How do investment apps work?
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It’s relatively simple to use an investment app, but to get the best use out of one it pays to understand how it works. This beginner friendly guide explains what investment apps are, the different apps you can use, and how they work.
What is an investment app?
It’s a mobile application that lets you invest in the stock market or other assets using your smartphone or tablet. Apps are offered by online brokerage firms and a number of financial technology companies. They can be used for different purposes; some let you invest manually while others are completely automated.
How do investment apps work?
Investment apps connect you to the financial markets via your smartphone or tablet. There are two main types of apps, active and passive, and they work in different ways. Below is an explanation of how each type of investment app works.
1. Active
This type of app gives you complete control over how you invest your money and is offered by most brokerage firms. Active investing is when you decide what to buy or sell and is best suited to experienced investors. Using an active investment app is easy and all you need to do is download the application to your device, create an account, and deposit funds.
When your account is funded you’ll then be able to start investing into whatever assets are available on the platform. Active investment apps are usually an additional way to access an account with an online brokerage firm, so you’ll also be able to manage your investments using a computer too.
2. Passive – Robo advisors
Passive investment apps are often referred to as robo-advisors and give users a hands off way to invest their money. Robo advisors work by investing your funds automatically into stocks, funds, and ETFs. To use a robo advisor you need to download the app, create an account, and deposit funds.
Once your account has been set up you then need to answer a series of questions so the software can understand your investment goals and risk appetite. The robo advisor will then use AI technology to invest your money automatically. When you use passive investment apps you can either invest a lump sum, or make regular investments.
3. Passive – Micro investing apps
Micro investing apps are another type of passive investment apps. They work in a similar way to robo-advisors and the whole process is completely automated. The main difference between the two is micro investing apps let you invest a few pennies which is automatically debited from your bank account when you make any purchase.
Usually micro investing apps round up to the nearest pound on your everyday spending and invest into low cost ETFs, funds, stocks. To use one, you need to give the app access to your bank account. This is achieved through open banking. Open banking is a new feature offered by banks that securely lets you share your account details with other services.
Which investment app is right for me?
Investment apps can be used by anyone who wants to invest and each type is best suited for certain individuals and circumstances. If you’re a well experienced investor then using an active investment app, like those offered by most online brokerage firms is your best option. Active investment apps give you the most control over your money.
New investors and those with little money will find passive apps such as robo advisors and micro investors most suitable. Students in particular can make use of micro investing apps. Robo advisors are suitable for all types of investors, even those with some experience and it is possible to use more than one investment app to spread your money across different funds.
Compare the best investment apps
Our investment experts have searched the market and selected some of the best apps you can start using right now. All of these apps are top choices for both beginners and experienced investors. Just click on any of the links below to get started in minutes.
Where can I learn more about investment apps?
Here on Invezz we have lots of information about investment apps. You can check out our other in depth guides to learn more about apps and find out if they’re safe and which are the best ones to use. Alternatively, if you want to learn more about the stock market, or investing in general then visit our education section, where our experts break down complex information into easy to read, bit sized free courses.
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