Social media is introducing the world of investing to a whole new audience. A growing number of young adults are now tuning into TikTok for tips on buying bitcoin, crypto, and other digital currency. Stock trading apps are looking to cash in on all that added interest.
Platforms such as Robinhood, E*Trade, TD Ameritrade, and Webull, which make the trading process easier and more comprehensible for newer, more unconventional investors, have experienced a surge in popularity. In fact, Robinhood has experienced record growth in downloads, leading to an announcement that they will be heavily recruiting college students to sign up for the app through tuition-payment incentives.
While this may be an exciting opportunity for investors, BBB strongly encourages young traders to do their research ahead of getting started. No matter the platform, buying stocks always carries the potential for both financial gain and loss.
Before you invest with a stock trading app, Better Business Bureau recommends you follow these tips:
- Learn everything you can about stock markets. The only way to succeed at mobile stock trading is to do your homework before you begin. Get to know the basics of investing. Familiarize yourself with concepts like expense ratios, trading commissions, asset allocations, individual stocks, exchange-traded funds, and more. Learn more about how stock markets work at Investor.gov.
- Choose a reputable stock trading app. The trading app you choose is more than just a platform for trading; it is the company that will serve as your broker. Be sure that any company you are considering has a good reputation and is legally licensed and registered with the appropriate government authorities.
- Compare and examine. These apps are designed to make investing a little less intimidating and provide educational information. Examine and compare each app closely, taking note of their fees, trading minimums, stock analysis tools, and educational offerings to choose the one that best fits your needs.
- Set a budget. Make sure you are in a good financial position to start trading. Since trading carries risks, you should never invest money you can’t afford to lose. Keep in mind that it is unwise to put more than 10 percent of your portfolio towards individual stocks, as this can expose your savings to too much volatility, advises CNN. If you don’t have much money to invest, you can look for a "micro-investing" platform. These services allow you to buy a share in a larger fund.
- Be wary of “hot tips.” Sponsored ads and online forums promoting “fail-safe” stocks that are “guaranteed” to get you a huge profit for a small investment (if you act now!) are likely fake or part of a racket designed to drive up the price of stock temporarily. Don’t fall for this kind of “insider’s advice.”
If you want to try the stock market, but aren’t ready to risk real money, try “virtual trading” first. Many online stockbrokers offer platforms where you can learn the ropes by buying and selling virtual stocks.
To learn more about investment scams, read the FINRA Investor Alert: Stock Spams and Scams.