Like anything, this convenience comes at a cost. Whether you’re investing in an actively managed mutual fund or an index fund, it costs money to run these investments. Some funds charge up-front fees and recurring expenses, others charge a back-end fee, and some just charge a regular recurring fee. It can get confusing for a new investor but with a little help you can learn how to spot what type of fees you’ll be paying and how to minimize those fees. After all, the less you pay in fees the greater your overall returns will be.

Load vs. No-Load

A load is one of the most important fees to watch out for. A load just means it’s an expense in addition to the underlying fund expenses. Typically these come in the form of front-end loads, often sold my financial advisers or brokers who work on commission. You pay the load up-front when you purchase the shares. Loads can vary greatly between fund companies, how much money you’re investing, and more. But it isn’t uncommon to see equity funds with a front load as high as 5.75%. To put that into perspective, if you wanted to invest $10,000 in ABC fund with a 5.75% load, you’d immediately lose $575 to the front-load fee. Ouch! And that’s in addition to the recurring annual expenses that may run higher than 1%.

The good news is that you don’t have to use loaded funds. While nobody will stop you from purchasing shares in a fund with a front-load, you’re typically going to be presented these funds by someone in the financial industry who works on commission. That’s because most of that load is a salesperson’s commission. So if you think about it, it’s no wonder they might try to steer you to a fund with a high load since they are going to instantly put a few hundred bucks in their own pocket. So you have to ask yourself whether the advice they gave you was worth that fee. In most cases, probably not. A fee-only financial planner won’t steer you into loaded funds since they aren’t earning a commission based on how much money you invest and where, and instead earn money by charging you for the advice they provide.

What about if you’re investing on your own? Obviously, you want to stay far away from front-load funds if you’re investing on your own. There’s no need to throw money away to a one-time fee just for purchasing the fund. So, how do you spot funds with fees? Morningstar is my favorite tool for this task. It packages all of the important information on an easy to use page that highlights everything from return, fees, yield, and more. Here is an example of using Morningstar to pull a quote on the Franklin Income Fund (FKINX):

You can easily see the front load listed on the first page. This fund has a 4.25% front load. If you had typed in a no-load fund it would show 0.00%.

Stick to No-Load Funds

It’s probably quite obvious, but you should stick to no-load funds. There’s almost never a situation where it’s worth losing a few percentage points off each investment just by investing in a load fund. Not sure where to start with no-load funds? While there are many options available you’ll probably end up with one of the four main no-load fund providers: Vanguard, T. Rowe Price, Fidelity, and Schwab.

If you’re looking for a more comprehensive search, I’ll again have to refer you to Morningstar and their Fund Screener. Here, you can easily select to only search no-load funds and then further narrow down your search by other criteria. You’ll probably be amazed at how many no-load funds there actually are to choose from.

Expense Ratios

You’ve found a no-load fund so that means you’re all set, right? Not so fast. Loads are only one of the fees to look out for. While not all funds have loads, all funds do have expenses. These expenses are expressed in the form of an expense ratio. This makes it easy to compare apples to apples when looking at multiple funds since the fee is shown as a percentage. Looking at the example above with the Franklin Income Fund you’ll see the expense ratio is 0.62%. That means if you had $10,000 invested in this fund for a year it would essentially cost you about $62.

Unlike a front load you don’t see this expense deducted directly from your account. Instead, the expenses are built into the fund’s overall return. So if you pull up your account statement and it shows that your fund had a 4.3% return, that is your net return after expenses already. You won’t have a quarterly or annual fee deducted from your account. That’s why these expenses can be tricky because they are almost hidden and people don’t really consider the effect they have on returns.

So, make sure you’re also looking at a fund’s expense ratio before making an investment. The lower the expense the better. If you’re looking for the absolute lowest fees you should probably stick to index funds. Since these aren’t actively managed and simply track an index they can keep costs down. This means you’re looking at usually only 0.10-0.25% expense ratios on index funds. Once you get into actively managed funds it’s a different story. You might find one fund charging 0.3% and another charging 1.3%, which can make a huge difference.

Share Classes

While this won’t apply to most of you simply investing in no-load funds, it is important to be aware of the different fund classes in the event you find yourself talking to a financial advisor or otherwise who might bring them up. While not as common today as they were, there are three main types of share classes. Each share class invests in the same assets, but the difference lies in how the load is applied.

• Class A – Your standard front-end load funds as discussed above.
• Class B – Deferred sales load. No up-front load, but if you sell prior a predetermined holding period you’re charged a back-end load.
• Class C – A fixed load applied every year.

Thankfully, class B and C shares are heading the way of the dinosaurs, but that doesn’t mean they aren’t still used by some financial salesmen. They are often used to encourage an investment where they can still earn a commission by putting you into something that doesn’t appear to have a big front load like A shares. While none of these loaded share classes are good, you most certainly want to stay away from B and C.

In addition to these primary share classes you may also stumble across other odd share classes in your research. You might see something like R shares or Z shares. These are typically special share classes offered by a fund company to be used in employer-sponsored retirement plans, sold by advisors, or to institutions. You may not be eligible to invest in these classes, so make sure you check the details and investment requirements.

Recap

As you can see, understanding the fees associated with your funds isn’t all that difficult, but you can probably also see how it’s easy to underestimate the impact the fees can actually have on your returns. An expense ratio of 0.6% might not sound like much, but when you’re talking about tens or hundreds of thousands of dollars over 30+ years that can significantly eat away at your return. And with the different share classes, loads, and no-load funds available you can see how some people, namely commission brokers, will steer you into a fund that could end up costing you.

Hopefully now that you’re armed with the basics you can make sure you’re getting the most out of your funds, both with new purchases and existing holdings. Now would be a good time to dig into the details of your current investments and see how much they are costing you. If it seems high, you can always use something like Morningstar to explore your other options. And if you’re currently invested in expensive funds it might be time to look for alternatives. You can always open a free account at a low-cost broker such as TradeKing and start investing in low-cost index funds.

Mutual or index funds are a collection of bonds, stocks or money market securities. These funds are popular choices for safer investments because they offer diversification. If one bond or stock performs poorly, another security’s stellar performance may balance the losses. Investing in a collection of securities creates a safety net for investors. In fact, a well-diversified portfolio can help you make money even while stocks are losing value.

Historically, investors can expect a typical total return of 8 percent to 9 percent over a year as a long-term average. Stocks, on the other hand, can yield 10% to 11%. Mutual and index funds are typically long term investments. Six of the best types of funds will be reviewed to help safeguard your finances.

Safest Investments

Federal Government Bond Funds

The most risk-averse investments are probably the federal government bond funds. U.S. Treasury bonds are considered safe because it is based on the government’s ability to print money and collect taxes. This eliminates most risk on behalf of a company and provides optimal protection. Even with the recent debt downgrade on the U.S. countries flooded into the Treasury market buying these securities for their safety.

Ginnie Mae mortgage-backed securities (MBS) are also considered safe investments because the securities are guaranteed by the Federal Housing Administration (FHA). Since they are securitized by the Government National Mortgage Association, they are considered safer than most investments. Including some mortgage-backed securities or federal government bonds in your mutual fund will provide more security.

Municipal Bond Funds

Municipal bond funds have a slightly higher risk than Federal Government Bond Funds. These bonds are listed by state and local governments and provide a high degree of safety to investors, because they are backed by the revenue-generating power of the issuing government. Include some municipal bonds in your mutual funds to increase your return, but maintain safety as well.

Taxable Corporate Bond Funds

If you are seeking a higher yield than federal government bonds, but less risk than stocks, taxable bond funds may be a good alternative. They do carry higher risk. However, with higher risk comes with higher yields. Investors should ask their financial advisors to recommend some high quality bonds to lower the risk associated with this type of investment. Corporate bondholders are ahead of stockholders when it comes to getting repaid due to bankruptcy.

Money Market Mutual Funds

Money market mutual funds are recommended for short term investments and provide a significant amount of security for investors. Money market mutual funds are recommended for investors that are not experienced and need a significant safety net to minimize losses. Consider money market mutual funds for diversification of your investment portfolio. But consider these basically a cash equivalent, because yields are very low, but the trade-off is the money is liquid.

Higher Risk Investments

These final securities are higher risk investments, but still considered generally considered safer than investing in just a few single stocks. Consider these investments for more aggressive returns with the benefit of diversification.

Dividends Funds and Large Cap Funds

Dividend funds are a safer way to make money while investing in the stock market. Investors experience less volatility while they focus on a steady growth by providing regular income in the form of dividends on top of capital appreciation. Consider dividends funds for a safer, but somewhat aggressive investment. Focusing on blue chip stocks is also safer than investing in smaller companies that may be slightly more volatile. Large cap stocks are typically less vulnerable to disastrous effects of an economic downturn. This will help to protect your portfolio in more difficult times in the stock market.

Hedge Funds

While not for everyone, hedge funds are designed to for people who want to make money no matter what the market is doing. Wealthy investors are often advised to invest a portion of their portfolio in hedge funds. These funds try to protect investors regardless of the market conditions. Consider hedge funds to diversify your portfolio, but only if you are very comfortable with the added risk and alternative investment types.

Where to go now?

Investing during a recession is akin to building your portfolio at a discount. When the market rebounds, your investments will increase, and the foundation of your portfolio will be built on sound investments. Recession is not the only time that people consider more conservative investments. They are also considered when a person is nearing retirement. Diversification often provides the safe haven that retirees need. With a safe haven, they can enjoy their retirement.

Invest Like a Pro

For even more information, be sure to check out Jeremy’s free Invest Like a Pro eBook. It has a ton of great information to help you research investments, track your portfolio, and invest like a pro.

If you’d like to walk through this post by using the tool yourself I encourage you to set up your free Morningstar account. It takes just a few seconds and not only will you get the mutual fund comparison tool, but you can access even more tools and save your portfolios to be used again in the future.

Lately I’ve received a few questions from readers asking about the difference between an ETF and an index or mutual fund, and which one is better. Well, as with almost all things, there are pros and cons to each. There is no right answer that applies to everyone, but I’ll provide a little background information and examples of why one might be better than the other for certain reasons and situations.

ETF Basics

An ETF, or Exchange Traded Fund, is nothing more than an investment portfolio consisting of many investments that trade like stocks. An ETF holds a collection of securities that are designed to track the performance of an index. This means that if you purchase a share of an ETF that tracks the S&P 500, you should see daily changes in your share price that come very close to, or exactly mirror the actual performance of the S&P 500.

ETFs were introduced in 1992, and back then, there were only a couple offerings. Even as late as 1999, there were only 32 ETFs in existence here in the U.S. markets. The ETF market has grown considerably as there are now nearly 1,000 available. This is good news for investors who are looking for ways to invest in many specialized niches, but it is also bad news because it can make choosing the right ETF more difficult than it has to be.

Mutual and Index Fund Basics

To give you some perspective, mutual funds have been around for a very long time compared to ETFs. The first mutual fund was established in 1924, and they have served as the primary investment vehicle for the average investor for decades. Like their ETF counterpart, a mutual or index fund is simply a collection of investments that are designed to reflect the performance of the underlying holdings. Mutual funds may have widely varying portfolios may not track a specific index, whereas an index fund is designed to track the performance of an index.

One of the biggest differences between funds and ETFs are the way they are bought and sold. ETFs trade like stocks, so that means the price per share of an ETF changes continually throughout the day while the markets are open. This allows you to buy and sell an ETF multiple times a day if you wanted. On the other hand, mutual and index funds only trade once a day. Because of this, you might place an order at 10 am, but you will get the shares for whatever the closing price is at the end of the day.

The other difference is in the fee structure. Mutual funds can have a number of ways to charge the investor–from front-end loads, back-end loads, early redemption fees, and everything from management to advertising expenses. ETFs have a very straightforward and transparent expense ratio (although, some mutual and index funds do as well).

Advantages of ETFs

While there are many similarities between these products, there are some potential advantages to ETFs:

• Low Ownership Costs - Because of their efficient structure that tracks an index rather than pay investment managers to create a portfolio, the recurring expenses for most ETFs are very low.
• Tax Advantages - While this isn’t really a concern if you’re investing in a tax-deferred account, ETFs are generally very tax friendly. In many cases, you are in control of when you pay capital gains tax because you pay it when you sell your shares. You aren’t at the mercy of wondering whether your mutual fund is going to declare a capital gains distribution or not. Many ETFs have never issued a capital gain distribution, and even the ones that do generally minimize the impact significantly.
• Liquidity - As I mentioned above, ETFs trade throughout the day just like a stock. This means you can buy and sell multiple times a day if you want, or buy and sell with virtually immediate results. You can also place market, limit, and even stop-loss orders through your broker for ETFs.
• No Minimum Investment – With an ETF, you are only limited by the amount of money you have and the price per share. Many mutual funds require thousands of dollars as a minimum before you can even invest in a fund, so ETFs have a much lower barrier to entry.
• Options - Since ETFs trade like stocks, many popular ETFs also have corresponding options. For more sophosticated investors, this means you can buy puts and calls, create spreads, or other creative techniques to hedge your investment. You can also trade ETFs anywhere you can trade stocks, so a discount broker like Zecco is an affordable option.

Drawbacks of ETFs

Even with so many advantages, there are also some drawbacks:

• Trading Costs - Since ETFs are traded like stocks, that means they generally have transaction costs like you would trading stock. Trading commissions can vary widely, from $0 to $20 or more per trade. These costs can eat into your returns.
• Brokerage Requirement - While most brokerages offer ETF trading availability, if you don’t currently have a brokerage account, that means you have to establish one. Brokerage accounts may also have account minimums or recurring fees, so you need to shop carefully.
• Slippage - This doesn’t really apply to someone buying an ETF with the idea of holding it for many years, but because ETFs trade like stocks on the open market, they have a bid and ask price. This means at any given time, what you can buy and sell a share for will be different.
• Dividend Drag - Unlike mutual funds, dividends paid out by the ETF are not reinvested which is common with mutual funds. This means the investor is paid the dividend in cash.

Advantages of Index/Mutual Funds

We’ve taken a look at the pros and cons of ETFs, so let’s now look at how index and mutual funds shine:

• No Trading Commissions - In most cases, you can invest in a no-load mutual fund without incurring a trading fee. While there may be a minimum initial investment, you can make purchases without being charged a trading commission as you would with buying/selling a stock or ETF.
• Dividend Reinvestment - Unlike ETFs, dividends paid out by the fund can be set to be automatically reinvested into the fund. This can be a significant benefit for funds that pay out regular and sizable dividends.
• Breakpoints and Share Classes - While I advocate no-load funds, the fact is that many investors do invest in funds that have loads, whether through a broker or otherwise. With different share classes from front-load, back-load, institutional shares, there is flexibility in how funds are purchased. There are also breakpoints on fees for having a certain amount invested with one particular fund company.
• No-Fuss Pricing – Since funds are price once at the end of each trading day, there are little surprises. With an ETF, the underlying share price may change minute to minute, and fluctuate a few percentage points throughout the day. While not a huge concern for the long-term investor, it can be a little unsettling to lose 1-2% on your trade mid-day trade due to market conditions out of your control.

Drawbacks of Index/Mutual Funds

ETFs and mutual funds have many things in common, but there are some drawbacks as well:

• Actively Managed Expenses - Not so much a concern for the index fund variety, but some actively managed funds may come with high expenses. These high expenses can really drag down your performance over time.
• High Minimums - Many funds require a high minimum investment just to get started. In some cases, this can be anywhere from $1,000 to $5,000 or more. This prohibits new investors without a lot of capital from getting started in the fund they may want.
• Additional Fees – Some funds have substantial front and back-end sales charges, and may even have 12b-1 fees to cover expenses such as advertising. While not all funds have these, some investors may inadvertently invest in funds with these fees without realizing it or by being tricked by a salesman.
• Style Drift – Funds that aren’t tied to a specific index are subject to the whims of the portfolio managers. This means they can alter and change the investment holdings in an attempt to bolster returns. This can be good, but more often than not, it means your investment is not doing what you wanted it to do when you purchased it.

What’s Right for You?

Hopefully the information above has shed some light on the pros and cons of both types of investment vehicles so that you can determine what would work best for you. There is no right or wrong answer, and there is no single product that fits all scenarios. In fact, there are many instances where it is desirable to have both ETFs and mutual funds in your overall portfolio. The tax advantaged ETFs will make more sense in a taxable account, and funds that regular issue capital gains distributions will be better suited for tax-deferred retirement accounts. And if you’re interested in short-term trading, ETFs are the way to go, but if you will be investing small amounts regularly, a mutual fund is going to help eliminate the trading costs associated with ETFs.

So, take a look at your situation and what you want to accomplish with your investments. There are a lot of choices out there, and it can be overwhelming, but it doesn’t have to be difficult. Take the time to understand how these investments work, and what the true costs associated with them are, and you’ll be on your way to maximizing your returns in no time.

If you have survived the economic downturn, you may be happy just to be paying your bills on time. Investing for your future might not even be on your radar and many folks assume that if they do not have large amounts they should not even bother. However, did you know it is possible to invest with very little money, as little as five dollars? Every little bit counts and now is an ideal time to begin investing small amounts, and you won’t even feel the pain.

Invest in a 401k

No matter what the current financial market is doing, most financial experts advise folks to invest in a 401k if their company offers one. Luckily, only a small amount is needed to invest in a 401k, and the amount is deducted from your paycheck automatically. In fact, it isn’t uncommon to allow minimum contributions of one percent, or even just five dollars per paycheck.

Some companies offer a matching amount that they will contribute to your plan as well. This is essentially free money. You make a contribution, and they turn around and match that contribution in part or entirely. If your place of employment offers this option it’s a no-brainer to take advantage of it.

The other benefit of using a 401k is that contributions are pre-tax. This means you don’t pay tax on the money that you contribute, and instead only pay taxes on withdrawals from the plan at a future date. To put it a different way, imagine you began contributing ten dollars per paycheck into your 401k. Your paycheck would actually only be about eight dollars less than usual due to the fact the entire contribution is not taxed, so you save about two dollars in taxes.

Don’t worry about losing the money in your 401k if you quit or are laid off. The money is still yours and you have a number of options. The best option is usually to do a 401k rollover which allows you to move your funds from your retirement plan into an IRA that you control.

DPP or Direct Purchase Plans

Direct Purchase Plans, or DPPs are ideal for folks who want to invest in the stock market but do not have large sums on hand. By using a DPP, you can avoid using a brokerage firm that can become costly when you make a lot of small transactions or don’t meet account minimums.

Direct Purchase Plans enable you to purchase stock directly from the company. There are usually no fees associated with this, or if there are, they are minimal. And unlike purchasing stock through a brokerage account where you are required to buy whole shares, the DPP typically allows you to purchase fractions of shares which is how they allow you to get started with very little money

The downsides to DPPs are that not all companies offer the plans, and it’s also a little harder to diversify since you’re dealing in individual stocks. But if you don’t mind taking the time to find a good company you’d like to invest in it can be a great option.

Investing In ETFs

ETFs are exchange-traded funds that are purchased in the same way as stocks. They can be purchased throughout the day, as their price is not set at the end of the day like somewhat similar open-end mutual funds. ETFs can track a specific industry, country or regional stocks, or they can cover broad based indices.

ETFs don’t require much day-to-day management, which is why the fees associated with them are relatively low. They also have lower ongoing operating expenses. This is one of the reasons they are ideal for long-term investment portfolios as well as short-term trading.

The minimum amount required to invest in an ETF is simply the share price plus any brokerage commission on the trade. If an ETF is trading at $25 a share and your broker charges you $4.95 to place a trade you could invest with just $30.

The drawback to ETFs is that if you are with a broker that charges a commission on each trade it can get costly to make frequent small purchases. The good news is that many brokers have a selection of no-transaction fee ETFs that you can trade without paying commission.

One good thing about ETFs is that unlike using a DPP that only invests in a single stock, you can purchase one share of an ETF and are instantly diversified. And with thousands of ETFs to choose from you can create a well-rounded portfolio.

Low Cost Brokerage Firms

If you feel you want to have the ability to invest in many different things such as stocks, bonds, ETFs, and mutual funds, a discount broker may be the ticket. There are many discount brokerage firms online, and some of them allow a small, or even no initial deposit to open an account. Once you put money in the account you’re free invest in virtually anything you want, from individual stocks and bonds to ETFs and mutual funds.

If you are looking for brokerage options I’d recommend either Zecco as they have some of the lowest commissions around.

Individual Fund Companies

Finally, if you’re low on cash but still want to get started investing, you may want to look at investing with a specific fund company. Two great low-cost companies are Fidelity and Vanguard. They offer some of the most affordable funds out there.

When investing in an individual fund you will need to pay attention to the minimum investment required. Each fund is different and the amount needed to get started can be as low as $250 or as high as $10,000. But once you make the initial investment you can usually continue to invest with as little as ten dollars.

The great thing about investing in a fund directly is there typically isn’t a transaction fee or commission for making purchases, so you’re free to add money to the account as often as you’d like without worrying about being hit with transaction fees.

The drawback is that some of the better funds do have higher minimums so it can take a little time to come up with the money to purchase the funds you’re interested in.

Learning How to Invest

Now that you’ve found a number of ways to start investing where do you turn to learn how to put that money to work? Well, for starters, you can download my free Invest Like a Pro eBook. In the book you’ll learn:

• Learn how funds charge fees and how to minimize them.
• Learn how to use Morningstar to research and compare investments.
• Learn about asset allocation, correlation, and true diversification.
• Learn how and when to rebalance your portfolio.

Download the free eBook now!

]]> http://genxfinance.com/how-to-start-investing-with-very-little-money/feed/ 0 http://genxfinance.com/investing-made-easy-with-betterment-plus-a-25-bonus/ http://genxfinance.com/investing-made-easy-with-betterment-plus-a-25-bonus/#comments Tue, 18 Oct 2011 15:34:34 +0000 Jeremy Vohwinkle http://genxfinance.com/?p=2946 Do you know what prevents most people from getting started with investing? The fear of choosing the wrong investment. This fear delays the decision to get started for weeks, months, and often even years. After all, when it comes to your hard-earned money, the last thing you want to do is see it vanish overnight because you chose the wrong place to put it.

The second reason many people never get started investing is a lack of funds. When just starting out, you may only have a few hundred dollars to work with, but that can be a problem when many of the best low-cost investment options have minimum purchase requirements. These minimums can be anywhere from $500 to $3,000, and that’s just to invest in a single fund.

So, with these two major issues preventing new investors from getting started, it means a lot of missed opportunities. Thankfully, a relatively new company called Betterment has come to the rescue. They have introduced a method of investing that is so easy there’s no reason to stress over the decisions. On top of that, they have no minimum investment requirement, so you can get started even if you only have twenty bucks to get started with. Here is a little more information about Betterment, how it works, and if it is right for you.

How Betterment Works

If you are familiar with online savings accounts, you’ll be right at home with Betterment. It’s basically a three part process: 1. Link up a bank account to Betterment. 2. Choose how you want to invest on an easy to understand risk scale. 3. Track your returns and withdraw funds at any time.

That’s it. You don’t have to go through a lengthy registration process like many brokerage accounts require, you don’t have to wade through hundreds of investment options, or worry about hidden fees or transaction costs. Before moving on, let’s talk about the investment options work.

Betterment’s Investment Options

The underlying investments are ETFs. If you aren’t familiar with ETFs, here’s a quick refresher. These are exchange traded funds, which means each fund typically tracks an index (such as the S&P 500) and then is traded on the major stock exchanges. These differ from traditional mutual and index funds which are not traded on an exchange and can only be bought or sold at the closing price set each day.

Betterment creates portfolios tailored to a specific risk tolerance you set by combining ETFs that cover everything from treasury bonds to stocks. Obviously, the more risk you’re willing to take, the more of your money that is invested in stocks versus bonds. But rather than having to go out there and create a diversified portfolio of maybe a half-dozen ETFs on your own, Betterment does this for you. And the best part is you can do this even if you only invest ten dollars to start. In the real world, there’s no possible way to invest in many different ETFs to get your target allocation without having hundreds of dollars available.

Key Features

• Fractional Trading – Betterment’s platform is dollar-based, not share- based, so it doesn’t matter how much you have to invest.
• Diversified Every Penny �’ Through proprietary software, every penny is seamlessly reinvested.
• Rebalances Automatically �’ Betterment rebalances automatically every quarter, or when more than 5 percent from your target allocation.
• Goal Based �’ Betterment empowers you to invest toward specific, and multiple goals, with different allocations and advice for each.
• Dollar Cost Averaging �’ With the automatic deposit feature you can employ dollar cost averaging.
• Efficient and Liquid �’ Your Betterment portfolio is comprised of the most efficient ETFs and funds can be withdrawn at any time.
• Free Transactions �’ No trading costs. Deposit funds, change your allocation, and withdraw funds without any fees.

I just want to touch on a few of those features to highlight how beneficial they are to investors. To start, the fractional trading is key because that’s what allows you to get started with just ten dollars. Unlike saving up a few hundred or even thousands of dollars just to be able to invest in a single index fund elsewhere, you can get started with next to nothing. And rebalancing is very important. I’ve written about this before, but even seasoned investors get tripped up by not sticking to a rebalancing strategy. With Betterment you don’t even have to worry about it because it’s done for you. And finally, one of the unique things is that you can allocate your money to specific goals and put real meaning behind that money. It’s that kind of motivation that will really encourage you to keep on saving and investing.

Betterment Fees

Ok, so we’ve mentioned a few times that there aren’t any fees, so what’s the catch? Well, there isn’t one really. Rather than nickel and diming you on transactions, maintaining an account minimum, and all of that, there’s simply a fee built into your balance. It’s exactly the same as the expense ratio you’d be paying on any ETF, index, or mutual fund. So with Betterment you’re simply paying an annual expense of between 0.3% and 0.9% annually, depending on your balance.

To put that into perspective, if your account balance was around $1,000 for the entire year, you’d pay just nine dollars in expenses. And remember, that’s what you’d pay regardless of how many times you traded, made deposits or withdrawals, rebalanced, etc. When just a single stock or ETF trade can run you between $5 to $10 you can see how expenses elsewhere can add up.

But let’s be perfectly honest, savvy investors can obtain lower expenses by picking their own ETF and index funds and may be able to keep expenses down to between 0.1% and 0.5%. While that is possible, keep in mind that the few extra basis points you’re paying is allowing you to do things you can’t do on your own, especially with limited funds. You’re able to get instant diversification with as little as ten dollars, automatic rebalancing, fractional share investing, and even some advice about how to make the most of your money.

Is Betterment Right For You?

The big question is whether or not Betterment is right for you. As just mentioned above, it is possible to find bare-bones funds and invest with lower expenses. So if you are already comfortable researching and picking out individual funds, and also have the money available to do so, then Betterment may not be as interesting of an option for you.

But if you’ve been putting off saving and investing for a long time because you aren’t comfortable with all the options or don’t already have hundreds or thousands saved and ready to invest, this is a no-brainer. Why keep kicking the can down the road and put it off when you can start with pocket change. Within five minutes you can have your account set up, linked to a bank account, and money deposited and invested. And since your money is completely liquid, you aren’t tying it up for any length of time and can move the money back into your bank account at any time.

Signing Bonus

If you still aren’t sure, they are giving my readers one more incentive by providing a $25 bonus for signing up. That’s 25 bucks for doing something you should have done a long time ago anyway. So give them a shot and see if it is right for you.

Does this sound like you or someone you know?  It’s an all too familiar story these days.  After all, isn’t cash KING?  Having that money in your hands feels great!  Unfortunately you will never make money by just holding that cash.

So which is it?  Is it safer to keep your money in cash right now or is it smarter to invest it and attempt to make a profit?  Let’s dig in our heels and find out.

Benefits of Holding Cash

When the stock market is crashing, your cash stays safe, thus preventing unecessary losses.  These market losses can be avoided because your money remains liquid and isn’t subject to market fluctuations.

Holding cash also has psychological benefits.  What would you rather have: a dwindling retirement account of stocks or a pile of cash that you can visually see and use?  For the short term, having that cash can give you peace of mind.

Negatives of Holding Cash

Unfortunately, there is this thing called inflation.  I don’t care how good it feels to hold your money on your hands, inflation is going to slap your cash across the face.  Don’t get fooled into thinking that just because your account value doesn’t go down that you’re not losing money. After you factor in inflation and tack on potential taxes, guess what? You could be effectively losing more than two percent a year.

Finally, have you ever heard of opportunity cost?  It’s that phrase we were taught in college.  In simple terms, it is the cost of foregoing something to buy or do something else.  When you hold cash, you theoretically forego gains in the stock market.  Although there is risk involved, there is also a potentially large payoff that you could miss. Just look at the last few years following the market crash of 2008. Stocks went on to post the two best years in history. Those who moved into cash missed out.

Making the Decision

So, comparing your two options, it seems that holding cash may or may not be your best option.  For the short term thinker, cash makes sense.  However, the implications for a long term investor are grim.  If you have a long term horizon, you can take a look at the historical charts of the stock market in general and it’s easy to see that stocks move up and down, especially in the short-term. But look at the big picture and you’ll see that what happens year to year doesn’t mean as much when you’re covering the span of a few decades. Even more important to note is that you can be a conservative investor and still protect your money while making more than one or two percent on your cash.

This brings me to another point: you should never let your emotions drive your investment decisions.  Too many people did that with the most recent stock market crash and look where that got them.  Yes, they had cash and may have prevented further losses, but now they have missed out on the market gains since then.  I actually fall in the opposite camp.  If I have investments in the market and my stocks start to plummet, I don’t go to cash, I actually buy more of that stock.  A majority of companies take hits and then come back with booms.  Buy low and sell high is a winning strategy and has worked for me extremely well. When you sell after a crash and invest again when the market is going up you’re doing the opposite and selling low and buying high.

This debate has been beaten to a pulp over the years.  When it comes down to it, one needs to look at their goals and desired retirement age.  The closer you get to retirement, you might consider a larger chunk of your portfolio in cash.  As a young person, the only cash I hold is my emergency fund.  So, you can see how this depends on your personal situation.  However, I recommend a buy and hold strategy for every type of investor out there.  Avoid extra fees, and dollar cost average your way to retirement.  It’s really that simple if you stick to it. Want proof? Take a look at how dollar-cost-averaging and diversified investing paid off during the so-called lost decade.

With the previously mentioned investment vehicles, it appears that there is no risk involved–your money won’t go down in value and in most cases it’s insured or backed by the government. But what you don’t realize is you are subjecting yourself to hidden risks that aren’t as apparent. While you may not lose your principal investment, you’re still losing money. That’s because in times when people are most afraid of taking risk, it’s almost always in a low interest rate environment. That means even though you may be earning interest, you’re still losing in two ways: for starters, these investments won’t outpace inflation, and second, after paying taxes on any gains (not counting Roth IRAs) you’re losing even more. So, after factoring inflation and possible taxes on that money you will often end up still realizing a loss of at least a few percentage points each and every year even though it looks like your account value is increasing.

I know what you’re thinking: “but it’s better than risking it in the stock market where you could lose half your money in just a single year!” You’re absolutely right. If avoiding a big loss is your primary objective, then putting your money into cash, CDs, and government bonds is one way to do that. Unfortunately, that goes to the extreme other end of the spectrum and you begin doing more harm than good. There are ways to still maintain the security you’re looking for without actually losing money to inflation and eventual taxes. Conservative investments are popular these days when the common belief is that you can’t make money in the stock market. True conservative investing will provide a solid balance between safety and returns. I’m here to show you how.

Avoiding Stock Market Risk

If you’re thinking about conservative investments, chances are you’re trying to minimize or eliminate the inherent risk in the stock market. I don’t have to remind you, but just turn on the news or go to your favorite financial website and you’re bombarded with information regarding how the stock market is doing. Especially in recent years, it isn’t uncommon to see the entire market shift more than three percent in either direction in a single day. Clearly, this can create some sleepless nights if all you’re trying to do is keep your money moving in the right direction.

To show you what I mean, here is what it looked like if you had $25,000 invested in the S&P 500 (using Vanguard’s S&P 500 index fund) over the past ten years:

You can see how wild the ride has been. There are a ton of short-term peaks and valleys, and obviously, some much larger ones that stretch for years. In the end you will also notice that stocks ended pretty flat over a ten year period. Some people call this the lost decade of investing. This is pretty much the polar opposite of what a conservative investor has in mind. So that brings us back to the original reason for choosing to be a conservative investor. You are basically trying to smooth out all of the randomness in the market as visualized by this chart and create a steady upward sloping line which means you’re making money.

Using Conservative Investments

After determining that you want to stick to something conservative, where do you turn? As I pointed out earlier, banks and government bonds are obviously a safe alternative that can eliminate the risk to your principal, but you may also remember that this means you still ultimately lose money after taking into account inflation and potential taxes on the gains. There is some good news. Most fund companies provide already diversified portfolios for almost any risk tolerance, conservative included, so you can literally put your money into a single fund and take immediate advantage.

Here is what the past ten years looked like if you put the same $25,000 into Vanguard’s Wellesley Income fund:

Clearly, this chart looks incredibly different than the S&P 500 chart above. That’s because of how the money is invested. To give you an idea, it is comprised of roughly 57% bonds, 32% stocks, 5% cash, and a smattering of other investments. What a change to be made by holding mostly bonds and only a third in stocks. Suddenly most of the peaks and valleys are gone and it’s a far more steady line of growth. Granted, there was still a pretty significant drop in 2008 thanks to the financial crisis, so even this “conservative” allocation wasn’t quite enough to prevent some short-term damage. But in the end, this fund managed to average over 6 percent per year over this time period, and it still far outperformed the stock market as a whole. That’s not bad.

Let’s take things one step further. Clearly, all you staunch conservative investors out there are pointing to that drop during 2008 and saying that is unacceptable when you’re trying to protect your money. I agree, and I think we can still do better without resorting to earning less than 2 percent in government bonds or the bank. So, I’ve put together a custom conservative portfolio that is made up of three equal parts: a money market/cash fund, a long-term treasury fund, and a short-term investment grade bond fund. How did it do? I’ll let the chart do the talking:

Look at that. You can’t even spot the financial crisis of 2008-2009 in this chart. Even the last conservative allocation lost money during that period, but this portfolio kept on chugging. And notice there are no significant peaks and valleys, and for all intents and purposes, it’s a smooth line continuing to increase in value. Here’s the really good news: even though we got far more conservative, we were still able to achieve an average annual return of nearly 5 percent. Given what we’ve been through over the past decade, it is refreshing to see that there is still money to be made without taking on much risk. Most people just write-off the fact that safe investments will mean little or no return. But when you think outside the box instead of putting your head into the sand, there is still money to be made during even the rockiest markets.

Here is one last look. What if you did have your money parked in a cash-equivalent investment? Well, it isn’t very exciting:

Knowing Your Investment Goals

All of the above information is good, but it doesn’t mean anything without also looking at your goals for that money. For instance, if the money you are investing conservatively will be needed in just a few short years for a specific purpose (wedding, vacation, home or vehicle purchase, etc.) then the the absolute no-risk option of cash, savings, CDs, and such may be the best bet. But what if you are talking about longer term uses for that money? Whether it’s retirement, saving for college, or just trying to earn more money from non-emergency fund cash, as you can see from the examples above that there are conservative investment styles that can give you significantly better returns while introducing very little risk.

Let’s take a look at all of the previous investment choices and overlay them on a single chart:

As a reminder, each investment began with $25,000 and was held for the past ten years. The lines represented above are:

• Black: Cash/Money Market – Average annual return of 2% and cumulative return of 22.3%
• Gray: S&P 500 – Average annual return of 2.59% and cumulative return of 29%
• Green: A third each in money market, government bonds, and investment grade bonds –  Average annual return of 4.75% and cumulative return of 59%
• Blue: A Vanguard conservative allocation fund – Average annual return of 6.2% and cumulative return of 82%

Assuming you are looking for a conservative investment to span ten years or more, which of those lines above would you be comfortable with? When compared side-by-side, the green line doesn’t differ much from the money parked in cash in terms of the risk of losing money, but look at how much better it performs over time. In fact, you would have earned more than twice as much money and had little to no risk of losing your principal. Finally, in all of these examples we’ve simply been looking at a lump-sum investment held for a decade. Obviously, most people continue to add to their investments slowly over time. This dollar-cost-averaging takes even more risk out of your investment. In addition, you’ll also want to be sure to rebalance your portfolio regularly, which helps as well.

What Kind of Conservative Investor Are You?

We’ve covered a lot of information here, but the big question comes back to you. Just what kind of conservative investor are you? As you can see, you don’t have to essentially hide your money under the mattress to keep your money safe. In the end, keeping all of your money in cash or savings has you actually losing money in the long run. Of course, this strategy is still good for certain circumstances such as emergency savings or money that will be needed in a short amount of time. But if you’re just someone looking to save money for the future, whether it be retirement or otherwise, there’s just no sense in letting your money sit around earning nothing when you can find a conservative investment strategy that can provide you with reasonable returns with very little added risk. Even if the economy and stock market has you feeling down, step back and take a look at what you really want your money to do for you.

Another year, and another stock market crash. It may seem that in recent years the volatility of the market gives us more sharp rises and subsequent crashes, but in the end these market cycles have played out for decades to varying degrees. Every crash has its catalyst, which makes each one a little different�’whether it’s a Black Friday event, a dot-com bubble bursting, a fat-fingered trade, or real estate and credit crisis, there’s always something to blame. This is also why people love to say that “this time is different.” Sure, the reason the market went down might be different, but the basic mechanics of how the markets work remain the same.

Here we are on the heels of the “Great Recession” where markets plunged around 50 percent, and the following two years ended up being the best two-year period in the history of the stock market and stocks rebounded and doubled in value. Today, a continued weak economy, high unemployment, and now a downgrade by S&P on U.S. debt has sent the market into another tumble, the worst we’ve seen since 2008. Just when things were looking up, our portfolios are again humbled. So what is an investor to do during another stock market crash?

Don’t Panic

Above all else, don’t panic. I know, easier said than done, but this is one of the downsides of technology. Today we are wired to the news and our finances 24/7. If you’re on Twitter when the market is tanking you’re bombarded with unsettling messages. If you’re checking Facebook you see your friends complaining about their investments. If you watch the news, be prepared to curl into the fetal position and just start sobbing thanks to the over-the-top reporting. We can’t escape the news, and that’s part of the problem.

Years ago investors didn’t have this “luxury.” One would think that being on top of the markets and your money would be a good thing, but in fact it is just the opposite. Being flooded with headlines all day, every day, just means you’re constantly thinking about it and you could end up making a hasty decision. In the past you basically relied on your quarterly reports which meant you saw a progress report just once every three months. Your portfolio could have dropped 10 percent and subsequently regained all of that in the span of one quarter and when you got your statement you wouldn’t even know what happened and would be satisfied you didn’t lose any money over the past three months. Today, you’re getting text alerts and pulling up your portfolio on your iPhone 50 times a day, giving you a chance to react to the news on a by-the-minute basis instead of going weeks or months without knowing what’s going on. That is a recipe for disaster.

So first things first: unless you’re a day trader or manage other people’s money, unplug from the financial news a bit. It’s good to stay informed, but if you’re gawking at your phone every 20 minutes at work wondering what the market is doing, you’re only stressing yourself out and likely going to make an investing mistake. If you are still worried about your investments it’s time to step back and look at the big picture.

The Big Picture

It’s easy to get wrapped up in the media hype of a significant market rally or crash. Just a few days of good or bad news can send the market into a frenzy one way or the other. When this happens it isn’t uncommon to feel as if you’re missing out if you aren’t doing something to take advantage of the news. Resist the urge to act on impulse to this short-term news. Instead, it’s time to take a look at the big picture, your long-term objectives, and then determine if anything needs to be done.

For example, if you’re looking at just a two week period when the market started to crash, the picture is frightening. It looks like you’re falling off a cliff and there’s no end in sight.

It’s all about context. While there are obviously short-term bad periods, the opposite is also true. Take this example from late last year. We had a significant rally and the news was praising the recovery and talking about how great everything was going. If you were looking at your year-end investment statement you were probably quite happy.

As you can see, depending on what you choose to focus on you can see both very good and very bad when it comes to short timeframes. A few bad weeks or months and all you can see is red, but a few good months has you licking your chops wanting even more. But what happens on a week-to-week, or even month-to-month basis has little to do with your big picture.

Clearly, what happens today, this week, or even this year has a minimal impact when you’re likely looking at 30 or more years. Sure, in the short-term these swings can make you sick to your stomach of jump out of your chair in joy, but all said and done these periods of time are just a tiny snapshot of what you’re ultimately trying to accomplish. For example, let’s look back to 2003. As you can see, the past eight or so years has been a bumpy ride, but what happened in the past week hardly registers on the chart.

Then let’s go back even further, covering the past 15 years:

And finally, let’s look at a 30-year time frame, which is what many people are looking at in terms of their investment horizon:

Clearly, the greater the length of time you’re looking at, the less significant daily, weekly, or even monthly activity seems to have. Sure, what happens on a day-to-day basis will impact your bottom line, but if you step back and look at the forest for the trees you can alleviate much of your short-term anxiety.

Stick to the Basics

Even after looking at the big picture it’s easy to forget the basics. We’ve all heard the same advice year after year: invest regularly over time, create a diversified portfolio, and rebalance your portfolio. It sounds simple enough, yet we rarely follow through. It’s a shame, too, because it does work. In fact, I wrote about this in great detail in my piece about the lost decade of investing. The 2000s were a notoriously bad year for stocks and it’s been dubbed the ‘lost decade.’ That’s because over those ten years the broad stock market generally saw either no gain at all, or even lost money. That’s a far cry from the long-touted 8-12% annual returns. Even though the media likes to point out the indicies didn’t make money over the decade, I’ve shown that real world investors who stuck to the basics still came out ahead. Here’s what I’m talking about. If you were to put your money into stocks and let it ride for the next ten years, you would have actually lost money:

But wait a second. Even though stocks had one of the worst ten-year periods in history, if you continued to invest regularly over time in a diversified portfolio and rebalanced regularly, you actually made a respectable return while the indicies lost money, and most investors lost even more trying to time the market based on fear. Here’s what happened over that same time period above, and with the same amount of money invested, but following the tried and true advice:

That’s the power of dollar-cost-averaging. Sure, the market might be tanking, but guess what? If you’re still putting money into your 401(k) or IRA every two weeks from your paycheck you’re actually buying into the market at low points. This means when the market does turn around, you are fortunate enough to have some of that money invested at historically low points where the future gains can be quite high and then offset the losses you incurred elsewhere.

This method of investing isn’t just a textbook exercise. It’s promoted to this day because it works. The real problem is sticking to it. And nobody is arguing that in theory you could make far more money if you happened to make a lump-sum investment at the absolute bottom of a bear market and then sell after the rally, because on paper that’s true. But since we can’t predict the future, trying to pull your money in and out of stocks based on instinct or historical performance is no better than going to the casino and betting red or black on roulette based on what the past numbers have been. If you take luck out of the equation and invest consistently over time, into a well-diversified portfolio, and rebalance regularly, you’ll almost always come out ahead of the pack.

Taking Additional Measures

Even if you’re doing everything right there are still times when a prolonged bear market can take its toll on your finances. First, assess your situation. If you’re invested so heavily in stocks that the daily market fluctuations make you sick to the stomach or cause you to lose sleep, you need to think about investing differently. Seriously, no investment is worth reducing your quality of life due to worry and stress. If this is you, then maybe it’s time to create a more conservative portfolio and be satisfied with lower, but more consistent returns over time.

There’s nothing wrong with that and everybody has a different risk tolerance. So don’t think that just because you’re 35 years old you need to put 85% of your money into stocks. If you aren’t comfortable with that, don’t do it. But also have realistic expectations that you will inevitably miss out on future bull markets and be confined to more modest returns. The worst thing you can do is pretend to get conservative in a down market and then decide you’re willing to take on more risk when things are doing well. That’s a recipe for disaster because you almost always end up selling low and buying high. That’s why most people can’t make money in the stock market. So, develop an investment plan and stick to it through thick and thin.

Also, when the market is down you want to pay extra attention to your liquid assets. When stocks are down it usually means the economy is weak, unemployment is high, and there’s just a general uncertainty in the air. That means it pays to have that safety net in place. Whether it’s an emergency fund in a savings account, a few CDs at the bank, or whatever the case may be, it pays to have cash on hand in times like these. You may not need to tap into it, but with so much uncertainty in markets like these it may be very difficult to obtain credit if you need it in a pinch, and worse yet, if something comes up and you are forced to borrow from your 401k, the withdrawal at a historically low point will just make matters worse. So keep that cash on hand, even if it means putting a little less away for retirement.

Lastly, and this isn’t for the risk-adverse, but consider putting money into things that create a positive return even when the market goes down. That could mean putting a little extra money into bonds, paying additional on your mortgage or other debt, or even investing in things that go up as markets go down.

All of these have their downsides. When you prepay on debt you get a guaranteed savings, but that return could be less than you could get if you were to continue investing. The same is true for investing in bonds. Yes, they are safe and pay regular interest, but if the market turns around quickly and tacks on 20 percent in just a couple of months you could miss the ride. And of course investing in short ETFs or speculating in commodities is not something recommended for long-term investors, but if you’re an active trader and have some speculative money burning a hole in your account, then betting the market will continue to go down could yield a positive return.

Putting it All Together

There is no denying that watching thousands of dollars vanish from your investment account overnight is unsettling. No matter how many times people tell you to stay the course and things will eventually recover, you’re bound to have second thoughts about your investments. So I’m not here to say the same thing, but instead just trying to illustrate that over time things do generally improve, and if you do stick to the basics of investing you can fight many of the downsides that a bear market brings. And ultimately, if you truly are unable to weather the storm, it is ok to change your investment strategy. But if you do, you have to stick with that strategy through good times as well as bad because the worst thing you can do is continuously alter your investments based on the prevailing winds in the market. Without being able to see the future you’ll almost always come out behind using this strategy unless you’re lucky.  But if you invest properly, keep your safety net in place, and continue to look at the big picture, you will get through this and any future stock market crash just fine.

The social aspect of trading stocks and investing isn’t a new concept, but this is the first true full Facebook platform. The app acts like a financial hub right from your Facebook page. It greets you with real time stats, quotes, and charts from the market, most actively traded stocks, and then you can dig deeper and get real time individual quotes. Obviously, from there you will have your traditional Facebook features: liking certain stocks, leaving comments on them, or sharing with your friends. But what makes this app really unique is the ability to place trades right from Facebook. That’s right, with a few clicks you can buy 100 shares of that new company one of your Facebook friends just recommended. I was told this is also patent pending technology, so it is, and will probably be the only broker to offer such a feature.

I had some time to play with the new app after it was launched yesterday and I’ll walk you through some of the features. The best part is that this app is available to everyone. It doesn’t matter if you are a Zecco customer or not. Obviously, if you aren’t a customer you can’t place trades, but the rest of the app still functions as any other financial hub.

The Wall Street Dashboard

After “liking” or installing the app you’ll be taken to the dashboard. The dashboard is where you’ll have access to a lot of the broad market data. You’ll see what the Dow, S&P 500, and Nasdaq are doing for the day and get a customizable chart. Below that you also have a list of the most actively traded stocks (delayed by a day) with their respective real time quotes. Clicking on them will take you to their detailed quote page.

The dashboard on the right.

Getting Quotes

Sure, getting a quick look at how the market is doing is nice, but the real power of the app is digging into the details. All you have to do is begin typing a stock ticker or company name and the Wall Street app does the west. As you can see, it populates your query with possible matches if you don’t know the full ticket or company name. That is pretty slick and it works fast.

And finally, we have the meat and potatoes of the app where we get to see a detailed quote of the stock of our choosing. The layout should be pretty familiar if you’ve visited any financial site before. You have a quote at the top which turns red or green depending on the direction the stock has moved and a few different charts to choose from the bottom.

Of course there are now a few other interesting data points for a particular stock. You can “like” the company as a whole at the top which then posts a link on your wall reflecting you like the stock. Below the chart you can leave a comment or see what others are saying about a particular company. Here you have the option to post your comment to your wall or not, it’s up to you. Then on the right you have a list of your friends where you can leave them a specific comment about this stock page.

Placing a Trade

Finally, after you’ve researched your stocks or received recommendations from Facebook friends you can go ahead and place a trade without ever leaving facebook. When you click on the “Buy” or “Sell” icons at the top of a quote page a box with a secure connection will pop up. If you have a Zecco account just click the “Sign In” button and it will request your login credentials (again, securely) and give you the opportunity to set your order details. If you don’t have an account you can obviously click the link to open an account right on the spot as well. A few people have voiced concerns that since Facebook accounts can get hacked that it also means they can get into your Zecco account. No, they can’t. There is no physical link between Zecco and Facebook and you still have to login to Zecco from within Facebook to access your account. If your Facebook account was compromised all the person would see if they accessed your app would be the Zecco login box and be unable to do anything without those credentials.

And here is a typical order screen after you have logged in. As you can see, it will allow you to set market, limit and stop orders, you can tell it how long to keep the order open, and all of that. So it isn’t just a straightforward buy or sell market order and you get the flexibility you normally would if you were logged into your full Zecco account.

Final Thoughts

So, what’s the verdict? For a Facebook app I would have to say this is top-notch. There are a lot of clunky, slow, and otherwise painful to use apps out there, but this isn’t one of them. Given the data, even real time, that this app has to work with it was incredibly responsive. Quotes loaded almost instantly. That was actually a surprise to me.

If you are a regular Facebook user and also find yourself hopping over to Yahoo! Finance or Google Finance or something throughout the day, at the very least this app has merit whether you are a Zecco customer or not. It’s great to just click a link on your Facebook page and instantly get updated market information.

The new social aspect of the platform will be nice, but it is in its infancy since the app was just launched. But as more people begin to use it and interact with others and leave comments about various stocks it should provide some interesting reading. If you have some friends who also invest regularly it may also be useful to bounce ideas off each other via Facebook. It’s a quick way to get personal feedback.

While the app is really slick and works wonderfully, there is a potential drawback. And that is if you are a typical long-term investor who doesn’t really dabble in individual stocks this app can make it tempting to trade stocks you otherwise may not have. For active traders it’s great because it makes buying and selling stocks easy. For other investors it’s bad because it makes buying and selling stocks so easy. Combine that with the excitement and influence you may get by reading comments people are leaving and it could have you taking on more risk than you’re accustomed to. So as always, you’d want to do your due diligence before placing any trades and try not to get overcome by any possible social media hype surrounding a company.

So, as long as are comfortable with buying and selling individual stocks and think the added social aspect would improve your investing experience, I don’t think you can go wrong. If you’re just a casual market watcher and wanted to add stock data to your Facebook account then this is also a great and free app.

Check out the Wall Street application on Facebook or sign up for a free Zecco account today.