So you’ve been budgeting, paid off all your credit cards, and maxed out your retirement account. Now you’re thinking about the stock market. But don’t you need hundreds or even thousands of dollars to invest? Not any longer…
Several years ago, we created our first trading account at Scottrade. It required $500 which is why I selected Scottrade. Others were requiring $2000. Plus trades were only $7. Scottrade subsequently joined with TDAmeritrade, and trades are still $7, but that’s still a $14 round trip which kills small investors.
Some previous articles touched on free investing. Today I’ll go a little more in depth about the particulars of two freemium platforms we have tried. Both require just $100 deposit to create an account. And both offer free trade execution. They are Robinhood and M1 Finance.
Robinhood
I’ll start with Robinhood since it was the first freemium platform I learned about. We still only have about $250 with them. As you can see, we presently own 12 shares of Chimera Investment. (I selected this investment, because it is an REIT with a 10% – 12% yield depending on the trading price when purchased. More on REITS in a future article.)
You can buy as little as a single share of a stock or ETF, and there is no charge. Drawbacks are that research tool like charts are limited. But when you know what you’re doing, this is a quick an easy platform to use.
M1 Finance
The other “freemium” platform we are trying is M1 Finance. Like Robinhood, M1 Finance requires just $100 to start. And stock /ETF trades are free. But M1 has some additional premium features that are nice.
An interesting feature with M1 is that you do not have to purchase whole shares of stock. Yes, you can purchase partial shares, as little as 1/10,000 of a share. So if you don’t have enough to plunk down for Amazon or Google (over $1000), you can still participate in ownership through the M1 Finance platform.
M1 also has a great feature for beginners. You can answer a few questions about your investing goals and risk tolerance. Then M1 will build a diversified portfolio into which you can automatically invest deposits. With automatic deposits and automatic investing, you can let the AI do all the work for you! You can also just set it and forget it on your own portfolio or even just individual company stocks.
M1 Finance also has several tools that Robinhood does not. Their “share pie” feature is a nice visual for assessing asset allocation. It will even re-balance automatically. They also offer several research tools that premium online brokers offer.
According to the ad on my app, M1 Finance also has plans to offer an all digital bank account and a debit card with rewards. Overall this platform is great for novices with it’s auto investment “share pie” as well as intermediate and advanced investors with its slightly more sophisticated tools.
Note that while these two screen shots above are of the iPhone apps, both Robinhood and M1 Finance offer full website of options. So if you’re ready to dip your toe in the investing waters, Robinhood and M1 Finance are two low start-up cost alternatives to get you started.