In the realm of financial services, especially investment services, millennials are an underserved demographic. That’s largely because millennials have little inclination and, for the most part, little money to consider learning about investing. If they do have an interest in investing, they have particular preferences in how they want to invest their money.
All in all, they make for a very unattractive target market for the investment industry. That is until Stash Invest came along. Stash is one of the latest fintech companies to come along that is geared to attracting young millennials and they do it by offering a simple, cheap, and highly accessible way to start investing.
Founded in 2015, San Francisco-based Stash Invest bills itself as a “micro-investing” services app whose mission is to “empower a new generation of investors.” The first indication that they are targeting a very specific segment of millennials is that their service is only available on a mobile app. That is enough to exclude pretty much the rest of the population that still prefers to have the option to access their financial information through a website.
However, the Stash app is very sleek and simple enough for anyone to use. Its primary purpose is to help younger people start investing, and it accomplishes that by providing access to investments starting with just $5 and educating them each step of the way.
|Invest In||Asset class based ETFs|
|Monthly Fees||0.02% or $1 (depending on account balance)|
|Promotion||Instantly receive $5 to invest & first month free after opening an account|
|Best For||Long-term investments, asset class oriented portfolios|
Who Should Use Stash?
Stash was created specifically to help younger people participate in economic opportunities. Generally, people with little money see no purpose in learning about the stock market or how to invest for the future. Many people are simply afraid to make that leap. With Stash, if you have $5 in your pocket, you can invest in the same manner as someone who has $5,000. You can then auto-deposit as little as $5 a week directly from your checking account.
Along the way, the Stash app will tell you how to best invest your money and educate you about your investments. It will also keep you motivated by tracking the growth of your investments. And when things do go wrong (a sudden decline in the stock market), Stash is there to walk you through it. Stash is registered with the SEC as a Registered Investment Advisor which obligates it to act in a fiduciary capacity. That means it must provide unbiased and conflict-free advice.
If you have been wanting to get started with an investment program but thought you didn’t know enough, or didn’t have enough money to get started, or were afraid to take the first step, Stash is for you.
How Does Stash Work?
Stash is strictly an app. Everything from signing up to linking your bank account to making your investment selections is done on the app, which is very intuitive and lined with plenty of opportunities to get your questions answered. When you open an account, you will be asked to provide your Social Security number, evidence of U.S. citizenship, and your bank account number. Next, you complete a brief questionnaire to determine your risk profile, which can be conservative, moderate, or aggressive. With that, Stash will recommend specific investment options that match your investment goals and risk level.
Unlike many of its competitors which actually select the investment options for you, Stash allows you to select from among a range of choices. If Stash sees you leaning too far away from your risk level, it will nudge you back towards other choices. When you make your choices you are ready to invest.
At that point, you will be asked to link your bank account by providing your bank login information. Stash will verify your account by making a small deposit. Once your account is verified, which can take up to five business days, your money will go to work for you. You can make as many deposits as you like up to $10,000 per day. You can also set up AutoStash to schedule automatic deposits on a schedule. Remember, Stash only requires a minimum of $5 to make a deposit.
What Does Stash Charge?
Stash charges $1 per month for the use of its services. The $1 fee is deducted directly from your bank account. Once your account balance reaches $5,000, Stash starts charging an assets-based fee of 0.25 percent. While the $1 per month fee seems low enough, it is actually not, at least when you carry a low balance. For example, for an account balance of $100 over a year, it actually works out to be 12 percent of your balance, which is very high. When your balance reaches 2,500, the fee represents 0.48 percent, which is much better, but still higher than fees charged by other robo-advisors. The 0.25 percent fee for a $5,000 balance is more in line with what other robo-advisors charge.
You will also pay for investment expenses. Stash primarily uses exchange-traded funds (ETFs), which are low-cost investments. The expense ratios on Stash’s ETFs range from 0.07 percent to 0.95 percent. The higher cost ETFs tend to be niche investments which are more expensive to manage.
Investing in What You Believe, Want, Like
When Stash recommends a particular investment, it provides you with some background information to help you learn more about it. It’s an easy-to-read snapshot that includes a brief synopsis of the investment, where it fits on the risk spectrum, the underlying holdings of the investment, and the expense ratio. Additional information is available on its past performance.
Stash also lets you see who else owns the investment through a social component. If you want to connect with other people investing in the same security, Stash allows you to do that through Facebook or Stash’s own contacts application.
In addition to matching you with investments based on your risk tolerance and investment objectives, Stash also allows you to invest thematically based on your beliefs, wants, and likes. For example, if you have strong beliefs about clean energy, you can add an ETF that invests strictly in clean energy companies. If you want to be able to buy a house in 10 years, Stash will present you with more growth oriented ETFs that can help you accomplish your goal. If you like any particular market segment, such as retail stores, you can choose from among ETFs that invest in that sector.
If Stash is successful in its mission – to educate and empower young investors – it may not have lasting value for those who may outgrow it. Once you accumulate more than $5,000, you may want to consider an alternative robo-advisor with more advanced features and more competitive pricing. But, until then, Stash is the perfect vehicle to hold your hand and keep you from making big financial mistakes as you learn how to invest.