s hard to pick a product when you know a better one is only around the corner. But you can also sleep easy, knowing that if anything goes wrong, up to £50,000 of your investment is protected by the Financial Services Compensation Scheme. So don’t be indecisive. This is a really easy and relatively cheap way to try and secure your financial future.
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