Invest Like a Millennial

So you want to become a bleeding-edge, millennial-style market investor, do you? Awesome sauce. There are two simple rules. 1: if you make the trade, it better be free; and 2: if someone else makes the trade, that someone better be a robot. Oh yeah — and the robot trade should also be (almost) free.

Internet stock trading is nothing new. We’ve laughed at more eTrade baby commercials than we can hope to remember. And there are dozens of worthy platforms catering to every niche of the trading market: retirement, day-trading, options — you name it. But within the last year a few new ideas have come out of the woodwork. Personally I’m falling back in love with a market that left me for dead in the mid 2000s. But I’m finding it to be fun again.

Let’s start with free trading. In a world typically charging $10 for an online trade, we’ve been wooed by marketing that brings the cost down to $7.99 or $6.99 per trade; or gives you 999 free trades for some obscenely short period of time. Hogwash. Check out Robinhood (robinhood.com). This little gem allows 100% free trading all the time. It’s a slimmed down app for your mobile device — so you won’t find tons of market analysis and trading tools baked in. But did I mention trades are totally free? The clean and simple interface makes investing easy for novices and pros alike. And in case you were wondering, the company turns a profit by capturing the interest on a combination of uninvested deposits and margin trading. But with the exception of a very cool zero-cost model, there is nothing earth-shattering from a technology perspective. But it sure lubricates your ability to change positions at the drop of a hat.

A more futuristic, and potentially paradigm shifting technology is the robo-trading concept coming into prominence. These investment engines seek to handle long-term wealth building using proprietary algorithms to balance portfolios across stocks and bonds according to a desired level of investment risk. The two leading platforms are Betterment (betterment.com) and Wealthfront (wealthfront.com). Both platforms offer a low initial deposit (as little as $5 to $500) and extremely low annual fees. Instead of the average 1% a traditional broker might charge, these robo-platforms charge between 0.15% and 0.35% per year. And in addition to this substantially reduced management cost, the platforms offer some inventive tax magic. They call it tax-loss harvesting. Wealthfront describes this as “harvesting previously unrecognized investment losses to offset taxes due on your other gains and income. You can reinvest these tax savings to significantly grow the value of your portfolio.” Basically, you can make money on your losers — who doesn’t like the sound of that?

This is just the tip of the iceberg. Delve in to these platforms to find how they can help you save for retirement, education, healthcare — anything. I’m using Robinhood for the thrill of investing and Betterment for our daughter’s college fund. I can’t wait to see what investment platforms will be waiting for our little Gianna when she becomes an adult. Let’s just hope the phrase “awesome sauce” is long gone by then….