One of the bits of negative feedback I’ve gotten of my book is about the tactical how-to. Specifically, I recommend a bit of an “old school” way to get started. I recommend using direct purchase plans.
In my mind, there are three broad ways to invest:
- Traditional brokerages
- Direct purchase plans
Direct purchase plans vs traditional brokerages
Traditional brokerages are at significant disadvantage to direct purchase plans for those who I expect are in my target audience with the exception of people who roll over their 401(k)’s to IRAs.
Direct purchase plans are easy to start, have very low starting balance requirements, and enable people to buy in dollar amounts, rather than share amounts. It’s easier to get started if you can buy $25 of a stock rather than in round number of shares (one share, two shares, etc). Direct purchase plans also have a way to automate small monthly purchasing, so you can build a wealth-building habit.
Recommending direct purchase plans over a brokerage for non-401K rollovers was an easy choice. As you will see in the review below, Stash aligns very nicely to the things I valued in choosing direct purchase plans as the way to get started.
Direct purchase plans vs apps
Less easy was the choice to fail to mention the app options.
What it came down to was simplicity. I find that part of the challenge with investing is there are too many options. A cornerstone element of the Elephant’s Paycheck Blueprint is narrowing down the selection of investment choices to conservative dividend increasers (known as the Dividend Aristocrats).
Similarly, I wanted to narrow down the choices for how to invest and provide just one recommendation. It’s also ideal that direct purchase plans are the way I have started for my own children. (I started this way too, but things were very different 30–35 years ago when I did that!)
However, I don’t want to be considered out of touch with more modern options for getting started. Especially since the options for getting started with apps are good ones.
There are a lot of choices, so I thought I’d try them and write up short reviews. I’ll eventually consolidate them into one longer addendum to the book.
It’s going to be a random order, so don’t read into the order in which I review these solutions.
That said, may I present my first — Stash.
My second — Robinhood.