For millennials, apps provide the on-ramp to investing

For many young adults, easy-to-use applications on smartphones and tablets are a popular gateway to investing.

Historically, there have been two major roadblocks to starting out with investments: the amount of time it takes to create a smart, safe portfolio and the cost to do it. Companies like Digit, Acorns and Stash are a part of a financial tech industry that, with the giant base of millennials in mind, is simplifying and lowering the cost of investing.

After analyzing income and spending habits, Digit withdraws and deposits a small amount of cash into a Digit saving account. Nearly $16 million was saved with Digit in March, compared with only $1 million a year ago, said Ethan Bloch, chief executive of the San Francisco-based firm.

David Ronick, co-founder and chief executive of New York-based Stash, said allowing first-time investors to get their feet wet in the market, while keeping risk low, helps spur investment. Its app allows users to start with as little as $5. "Investing doesn't have to be complicated," Ronick said. "You can buy a little and learn as you go."

After building up a nest egg, millennials can use Acorns and Stash to get into slightly more sophisticated investing, such as through the purchase of fractions of exchange-traded funds, which are a mix of stocks and bonds.

"There are a paralyzing amount of choices," said Jeff Cruttenden, co-founder of Acorns, which is based in Los Angeles. "Now that [the number of choices is] smaller, people can get in with less research."

Acorns links to a customer's checking account and rounds their everyday purchases up to the nearest dollar (though that amount is adjustable). It then deposits the remainder of each purchase into an investment account. Users can choose from five risk levels for their portfolio, ranging from conservative to aggressive, Cruttenden said.

Sophia Bera, founder of Minneapolis-based Gen Y Planning, says one risk is that the excitement of investing overshadows the importance of a secure financial plan.

"Millennials are more interested in getting started [investing] sooner," Bera said. "But they are sometimes forgetting basic personal finance."

Having $1,000 invested isn't smart when someone has an empty savings account or debts to be paid. A mobile app is less likely to educate young adults about paying off loans or dealing with the ups and downs of investing. the emotional stresses of finances. Nathan Dungan, president and founder of Share Save Spend, a financial education group in Minneapolis, said the danger is a fixation on returns. "There is a much bigger picture," he said.