I quit trendy stock-trading app Robinhood for a new investing strategy, and I've been stress-free ever since

  • I ditched Robinhood almost nine months ago because I wanted a simpler long-term investing strategy.
  • I’m convinced it was the right move because it’s saved me loads of time and energy on managing investments.
  • Robinhood also offers just one account type, and it didn’t suit my needs. Ditching the app will help me save on taxes over time.
  • Consult with a fiduciary advisor to make sure you are doing everything necessary to grow your wealth in this challenging time »

Last spring, in the wake of the coronavirus market pandemonium, I realized the way I was investing wasn’t working.

I had an account with the trendy brokerage app Robinhood, and some extra money for pretty much the first time in my adult life. Robinhood wasn’t my first foray into investing — I’d set up an account at a legacy brokerage firm when I was in college. But I never used it. Throughout the winter when I first got Robinhood, I spent time and money investing on my phone, even setting up an automatic deposit and managing it once a week. 

After a few months — even though I was mostly seeing green —I realized this wasn’t the right way to invest if I wanted to meet my long-term goals. I switched to a service that helps me invest automatically, taking the stress and time out of investing, and gives me a few more advantages in the process. I’m not sorry I stopped using Robinhood.

Robinhood only offers one type of account — and it’s not the best one for building wealth over time

Robinhood only offers one type of account: an individual taxable investment account. This account type allows the most flexibility for what investors can buy, but it doesn’t offer some of the perks of other accounts, like IRAs. 

Unlike an individual taxable account, a Roth IRA has tax advantages attached. Essentially, this type of account allows money to grow tax-free — when it’s withdrawn after age 59 1/2, you won’t owe any taxes on the money or growth. 

An individual taxable account allows investors to take money out at any time, but you’ll be charged capital gains taxes. Depending on your income and how long you held the asset, it could mean paying between 10% and 37% of your earnings for a short-term gain, or between 0% and 20% for a long-term gain. 

A Roth IRA will allow me to keep more money later, something I think will be a huge benefit. While I might change my strategy in the future to invest for shorter-term goals, I know that having my long-term goals squared away should really come first.

I was spending too much time on the app

When I was using Robinhood often, I felt like I was constantly on the app. I was always looking through the choices and putting the weekly deposit to work. With Robinhood, deposited funds aren’t invested until you spend them on shares.

As a chronic over-thinker, I tended to spend way too much time on the app overthinking what I’d do with every deposit. And, that all added up to a surprising amount of time on the app. 

It was time spent that, quite simply, could have been better used. I’m not an expert investor, and I was never going to really do that much better than a simple investing service or robo-advisor would. Even just a mutual fund, an index fund, or simple ETF could have done just as well. 

For most people, being an active investor is a bad thing. Even professionals have a hard time beating the market, so it’s no wonder I was never an exception. In the world of investing, Robinhood certainly has a time and a place. But, for younger investors like myself who should be focused on big, essential goals like retirement, a Robinhood account simply isn’t the answer.  

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