The fintech revolution is here and investment apps are leading the charge.
Robinhood, Acorns, Betterment and other apps have simplified the investment process for everyday Americans by removing once-common barriers to access, like complex jargon and high trading fees.
Investment apps shook up the archaic financial landscape by giving people user-friendly platforms to access the stock market with as little as $5.
Then came the COVID-19 pandemic, which coincided with economic worries, stimulus checks and growing interest in investing apps and cryptocurrency.
This proved to be a perfect environment for app use to accelerate — especially among new and young investors. In a new survey of nearly 2,000 Americans conducted by Codetic, 66% of respondents only began using an investment app in 2020 or 2021, and two out of three said the pandemic led them to become more serious users.
Codetic’s survey found more striking findings about investment app users, who are getting their feet wet in a stock market once roped off for white collars and Wall Street elites.
- They’re new to the scene: About half said they had little to no investing experience prior to using an app.
- They’re starting small: About half of respondents have less than $1,000 invested on an app.
- They’re using this new access to: Dabble with crypto, fractional shares and meme stocks.
- Social media is a primary source of investing advice: Most investment app users flock to Facebook and YouTube for investment advice, although 18-to-24-year-olds also heavily favor TikTok and Instagram.
- Celebrities also hold sway: 44% of all respondents said they would be more likely to invest in a stock if Elon Musk tweeted about it. Among high-income earners — those earning over $150,000 — 67% said they’d be likely to follow Musk’s advice.
Covid-19 Spurs New Wave of Investment App Users
Investment apps aren’t new.
Acorns, a robo-advisor app that encourages small, regular investments, debuted in 2012. Robinhood, a self-directed stock trading platform featuring fractional shares, followed in 2013.
Yet 71% of survey respondents aged 18-24 got started in 2020 or 2021.
And investing apps aren’t just popular with Gen Z and Millennials either: 37% of respondents were 45 years or older. Of those age groups, 67% began using an app in the last two years.
Over half of respondents (53%) said they had little to no investing experience prior to using an app. Only 21% said they were very experienced when they took the investment app plunge.
Nearly three out of four respondents (73%) said they would use personalized advice from a computer algorithm if their investment app offered it. Robo-advisors like Betterment and Wealthfront offer this type of service.
Investment App Users Are Starting Small
Extra time, stimulus cash and easy digital access to a surging stock market enticed a new wave of investors.
But they are starting small. Over half (52%) reported having less than $1,000 invested in an app. Only 24% said they have $5,000 or more at work in any given investment app.
That said, when people found themselves flush with money thanks to three rounds of stimulus checks, many jumped to invest it. More than half of respondents said they invested stimulus money in an investment app, including 57% of those making less than $25,000 a year.
Investing apps are drawing investors of all income levels. Some 78% of respondents earning $25,000 or less said they started using an investment app in 2020 or 2021, while 56% of respondents earning $150,000 or more started during the pandemic.
Experience and Education Make a Difference
More experienced and educated traders reported better results using investment apps than investors with less experience and education.
People who learned investing basics and best practices in their teenage years were considerably more likely to report a positive return on their investments than those who learned investing basics in their 30s or later (60% vs. 43%).
Survey respondents with a college degree were more likely to report a positive return on their investments than those with only a high school education (58% vs. 42%).
About 60% of people who said they were very experienced with investing prior to using an app reported a positive return, while 42% of respondents with no prior investing experience reported a positive return.
Not surprisingly, higher income earners are more familiar with investing overall. About 30% of respondents with incomes between $25,000 and $49,999 said they had no prior investing experience, while just 12% of respondents earning $150,000 or more reported no prior investment experience.
Are Users Making Risky Decisions With Investment Apps?
Investment apps are simple and accessible, but they’ve been criticized for gamification tactics that track user activity, encourage trades, send alerts, employ leaderboards and reward users with badges when they hit milestones.
Giving people unrestricted access to complex financial products carries an inherent risk that some investors may use investment apps to engage in gambling-like behavior.
Over half of respondents (56%) say they used an app to buy and sell stocks in the same day — a common day trading practice — while nearly 30% said they consider cryptocurrency a low-risk investment.
A growing pool of investment apps lets users dabble in crypto trading, including Robinhood and Webull and money-transfer platforms like PayPal and Cash App.
About 58% of respondents said they used an investment app to trade crypto for the first time in 2020 or 2021.
It’s easy to get money invested with these apps, but survey respondents seem to take advantage of easy withdrawals too: About 55% said they pulled money out of an investment app in 2021.
But withdrawing investment money early can come at a cost by way of short-term capital gains tax or potential IRA withdrawal penalties.
It also goes against tried-and-true longer-term investing principles.
Will the Investment App Revolution Continue?
Investment apps have carved out their spot in the fintech revolution — but are they here to stay?
Investors seem to think so.
A majority of survey respondents (60%) said they plan to put more money into investment apps in 2022 than they did in 2021.
Nearly two-thirds (66%) said they planned to try a new investing app this year.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for Codetic.
About the Survey
Codetic conducted the random national survey in partnership with Pollfish from December 15-18, 2021. Pollfish screened respondents by asking if they had used at least one investment app regularly within the past year: 3,581 people responded to the screening question, with 2,000 people who used at least one investment app regularly advancing to the survey’s 20 questions. Codetic analyzed the data and removed 82 responses that were not valid, bringing the response count to 1,918. Responses were weighted for age and gender so that each response is representative of the U.S. population. The overall survey’s margin of error is +-2 percentage points at a 95% confidence interval.