Monday, 30 November 2020

Stash Review

Stash Review
29 Oct
8:09

Updated on Thursday, October 29, 2020

Stash is an online investment app designed for beginners who have limited funds to invest or limited knowledge of how to get started, or both. With no minimum, users can begin investing in exchange-traded funds (ETFs) and/or individual stocks for no commission, other than the standard account fees of $1, $3 or $9 monthly, depending on the type of account. Stash’s strengths are to some degree also its weaknesses. Users looking for greater functionality, more investment options and financial assistance may find Stash to be limiting.

Note: LendingTree, the parent company of MagnifyMoney, is an investor in Stash.

Best for…
  • New investors
  • Users with limited investment funds
  • Users looking for thematic investment options
  • Investors who are in need of guidance but don’t want to pay for full service
Account minimum $0; $1 for custodial and retirement accounts, or to get a debit card
Management fee $1, $3 or $9 monthly
Accounts offered Taxable, retirement, custodial
Access to human advisors No
Banking services Yes

What is Stash and how does it work?

Stash is an all-in-one banking, investing and retirement savings app that also offers custodial accounts. Users can choose one of three subscription tiers: Beginner, Growth or Stash +. These services cost $1, $3 and $9 per month, respectively. Each level provides the following services:

  • Stash Beginner: Includes a brokerage account, basic banking services and Stock-Back™ rewards
  • Stash Growth: Adds a retirement account in addition to the services offered with Stash Beginner
  • Stash+: Adds two custodial accounts for minors, a metal debit card and a monthly market insight report

As Stash is targeted toward newer or more inexperienced investors, it offers a user-friendly interface and provides extensive financial education materials on its site, including its “Stash Coach,” which is a gamified, personalized financial coaching tool. Stash also renames popular ETFs with thematic names for more accessibility and familiarity. For example, the Vanguard Tax-Exempt Bond ETF, with the ticker symbol VTEB, is given the more playful name “Don’t Tax on Me” in the Stash universe. The Vanguard FTSE Emerging Markets Index Fund (VWO) is similarly dubbed “Up & Coming” by Stash. This can make things a bit more fun for the user.

Stash uses a traditional customer questionnaire to gather information about users’ financial situations and suitability. However,  unlike a traditional robo-advisor, Stash doesn’t actually manage client accounts. Account holders then choose their own investments, using as much or as little help from Stash as they would like. Real-world financial advisors are not available via Stash.

For investments, users can choose from stocks, ETFs or bonds, and fractional shares are available. This comes in handy if you’re looking to buy a stock like Amazon, for example, with a current share price north of $3,000. If you only have $60 to invest, you can buy 0.02 shares of AMZN.

Currently, the only account types available at Stash are taxable investment accounts, Roth or Traditional IRAs and custodial accounts.

Pros

  • Single-stock investing: Many investment apps and robo-advisors only allow ETF investments, but Stash allows users to pick from select individual stocks as well.
  • Fractional-share investing: Users can invest dollar amounts into stocks rather than having to save up to buy a full share, which comes in handy in the case of stocks that have a prohibitively high per-share price.
  • No account minimums: Although you’ll need to deposit money to make an actual investment, Stash doesn’t require a minimum amount to open an account.
  • Self-directed portfolios: Users pick their own investments at Stash, unlike at many robo-advisors that assign investors specific, pre-determined portfolios.
  • Banking and debit card access: Banking services are an important part of the Stash universe, which provides various automated savings tools and a debit card.

Cons

  • No access to financial advisors: Stash provides lots of financial education and advice on its website, but it doesn’t offer the services of actual financial advisors, as some other robo-advisors do.
  • No true investment advisory capability: In spite of its tailored investment recommendations and user-friendly interfaces, you’ll ultimately have to manage your own portfolio yourself.
  • Fees: Although the $9 per month fee for the Stash+ tier may not sound like much, if you have a small balance, that rate may amount to a significant percentage of your invested assets.

Stash investment approach

Investment options ETFs, individual stocks and bonds
Tax-loss harvesting
Portfolio rebalancing
Smart Beta
Socially Responsible Investing
Fractional shares

Asset allocation

Stash makes investment suggestions based on client-provided investment goals and risk tolerance. Allocations are designed to diversify portfolios across assets in accordance with a client’s desired level of risk and reward. Investments are suggested to provide exposure to a diversified array of companies, industries, geographic regions, economic sectors, investment strategies and social beliefs, as long as they match a client’s desired input.

As Stash is not a robo-advisor and does not have discretionary authority over how client accounts are specifically allocated, it doesn’t offer the types of packaged ETF portfolios that are common with traditional robo-advisors.

Tax strategy

Stash doesn’t offer tax-loss harvesting, Smart Beta or other tax-efficient investment aids, as it has no discretionary authority over client accounts. Tax-loss harvesting involves selling specific investments that have gone down in value to offset capital gains taken elsewhere within a portfolio. Smart Beta is a broad term that encompasses rules-based portfolio strategies designed to reduce risk and improve returns. But with Stash, clients are collectively responsible for making the investment and tax-management decisions for their own accounts.

Stash fees

  • Annual management fee: $12, $36 or $108
  • Investment expense ratios: Vary by fund

Stash fees vary based on account type. The most basic account, Beginner, charges $1 monthly. Growth charges a $3 monthly fee, while the top-tier Stash+ account incurs a $9 monthly fee. This fee doesn’t vary by account size, so users will pay either $12, $36 or $108 annually to hold a Stash account. With a $5,000 account balance, this amounts to a 0.24%, 0.72% or 2.16% fee annually. Each ETF also carries expenses that are automatically deducted from fund values throughout the year.

Most banking services at Stash are fee-free. There are no monthly account fees, overdraft fees, minimum balance fees or in-network ATM fees. Out-of-network ATM transactions incur a $2.50 fee, and foreign transaction fees amount to 3% of the total transaction. As Stash uses Green Dot to run its debit card program, there is a fee to deposit cash to the account that varies by retailer, with a cap of $4.95.

Stash features and tools

Stash DRIP

Stash offers a dividend reinvestment plan, or DRIP. If users opt in, dividends that are paid out on owned stocks are automatically reinvested into additional shares (or fractional shares) of the dividend-paying stock.

Stash Coach

Stash Coach is a personalized financial planning tool. It turns investing into a game, via sets of challenges tailored to each user. Every week, new challenges are presented, such as interactive trivia quizzes. You can earn points for completing challenges or goals.

Auto-Stash & Smart Stash

The Auto-Stash feature lets you set up regular, automated deposits or round up debit card purchases to the nearest dollar, with the excess amount automatically invested for you. Smart Stash analyzes your spending patterns and automatically transfers excess cash into your investments, up to limits that can be set by individual users.

Stock-Back™ Rewards

The Stock-Back™ rewards feature provides users with fractional shares of stock when they make a purchase at a participating retailer. For example, if you buy some groceries at Walmart, you’ll receive Stock-Back™ rewards in the form of fractional shares of Walmart stock. For companies that don’t trade on the stock exchange, you’ll receive fractional shares of a diversified ETF instead.

Stash banking

All Stash accounts have access to a debit card that can help fund investments through the Smart Stash feature outlined above. There are no fees with this debit/banking card, including overdraft fees, although retailers within the Green Dot Bank network, which supplies the card, may require a cash deposit fee of up to $4.95. Debit card users can earn rewards and get paid up to two days in advance when using direct deposit.

Stash user experience

The entire Stash experience is set up to make it easy for newer investors to use. The Android and iOS apps are slick and easy to navigate, as is the web interface. In addition to the basic account information you’d expect, the Stash app makes it easy to invest in fractional stock shares, track your stock-back rewards purchases, learn about investing and access budgeting and savings tools.

The renamed ETFs that Stash uses may be more engaging for new investors, who might be more interested in buying the ETF dubbed “Delicious Dividends” rather than the real name of the ETF, the “Schwab U.S. Dividend Equity ETF.” Stash Coach is an engaging way to increase investor knowledge while rewarding positive investor behavior via various financial challenges.

Stash has extensive online resources for customer questions, and that’s a good thing because the firm seems reluctant to provide direct support. Although you can send a message directly to customer service via the website, the Stash customer service phone number, (800) 205-5164, and direct email address, su[email protected], are buried deep in the website’s footnotes.

Stash safety and security

  • Investment adviser registration
  • Third-party custodian
  • SIPC insurance
  • Bank-grade encryption
  • Biometric security and two-factor authentication

Stash is registered as an investment adviser with the U.S. Securities and Exchange Commission (SEC). Although the firm doesn’t directly manage client accounts, it has passed all the legal hurdles required to offer investment advice, and the platform must act as a fiduciary. This means the investment suggestions it makes must be in the best interest of its clients, which is a higher regulatory hurdle than at some traditional brokerage firms, which are required only to make “suitable” investment recommendations. Although users choose their own investments, the options they are presented by Stash are fiduciary choices.

Securities purchased at Stash are held by a third-party custodian, Apex Clearing. Apex is a member of the Securities Investor Protection Corporation, or SIPC, and carries standard SIPC insurance. Cash invested with Stash and held at Apex is insured for up to $250,000, and individual investments are insured for up to $500,000. Note that this insurance does not cover against market losses, only against firm insolvency.

Stash uses 256-bit encryption and Transport Layer Security to help keep client data safe. It also offers biometric recognition and two-factor authentication. Stash security has been validated by a third party to be in compliance with the Payment Card Industry Data Security Standard, or PCI DDS.

Is Stash worth it?

Stash is a great way for beginning investors to dip their toe into the market. Between automated investing, auto roundups and fractional share purchases of both stocks and ETFs, Stash offers a nice package for people new to the investing world.

Stash comes up a bit short in a few areas, though. Customers looking for a true robo-advisor should look elsewhere. Although Stash is a registered investment advisor and provides general recommendations based on investor-supplied profiles, it does not manage portfolios like well-known competitors Wealthfront and Betterment.

Stash also doesn’t offer access to financial advisors, so even though it provides recommendations, investors must ultimately make all of their own decisions.

As long as investors are aware of what they are getting with Stash, however, the investment app delivers. In one simple package, customers can have access to banking, investment, retirement and custodial services. Those looking for user-friendly access to basic banking and investments could do a lot worse than trying Stash.

Alternatives to Stash

Stash offers a lot in its investment app, especially for beginners. However, it’s far from alone in this space. Popular competitors include Acorns and Betterment.

  Account minimum Annual fee Accounts offered
Stash $0 $12, $36 or $108 Taxable, retirement, custodial
Acorns $0 $12 or $36 Individual brokerage account, Roth IRA, Traditional IRA, SEP IRA, UGMA/UTMA
Betterment $0 or $100,000 0.25% or 0.40% Individual taxable, joint taxable, IRAs, trusts

Stash vs. Acorns

Acorns and Stash are similar in many ways. Both are investment apps that have no minimum balance requirements and can round up debit card purchases to the nearest dollar, investing that “extra” cash. The platforms differ primarily through their investment options. Whereas Stash offers a wide variety of stocks and ETFs, Acorns’ investment choices are limited to just five portfolios of ETFs, from conservative to aggressive.

Although neither app manages investments for portfolios, Stash lets account holders choose their own stocks or ETFs to invest in. Acorns simply assigns ETF portfolios to investors based on their risk profiles. Unless you intend to open custodial accounts, Stash and Acorns have a similar fee structure, thereby giving the overall advantage to Stash.

Stash vs. Betterment

Betterment is a true robo-advisor, so it’s fundamentally different from Stash. Betterment actively manages client portfolios and constantly rebalances allocations, whereas Stash simply makes investment recommendations. This leaves clients in the driver’s seat when it comes to making investment decisions.

Betterment also offers access to Certified Financial Planners, either via its more expensive Premium tier or through individual fee-based sessions. Stash has no such access at any price point. The bottom line is that, if you prefer to make your own investment decisions, you’ll likely prefer Stash. If you would rather have a robo-advisor make rules-based allocations to your portfolio based on your provided investment objectives and risk tolerance, Betterment will likely be the better choice.

All information included in this profile is accurate as of 10/29/2020. For more information, please consult Stash’s website.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Source: https://www.magnifymoney.com/blog/investing/stash-review/

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