Pros and Cons of Using Investment Apps

Quick Answer

Mobile investing platforms offer ready access to information and inexpensive trading, but if you're not experienced with investing, it can be easy to make poor investment decisions quickly.

Woman using investment app in coffee shop

Mobile investing platforms are popular because they make the investing process easier and less expensive. But gamification and other features can also result in more emotional decisions and day-trading-like behavior.

Before you use a mobile investment app, it's important to understand both the advantages and disadvantages for your investment strategy. Here's what to consider.

Pros of Mobile Investing Platforms

In recent years, mobile investment apps have helped democratize investing, making it easier and less expensive for people with all levels of wealth and experience to participate in the stock market. Investors who use these mobile platforms can take advantage of several benefits.

Low to No Fees

Historically, trading stocks and other financial instruments online required a commission, which could cost anywhere between $5 and $30, and some brokers still charge that fee to help you with trades.

With a mobile app, however, you generally won't have to pay a fee to trade stocks or exchange-traded funds (ETFs). However, some may charge a fee for option contracts.

Low Barrier to Entry

Some brokers still require you to open an account with a minimum deposit. With many mobile platforms, however, you can open an account with no minimum deposit at all.

Many mobile investment platforms also allow you to buy fractional shares, so you may be able to invest in an individual stock or an ETF with as little as $1 to $5.

Easy Access to Resources

While options can vary from app to app, mobile brokers typically offer resources to help you learn about the basics of investing, how to develop a good strategy and other crucial concepts.

They may also provide you with real-time information and news about individual stocks and companies, so you can make informed trading decisions.

Ease of Use

Mobile investing platforms are designed to make it easy to check your portfolio and make trades. The process is often more intuitive than other online brokers, so even beginners won't have too much trouble knowing where to go to do what they want to do.

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Cons of Mobile Investing Platforms

While there are some clear benefits to investing with a mobile platform, there are also potential downsides, some of which can have a significant impact on your finances.

Gamification Supports Risky Moves

Some mobile investing platforms use elements of game design to encourage usage. For example, you may get a burst of confetti or balloons after you make a trade, rewards for deposits or achievement badges.

In one study by researchers at the University of Toronto, it was found that these gamified elements nudge investors into making riskier decisions, particularly with securities that are risky to begin with, and that the impact is the most significant for inexperienced traders.

Additionally, the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) have stepped up oversight and research into investment apps with game-like features to determine whether to crack down on brokers that offer them.

You're on Your Own

Mobile investing apps typically don't offer human advisor services. While you can take the time to learn about investing and research the stocks and other securities you want to invest in, the fact is that you don't know what you don't know.

In other words, if you're a novice investor, there's no one to help you develop a sound investment strategy, help you diversify your portfolio or stop you from making ill-advised decisions.

No Advanced Tools

If you're an experienced investor, you may benefit more from an online trading platform that offers more sophisticated tools, such as premium market research reports, extensive charts and analyses and access to human advisors.

Limited Investment Choices

Many mobile investment platforms only allow you to invest in stocks and ETFs, though some may also allow you to buy options contracts and trade cryptocurrency. If you want to invest in mutual funds, real estate investment trusts and other asset classes, you may be out of luck.

Should You Invest With a Mobile Investing Platform?

As an investor, it's important to choose the right broker for you. While there are some advantages to using a mobile investment app to build your portfolio, you may end up taking on more risk than you intended, particularly if you're a new investor.

Depending on your situation and goals, take some time to think about what's important to you in your investing journey and which broker features can help or hurt you along the way. If you're concerned about making emotional decisions with your portfolio, a mobile platform that makes instant deposits and trades possible may not be the right fit for you.

But if you've been investing for a while and have a good strategy in place, you may be able to enjoy the benefits of mobile platforms without being affected too much by the drawbacks.

And keep in mind that if you decide for or against a mobile investing platform, you can always change your mind later on and make changes to get the features and experience you want.