Are investment apps worth it?

Posted by TEBI on June 15, 2020

Are investment apps worth it?


“There’s an app for that,” Apple told us in 2009. Today, whatever it is you want to do, there’s a wide range of applications to choose from.

It’s certainly true in finance. The advent of mobile banking in 2010, and then open banking a few years later, has allowed developers to bring the whole gamut of retail financial services to consumers’ fingertips.

There are several investment apps specifically that claim to make investing quick and easy. Apps like Nutmeg, Wealthify, Wealthsimple and Moneyfarm can have you investing with as little as a few pounds. They’re popular too; the number of downloads for investing apps has grown 126% over the past four years.

But how useful are these apps? What sort of value for money do they offer? In short, are they really worth it? The answer is: it depends.

When choosing whether an investment app is right for you, it’s important to know how each app differs. Different apps have different features which come with their own advantages and disadvantages.


Micro-investing apps

Like ISAs, investment apps all require different sums to get started with. Whether your starting sum is big or small will guide your decision to get the most out of your money.

For those on a tighter budget, micro-investing apps such as Moneybox might be the way forward. Also known as “spare change” apps, they can round up each debit card transaction to the nearest pound and invest the difference automatically. This has several pros and cons depending on your circumstances.

The biggest advantage to these apps is the low starting sum needed — finally removing the barrier to investing that so many millennials face. A lot of them allow you to start investing with as little as £1. Beware the fees though: if you’re only investing small amounts, you may be sacrificing a large proportion of your earnings to fees. More on this below.



If you’re in a position to invest a larger sum each month, another type of app could help: the robo-adviser. These apps use algorithms to create the best portfolio for you based on information from top financial advisers. This ensures you automatically get the best possible return on investment based on up-to-date information about the market. It goes without saying, however, that your money is still at risk. Past performance does not predict future success.

To start, you input information about the level of risk and types of portfolios you’d like to invest in. After that, the algorithm creates a diversified portfolio to suit your needs and goals. You can set up a direct debit to invest regularly each month, while the algorithm rebalances your portfolio annually. 

Some robo-advisers have a similarly low starting sum requirement to micro-investors, but others require a higher initial payment. While they are useful for investing larger sums than micro-investors, the hands-off approach limits anyone with specific goals in mind. If you’d prefer to have more involvement in your portfolio, this might not be for you.



Investment apps typically have much lower fees than financial advisers, hence their popularity. However, it’s important to look before you leap to avoid offsetting your return with a high monthly or annual fee.

When choosing your investment app, you should look carefully at the different fees and charges payable. You’ll need to pay annual fees on your funds and a small percentage of your investment value in each of the apps (usually less than 1%). Some apps, however, charge an additional monthly flat fee (usually £1 per month).

This might not sound like much. But if you’re using a micro-investor and saving spare change, that £1 could add up to a hefty expense ratio.


So, should I use an investment app?

Like all investments, it’s important to do your research and choose the one that best meets your needs. Not all investment apps are made equal.

Yes, they’re generally simple to use; they’re significantly cheaper than paying for face-to-face financial advice; and the minimum investments required are small.

However, with the new opportunity these apps provide comes responsibility. You could be caught out by high expense ratios if you don’t do the maths. You should also think carefully before answering questions about the level of risk you’re comfortable with.

You need to bear in mind as well that, despite the name robo-adviser, most of these sorts of services don’t actually offer advice. You’re very much on your own. If you want longer-term, bespoke financial planning, you certainly need a proper financial adviser.

That said, for those new to investing, these apps do offer a good place to start. And remember, the earlier you start investing the better.


Picture: Nathan Dumlao via Unsplash


© The Evidence-Based Investor MMXX



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