Think big-name technology companies, healthcare companies, corporate bonds, small-cap, big-cap, consumer goods. Creating a portfolio with small amounts of money is easy as opening an app on your phone or logging online.

Plus, you can invest according to your risk level and goals. Want to save for a down payment on a house? Ready to leap into opening your retirement account?

There’s no need to wait to accumulate that big pile of cash. You can start right now. Stash even has a tool called Portfolio Builder that can help you create a portfolio with a mix of investments according to your risk preferences.

(Find out more about fractional shares here.)

The best time to start investing is today. With fractional shares, you don’t have to wait for the “right time” to start. The time is now.

Sure, you’re starting out small. That’s okay. Start with any dollar amount  and invest in a company that you think represents the future. Invest a little in a bond fund to protect you against inflation. And then maybe a little in  an international fund that gives you access to global companies.

Even if you’re starting small, fractional shares can still offer you a return on your money and depending on your investment, dividends.

Little amounts can earn interest, and that interest can compound over time. Especially if your dividends are automatically reinvested through DRIP, which Stash offers.

For those who are looking to invest in the market but worry they don’t have enough to begin, fractional shares are a good way to get started.

How can I purchase fractional shares on Stash?

You can purchase fractional shares of stocks and exchange-traded funds (ETFs) on Stash.

Now is the time. Start now.

The post Investing in Fractional Shares on Stash appeared first on Stash Learn.

But how, exactly, investing pays is something of a mystery to many investors. For some people, the idea that you can stash money away in an account or security and that it could grow into more money seems at best, like magic and at worst, suspicious.

We all know people that have made money “investing”. But what they actually did (and where they figured out how to do it) can seem like a Mulder and Scully-level mystery.

So how does your money actually make money?

While almost everyone invests their money with the goal of turning a profit, investing involves risk.

Markets can be volatile and investors need a sound strategy to weather the ups and downs over the long term.

That said, over the long run, though, markets (and returns) trend up:

Disclosure: This is not a prediction or projection of performance of an investment or investment strategy. Past performance is no guarantee of future results. Any historical returns, expected returns or probability projections are hypothetical in nature and may not reflect actual future performance. The rate of return on investments can vary widely over time, especially for long term investments including the potential loss of principal. For example, the S&P 500® for the 10 years ending 1/1/2014, had an annual compounded rate of return of 8.06%, including reinvestment of dividends (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). The S&P 500® is an index of 500 stocks seen as a leading indicator of U.S. equities and a reflection of the performance of the large cap universe, made up of companies selected by economists. The S&P 500 is a market value weighted index and one of the common benchmarks for the U.S. stock market. Source: Yahoo Finance. Source: Yahoo Finance.

The Dow Jones Industrial Average, for example, saw big gains over the past two or three decades. After the market bottomed-out during the financial crisis in 2009, the Dow more than doubled, briefly topping out above 29,000 points in early 2020.

Here are the three primary ways that companies pay back their shareholders, or, by which investments can earn you money.

1. An increase in share value

Perhaps the most obvious way in which an investment can make you money is that it gains value. As stock prices rise, shares become more valuable. And if you’re a shareholder, you can sell your stocks, earning you a profit, or return, on your initial investment.

The same applies to bonds, exchange-traded funds (ETFs), and other investments. When a company’s shares are worth more, shareholders reap the benefits.

2. Dividends

A dividend is your cut of a company’s earnings. If you own shares in a company, you own a part of the company — and therefore, you get a cut of the profits.

Typically, dividends are cash payouts to shareholders which can be reinvested, or sent to your accounts t through a dividend reinvestment plan (DRIP). With Stash, you can turn on DRIP and have dividends automatically reinvested. They can, however, be issued in the form of additional shares.

3. Interest payments

Interest payments are generally associated with fixed-income securities, like bonds. Bonds are a form of debt, meaning that you’ve loaned a company your money. In exchange, a bondholder is due interest payments and the bond’s full amount upon maturity.

If you’re a bondholder, then, you can expect periodic interest payments.

A quick note about stock buybacks

Sometimes, companies will engage in stock buybacks, which is when a company buys its own stock on the market. There are a few reasons why a company might do this, but one of the most common is to consolidate stakeholder value, and to increase share prices.

While somewhat controversial, a stock buyback is another way that companies can effectively “pay back” their shareholders.

The post How Your Investments Earn You Money appeared first on Stash Learn.

A stock index is a gauge to read the whole market, or sector of the market. In contrast, a stock exchange is the place where you buy and sell stocks, bonds, and other securities that are listed on various indexes.

Here’s a quick primer.

What are Stock Indexes?

An index is a grouping of company stocks that measures change in the broader stock market, or a sector of the stock market.

Some examples of famous indexes include the Dow Jones Industrial Average, often referred to as the Dow. It includes 30 of the largest companies in the U.S.

The S&P 500 index is made up of the 500 largest companies in the U.S., including names such as insurance company Allstate, home construction and refurbishing company Home Depot, and Walmart, the largest retailer in the world.

The NASDAQ is an index with a high concentration of technology stocks. It consists of the stocks of more than 3,200 companies. In addition to Amazon, Apple, and Facebook, other well-known tech names include Google’s parent company Alphabet, computer network router maker Cisco Systems, and computer software and services giant IBM.

Generally speaking, each company in an index is assigned a weight in a mathematical calculation that creates the final index number.

That weight can be based on the stock share price, as it is with the Dow. It can also be based on market cap, a reflection of a company’s value, which is how the S&P is calculated. Some indexes might also combine both to assign the weight.

As individual share prices or market caps move up and down, those changes affect the total point value of the individual index.

What’s an exchange?

Exchanges are the actual places where stocks are bought and sold. One of the most famous exchanges, called the New York Stock Exchange (NYSE), is headquartered on Wall Street, in New York.

The Nasdaq, located in Midtown Manhattan, is also an exchange where traders buy and sell the stocks that make up the Nasdaq index. The index is a purely electronic exchange. The NYSE combines an electronic exchange with live people who help execute stock trades.

And there are exchanges all over the world. Japan has the Tokyo Stock Exchange. Brazil has the B3. England has the London Stock Exchange.

When you place an order to buy or sell stocks, bonds or other securities, an exchange will ultimately play a role in the transaction.

Stash on

Ready to start investing? With Stash, you can invest in dozens of funds and individual stocks. All you need is $5 to get started.

The post Stock Exchange vs. Stock Index: What’s the Difference? appeared first on Stash Learn.

Dig deeper: Now That’s What I Call an Investment! ETFs explained

What’s an ETF?

ETFs, or exchange-traded funds, are a basket of investments bundled into a fund and sold on an exchange. And they’re becoming the investment of choice for more and more people, according to a recent study:

• 60% of millennial investors plan to increase their investments in ETFs in the next year.
• 56% of millennials who have invested in ETFs say they are their “primary investment vehicle.”
• That’s up from 28% in 2016.

Why are ETFs blowing up?

ETFs offer investors exposure to a wider, more diversified slice of the market than they get with single stocks, and typically at a lower price than many mutual funds. They also tend to have lower associated fees and can be traded just like stocks.

On the other hand, investing in ETFs can limit your investment choices to larger companies, dividends could be limited, and higher trading costs for certain funds.

Read more: What’s the Difference Between a Stock and a Fund?

Investing in ETFs on Stash

Stash offers ETFs with themes like technology, healthcare, AI, aerospace and defense, and more. Invest in the future you want.

The post The Simple Reason Many Young Investors Love ETFs appeared first on Stash Learn.

Like what you’re hearing? Leave us a review on Apple Podcasts (or wherever you listen to your favorite podcasts).

We’re getting back to basics. We’re talking funds, diversification, and all things that can go into your portfolio.

In this episode, we talk about mutual funds, index funds, exchange-traded funds (ETFs). What do those terms even mean?

If you’re new to all this, relax. Our very own senior financial writer Jeremy Quittner is here to explain it all. We also tackle active vs. passive management, expense ratio, and why you never want to put all your eggs in one basket.

Don’t have Stash yet?

The post Podcast: Learn About Funds and Diversification with Jeremy Quittner appeared first on Stash Learn.

One of the best ways to learn about a fund is by reading its prospectus. All stocks, bonds, mutual funds, and ETFs are required by law to file a prospectus with the Securities and Exchange Commission (SEC).

When you read a prospectus, you may see a lot of jargon. Fear not! We’ve broken it down and decoded it so you can be a smarter and more confident investor.

What’s a prospectus?

A prospectus is essentially the  financial blueprint of a stock, bond, or fund. (In this article, we’re talking about funds.) The prospectus can help you familiarize yourself with its holdings and objectives, and provide you with information about its performance, managers and fees.

In the old days, a paper version of the prospectus would have been sent to you in the mail. Today, a fund’s prospectus is easily and readily available online. Most times you can find it by simply typing the fund’s ticker and “prospectus” into a search engine.

But the SEC also maintains a database called EDGAR that includes prospectuses, and that’s fully accessible to the public. The SEC keeps all investment prospectuses updated if you want to explore investments or to keep tabs on changes to a fund.

Generally, there are two kinds of prospectus–the summary, and the long-form. It’s advisable to look at the long-form version, as it contains more information.

One of the best ways to learn about a fund is by reading its prospectus.

Here are the main things to look for:

General information

Fund objective: The name of the fund will almost always tell you what the fund’s goals are. But near the top of any prospectus, you’ll also find a general statement about the fund’s objective: Does it track in an index? Is it going after growth or value? Perhaps it focuses on a particular sector or industry, such as technology, energy, or healthcare. As you build your portfolio of stocks and funds, you want to diversify. This section will help orient you as you develop your own strategy.

Fund managers: The names of the people who established the fund, and who runs it, are typically listed. Many times, funds are passively managed because they follow an index. That means there is no active manager picking stocks. Nevertheless, the prospectus will list either an individual or an investment group that established the fund, or oversees it. This can be valuable information for you to conduct more research, or to get in touch if you want to.

Fees and expenses

It’s critical to pay attention to the fees portion of a prospectus, because it will tell you how much it will cost you each year to own the fund. Say a fund has an annual return of 5%, and the total annual fees are 2%, your actual gain would be 3%. Over time, that can really eat into what the investment returns. Generally speaking, you want to keep your fees as low as possible, and industry guidance will tell you that means less than 1%.

Management fees: The managers of the fund may charge for running it.  Management fees are typically deducted as a fixed percentage annually.

12b-1 fees: These are charged for costs associated with the marketing and promotion of the fund, including the sale of a fund through brokers.

Total annual operating expenses, or expense ratio: This is the most important number to keep track of, because it will tell you what it costs to own the fund each year. Generally speaking you want a fund with an expense ratio less than 1%, and as low as 0.25% for index funds with no active manager.

Load: You may be charged a sales fee when you purchase the fund, which is known as a load. You might also be charged a load for selling the fund. Many funds are known as no-load, meaning you can purchase shares–and sell them–without this fee. You might want to seek these out, because they will save you some money.

Redemption fee: If you sell the fund within a short time frame, you may get hit with this charge. For example, if you sell the fund before six months, you might be charged a redemption fee. It’s to discourage market timing–or buying and selling the fund quickly.

You can find out more about fees here.

Holdings

This section is critical, as it will tell you how many companies the fund invests in, and exactly which ones. If the fund is quite large, the prospectus may not tell you each company the fund holds–although that information is public, and widely available on the fund company’s website, other investment sites, or at SEC.gov–it will often tell you the top ten companies in the portfolio, and the percentage of assets it invests in each of these companies. Different companies are assigned different weights in a fund, and this information can help you figure out whether the fund’s investment strategy aligns with your objectives.

Risks

Just as you want to know how your car will perform in bad weather, at high speeds, or in traffic, you also want to know what possibile liabilities your fund might have. The risks section will help inform you about all of that. If the fund invests in only large companies, for example, it will have different risks than if it only follows much smaller companies. The same thing goes for sector-focused funds, which are a subset of the stock market. Each sector is subject to individual economic factors, events, or possible shocks. For example, new taxes or tariffs could negatively affect some industries. Shortages of raw materials might affect others, or new legislation might have consequences for yet other businesses.

Performance

This segment will tell you about the returns of the fund over a period of years. It will tell you things like the total annual return–which will be expressed as a percentage that the fund’s value either increased or decreased during a particular year. (The numbers in the performance section can be quite detailed, and may involve the return after taxes on distributions, which are a part of the fund’s profits.)

The performance portion will also compare the fund’s returns to a category, such as similar funds, typically called peers, or an index such as the S&P 500 or Russell 5000. If the fund you’ve invested in is performing better or worse, compared to a peer or index, that can be useful information about whether you want to invest in or–if you already have–hold on to the fund.

Good to know: In addition to the prospectus, fund companies produce something called a Statement of Additional Information, or SAI. It will provide you with more detailed financial information about the fund, including performance, taxes and debts, as well as details about fund managers and directors. It’s free, but you must write directly to the fund company in order to get it. The address of the fund company is typically included in the prospectus.

The post How to Read a Fund Prospectus appeared first on Stash Learn.

But what about individual stocks. Do they have a place in a diversified portfolio?

The answer is yes. But there’s more to it than that. We can’t talk about single stocks without talking about risk and volatility.

Let’s get started.

Since individual stocks tend to be more volatile than investing in funds–your money will ride on the fortunes of just one company. And it might be best if the money you put into individuals stocks is so-called play money, which is cash you don’t mind losing if markets fall, and the company’s share price tumbles along with it.

What are the pros and cons of investing in single stocks?

Owning single stocks has pros and cons, just like any other investment.

On the pro side, owning individual stocks could help some investors feel more in control. They know how much of that investment they’ve purchased, and they can monitor its progress over time.

This is in contrast to owning shares of a fund, which may contain hundreds of stocks. With a fund, the fund managers choose which stocks to include and how they’re weighted, meaning that it may hold more of one stock than another. For example, a tech-focused ETF may contain more Apple shares than Facebook. And that may not suit all investors.

Single stocks may also suit the temperament of investors who may feel strongly about a particular company and its products, and may want to be part of its growth story: Perhaps you like Tesla’s vision for electric cars, or Apple’s endless stream of innovative consumer electronics. You may want to buy their shares directly.

And for investors who don’t mind doing the research, single stocks could actually help with diversification.

What’s more, single stock investors can potentially cap their own losses a bit more directly than fund investors: Don’t like how a particular stock is performing? You can sell it if losses reach a threshold you’ve predetermined. For example, you might decide to sell an individual stock if it loses 10% of its value or more.

And for investors who don’t mind doing the research, single stocks could actually help with diversification.

With that in mind, single stocks could in some instances help tweak the performance of a portfolio. In a down year when other stocks are suffering, a solid year that lifts the stock price of a single promising company that’s beating the market could potentially improve the total performance of your holdings.

On the flip side, single stocks are inherently more risky. You’re placing all your bets on the management team and performance of just one business, as well as ongoing consumer demand for its product or service, which can vary over time.

A portfolio filled with single stocks would be considered very aggressive. Many investment advisors, including Stash, would recommend balancing out a portfolio with bonds and funds, appropriate to your risk profile.

Do your research

Remember, though, before you invest in single stocks, you should do your research and learn all about the company’s executive team, the consumer demand for its product or services, not to mention the company’s quarterly and annual performance.

One good place to check on any public listed company is the Securities and Exchange Commission (SEC). Listed companies are required to file their quarterly and annual reports with the SEC. These are public documents, which you can access here, and they are usually gold mines of information about the companies themselves.

You can also find company information in the investor section of most public company’s websites.

And just like any other investing, if you plan to buy single stocks, consider owning them for the long haul. You’re likely to smooth out any shorter-term losses that way.

The post How Should I Invest With Single Stocks? appeared first on Stash Learn.