One of the best ways to save for the future is to make investing automatic. There are several ways to automate your investing, such as contributing to a 401(k) with every paycheck or setting up regular automatic deposits to your IRA or brokerage account. But what if you could automatically invest not just every time you get paid, but every time you spend money?
There’s a personal finance app called Grifin that enables you to automatically invest when you shop. Grifin lets you choose to buy stocks from certain companies every time you buy products or services from those companies. This can help make buying stocks into an automatic, recurring activity that happens as part of your everyday financial life.
Let’s take a closer look at the Grifin automatic investing app and see how it stacks up as a way to help people learn about buying stocks and investing for the future.
How Grifin helps you buy stocks automatically
Grifin automatically invests in companies where you spend money. For example, if you make an online purchase from Amazon, Grifin will help you automatically buy $1 of Amazon stock. If you buy lunch at McDonald’s: $1 of McDonald’s stock. Jump in an Uber for a ride across town? You just got $1 of Uber stock with your name on it.
If you decide to use Grifin to buy stocks, you connect the app to your bank account (checking or savings) to deposit cash into your Grifin account. And you connect your debit card or credit card so Grifin can track your spending. Any time you make a purchase from one of the dozens of companies on Grifin’s list of available stocks, you’ll also make a stock purchase.
Grifin is not a brokerage account; it’s an investment advisor. But Grifin partners with a brokerage called Alpaca Securities to handle customers’ investment transactions. Alpaca Securities is a member of the Securities Investor Protection Corporation (SIPC), and your account is protected with SIPC insurance against loss up to $500,000 ($250,000 for cash).
Grifin: Pros and Cons
Investing in stocks always includes some risk, and there are some potential upsides and downsides to the Grifin app, depending on your financial goals. Let’s look at a few.
Pros
- Low-cost investing: Grifin does not charge trading fees, commissions, or monthly account fees. Instead, customers pay Grifin an advisory fee equal to a portion of the interest earned on the cash in their Grifin accounts. And you don’t have to keep cash in your Grifin account; if you choose to use all your cash to buy stocks, you don’t have to pay Grifin the advisory fee.
- You can choose companies to invest in (or not invest in): Just because you shop at a certain store or buy from a certain brand doesn’t mean you want to own that stock. If you believe that a certain company is not a good investment or you don’t agree with the business practices of a company or industry, Grifin will allow you to exclude it from your automatic investing. You’re not “forced” to buy any stocks that you don’t want to; Grifin lets you customize your stock portfolio as you go.
- Dollar-cost averaging: Assuming you shop regularly at some of your favorite brands, you’re likely going to benefit from dollar-cost averaging — buying shares on a regular schedule, rather than trying to time the market.
Cons
- Stock investments might not be right for your time horizon: Do you already have an emergency savings fund with three to six months of expenses in cash in the bank? If not, beware of putting too much spare cash into stocks. Stock prices can go down as well as up, even for well-established companies. If the stock market goes into a downturn and you need that money immediately, you might have to sell your stocks at a loss.
- Investment risk for less-savvy investors: Unless they’ve done research into various companies, beginning investors might not understand which companies’ stocks are the best to buy. Try to only buy shares of companies that you really believe in.
- You’re picking individual stocks: One risk of buying stocks in individual companies is that the stock prices might go down or might fail to keep up with the performance of the broader stock market indexes like the S&P 500. Most day traders lose money; unless you’re Warren Buffett or The Motley Fool Stock Advisor, you’re not likely to be good at choosing individual stocks that will make money in the long run.
Bottom line
Grifin is an intriguing way to help people learn about the stock market through automatic investing. It’s like a round-up app, but instead of a few pennies into savings, you can put $1 (or more) into stocks with every transaction. If you want to use some “fun money” to buy the stock of brands you love, then Grifin could be worth trying.
But be aware of the possible downsides. Don’t put your emergency savings into Grifin (or any stocks); you might need that money sooner than the stock market can go up. And watch out for the time-honored challenge of buying individual stocks: it’s very hard to beat the market. Many investors might be better off setting up automatic investments in diversified index funds via an IRA or other brokerage account.
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