Best Investing App for Market Crashes
Chances are you're hip on the news since you're cool enough to be here. Besides, if you've listened to many of my videos you've seen me warn investors of the consequences of this upcoming market crash. No, I don't know exactly when or why it will happen - but I do know it will happen.
As it turns out the US stock markets have been flipping violently over since last Friday and sentiment seems confused at best. The Dow recorded its largest single-day loss in history and investors are saying things like, "Is this it!?"
So, what is the best investing app for market crashes? You know, just in case this turns out to be one. Or, maybe, if ever there could possibly be one in the future...
Features of a Crash Investing App
I'm going to argue that there are several extremely important mechanics that most investors will want in an app to get them through a crash or recession. Many of these are not groundbreaking concepts - just smart investing done right during a crash to make you money and save you from your own poor judgment.
Dollar Cost Averaging
This is a fun little trick of mathematics that takes the guesswork out of investing. If there's a situation in which human intuition cannot be trusted to guide investing, it is during a major crash. That's why putting things on autopilot with DCA can help.
Dollar cost averaging means to purchase shares of an investment in regular, scheduled chunks. $25 per month of a stock, let's say. This can be done on autopilot with many of today's investing apps.
By averaging into the market you don't have to guess when to buy. Because timing the market is difficult at best or, as many believe, statistically impossible, dollar cost averaging gives most of us a safe and smart way to enter the market.
By purchasing a fixed dollar amount of shares every month you will buy more for your money when the market is down and less for your money when the market is up.
By dollar cost averaging you're guaranteed not to have bought in at the bottom of the market for any given period during which you maintain a schedule of purchases. Even if you do make one trade at the absolute bottom of the market, the average of all your trades will always be above that.
Especially when markets are rough and rocky like during a crash, this gives you a way to take advantage of the discounted share prices without trying to time everything.
Automatic Portfolio Rebalancing
What is portfolio rebalancing? Essentially you set up how much of your total assets (money) you want to have allocated to each investment in your portfolio and the investing app manages it for you.
Think of it as a pie chart from high school:
In this case, you have 33% of your portfolio allocated to AAPL, IAU, and VPU respectively. No matter how much money you have invested overall, 33% of it will always be in each of these funds until you change your allocation.
This is just an example - with a good investing app using automatic rebalancing you could have as many individual investments as you want with any percentage assigned to each. So long as the total adds up to 100%!
So, let's say that one day the market panics and begins a tech-fueled selloff. Obviously, AAPL is going to take a hit while the more defensive IAU and VPU might not. So, as AAPL falls in price, assuming that VPU and IAU stay the same your portfolio might look like this on day 1 of this imaginary crash:
At this point, an automatically rebalancing portfolio would initiate a sell order on IAU and VPU to free up just enough funds to purchase the now discounted shares of AAPL. You would, in essence, be selling IAU and VPU "high" and buying extra shares of AAPL "low".
After rebalancing your portfolio would again look like the first graph where all assets are balanced by percentage of portfolio share.
During a market crash, automatic portfolio rebalancing helps to keep your portfolio steady as things become tumultuous. This automation also allows you to not even have to look at it and be tempted to seel or make major alterations to your strategy during down times which can be dangerous.
Avoiding Social Investing
During a market crash, one of the worst things most investors can do is turn on the news or read investment twitter streams. It's toxic, full of bad ideas, and makes your fingers twitch to change plans and sell here or buy there.
That's not to say that good information cannot be gained from social sources as it pertains to investing. However, unless that's your very specific intent and you're a social trader with lots of experience and a clear goal I'd advise staying away from social investing outlets.
Best Invest App for Stock Market Crash
Let's peel back the curtain and reveal my top pick for the best stock market crash investing app. And it is...
While M1 Finance ranked among my top favorite investing apps for 2017, they stole the limelight for 2018. How did it happen? M1 Finance announced that they're not totally free to use!
I personally use M1 Finance so honestly I'm stoked to hear this news! While they were cheap to use before, they're downright free now and that's awesome for all of us.
But what makes M1 Finance so good for investing during a stock market crash?
- No social integrations on their platform
- Easy to use automatic rebalancing
- Automatic deposits and investments for DCA
- Now totally free!
Unlike other apps, M1 Finance has zero social or news integrations. I considered both Robinhood and Motif Investing (among many others) for the position of "best stock market crash investing app". However, Robinhood has social and news features built right into the main screen. Motif has a massive section of "motifs" built by the community.
Again, social investing isn't always bad but for most - particularly during a market scare - social sentiment may be misguiding.
M1 Finance is built around the concept of automatically rebalancing a "pie" of investments. This means during volatile swings you won't even have to log in and you can rest assured that your assets are being rebalanced when needed. It's also insanely easy to use!
Every time you deposit or earn more than $5 in your M1 Finance account it will automatically be distributed into your investments. Because M1 Finance supports fractional shares, all you need is $5 to contribute before the rebalance kicks in! You won't find that elsewhere.
Like I mentioned above, all of this is now totally free. You can check out my in-depth article M1 Finance Review if you want to know all the fine details. Suffice it to say that M1 is my top pick for investing in what may be a volatile 2018.
If you decide that M1 Finance sounds like something you're interested in, you can find more information by using this link. If you choose to sign up I may receive a commission that helps to keep this site running.