The Hidden Cost of Investing Apps: Avoid this easy psychological mistake when starting to invest

Investing apps with low minimums and fractional share trading might reduce how much you save and therefore LEAD TO SMALLER PORTFOLIO SIZES OVER TIME.
Are you starting your investing journey with a user-friendly trading app? Here's something you might not have considered: the very features that make it easy to start investing could be capping your financial growth.
In this video, we dive into a fascinating study that reveals how starting small with your investments could inadvertently lead to staying small. And that's not just pocket change we're talking about-it could mean the difference between a comfortable nest egg and a missed financial opportunity.
Paper link (paywalled): www.tandfonline.com/doi/10.10...
We'll explore how the initial investment amount can act as an anchor, potentially restricting future contributions and affecting long-term wealth accumulation. Whether it's $1 or $100, the first step you take on your investment path can set the tone for your financial journey-and not always in the way you'd hope.
Join me as we unravel the "Start Small and Stay Small" phenomenon, discuss the implications of fractional share trading, and most importantly, I'll share strategies to ensure that your contributions grow with your ambitions.
Let's get your investment journey on the right track. It's not just about starting; it's about scaling. Subscribe for more clear-cut financial advice and hit the like button if you're ready to break free from the investment anchors.
Timestamps:
0:00 - 00:58 Introduction
00:58 - 02:12 Study Overview: The Anchoring Effect in App-Based Investing
02:12 - 04:53 Details of the study
04:53 - 06:23 Early on: contribution rate trumps returns
06:23 - 07:41 What does this mean for YOU?
07:41 - 08:40 Assumption is you have a good portfolio
08:40 - 09:58 Key takeaways
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[@isaiah_b_3798]

It is important for people to develop a saving/investing mindset early on. Once it becomes part of your lifestyle its hard to break that habit.

[@cherylhurst]

Great video as per usual Preet

[@kbeestube]

Great video … and info. Thank you …

[@Helix5370]

Glad to see a new video Preet. I've been following you since your WhereDoesAllMyMoneyGo days. I've had to reference your book recently as I'm reviewing our insurance needs. Thank you for sharing with Canadians great personal finance advice!

[@PreetBanerjee]

Wow - thanks Brian! WDAMMG - what a long time ago that was. I remember when I first told the brokerage I worked for that I had a blog and they said: "What's a blog?". THAT's how long ago that was lol

[@Helix5370]

That was an amazing time. I would visit you, Million Dollar Journey, Canadian Capitalist, and Four Pillars daily. What a great community it was. @@PreetBanerjee

[@daveconlon3453]

I could be accused of anchoring my stock purchases, as I buy when my dividends accumulate to a $500 value. I buy what's on sale and wait until my next "anchor" is reached.

[@littleninjai222]

'You got the brains and the looks', Preet. Thanks for educating us and helping us make 'lots of money'. Another very helpful video. Validation that starting with small sums is good, so long as you start, and continue to increase the contributions as your income increases.

[@PreetBanerjee]

Overall, I think it's good to start the journey sooner because I have yet to meet anyone who knew how to invest when they started. No one I've ever met ends up investing the same way they started. Hopefully they learn good things and get better though, and not worse 😊

[@CARL_093]

thanks bro very informative video

[@PreetBanerjee]

👊

[@alexwong8851]

Great video! Definitely something to keep in mind. I think another potential drawback with the free investing apps is that it makes it almost too easy to buy and sell stocks, which could lead to day trading or timing the market versus just buying and holding for the long term.

[@PreetBanerjee]

100% - and there is a preponderance of evidence that suggests these types of features on brokerages tends to encourage gambling and excessive trading. It can take many years to graduate to "portfolio management" level thinking, and then many more to think about prudent portfolio management, etc. There is likely going to be another trend where the social aspect of trading gets put into overdrive (maybe it's already there with WallStreetBets) which encourages group think into riskier speculative strategies...

[@alexwong8851]

@@PreetBanerjee 100%. Couldn't agree more. I know because I made the same mistake when I first signed up for Wealth Simple during the pandemic and invested in a bunch of stocks that were over inflated and I didn't understand. Ended up losing some money but it's a good lesson. Much better to keep things simple, buy a low cost index fund and buy and hold companies you understand and believe in for the long term.

[@jeffreysebern4693]

Nice intro Preet! 🎶

[@PreetBanerjee]

Thanks! Been having fun with a new music licensing service 😊

[@kevinpowell3667]

Sabotage...they've had 5 years because of the SEC to find other alternative. The want a bigger pieces of the Pie. Trust no one as it could even be the works of a partnership deal within Ripple. Ripple Dlt have got to put themselves first regarding security. Just my thoughts on what could have played out. A lot at stake to come.

[@OptimisticHominid]

Is this the real Preet? Am I real!

[@PreetBanerjee]

The answer to at least one of these questions is "yes".