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Financial News

Feb 16, 2021

How Stash Chooses Its Stocks and Funds

By Stash Team

Our investment committee researches funds, stocks, and other investment choices.

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Update June 2022: If you’ve been watching the market, you might be feeling a little anxious. Inflation data, the Russia-Ukraine war, and anticipated monetary policy changes are contributing to increased market volatility.

It's normal to feel nervous when the market goes down, but panic selling can hurt your portfolio rather than help it. We think it’s best to focus on the long-term, invest in a diversified portfolio and automate investing with Auto-Stash.

Staying invested through all parts of a market cycle is key to long term investing success.

Getting Started

It is never too late to start investing, and it is certainly never too early. 

The market often presents an opportunity to invest and it is exciting to watch how it moves and how the companies you have selected perform. Especially in times of volatility, when the stock market moves all over the place, there is a tendency to follow social media investing ideas for comfort. There is also a resurgence in day trading, people who speculate. They make bets on where they think the stock market is going during the day, therefore they move in and out of their stock positions in efforts to make quick returns. 

This is not the Stash Way, our investing philosophy that emphasizes regular investing over the long term.  Remember what they say, “Good things come to those who wait.” As you start thinking about your financial future, Stash wants to guide you every step of the way. 

Here’s how.

How we choose investments

First off, Stash is a fiduciary. This means that Stash is always looking out for your best interest as we provide you with investment options. As a fiduciary, we do our best to help guide you to make the best investment decisions possible. That explains why some of the investments you’re looking for may not be available on the Stash App.

Our Investment Committee here at Stash prescreens investments before adding them to the platform. We look for certain qualities in the investments in an effort to lower some of the potential risks that you may experience in the market and to help you diversify your portfolio. 

To name a few, we review qualities such as the market capitalization, trading volume, and more to assess the risk of stocks. For exchange traded funds (ETFs), we review the investment strategy, underlying exposure of the fund, assets under management, expense ratio, volatility, and much more. Think of it as going to the grocery store to buy apples. You examine the exterior of the apple to lessen the risk that the inside of the apple may be rotten. This is what the Investment Committee aims to do, and this is why you may not see some names on the Stash App.

The Stash Way

Although it may be tempting to find names that have that quick moment of satisfaction seeing the price jump rapidly, it may be possible that just as quickly as you see the stock price go up, it may go down. Think of the volatility from past crises such as the Dotcom Bubble, the 2008 Financial Crisis, and the 2020 Pandemic. Don’t attempt to time the market, but try to maximize your time in the market.

As you invest, always remember our investing philosophy, the Stash Way. Think long- term, invest regularly, and diversify. Historically, we’ve seen the market move up and down however the trend is always upwards. If you think of what happens in the long-term, you will understand to not react to any short-term volatility. Stay the course and allow the power of compounding to help you grow your investments. Invest regularly to remove the emotional aspect of trying to time the market and having to think about when is a good time to invest. It allows you to subconsciously build the habit of investing for your financial future. Lastly, it is important to diversify. Don’t expose your financial well-being to volatility by putting all your money into one stock. Spread your money in different companies, industries, different investment vehicles such as ETFs, and asset classes to avoid the risk of putting all your eggs in one basket. 

Remember, all investing involves risk, and you can always lose money on your investments. Understand your financial situation and investment objectives before investing. Stash is here to help you make educated decisions to help you make financial progress. 

Stash has thousands of investment options including both single stocks and ETFs. If you haven’t found what you’re looking for, however, we can make some suggestions to help you invest in the market for the long term. Check out our diversification analysis score to receive customized investment recommendations selected by Stash’s investment committee.1

If you would like to explore on your own, visit the “Beginners: Start Here” tile in the “Invest”  tab to find the following ETFs2, which can add immediate diversification to your portfolio:

Stocks Worldwide—provides exposure to companies around the world.

Global USD Bonds: Variety Pack—provides exposure to global bonds issued in U.S.

Match the Market— provides exposure to the largest companies in the U.S.

Delicious Dividends—provides exposure to companies that issue dividends.

Foreign Heavyweights—provides exposure to foreign companies (excludes U.S. and Canada).

Stocks Nationwide—provides exposure to all companies in the U.S., no matter the size. Includes small, mid, and large-sized companies.

Conservative Mix—provides a balanced exposure that includes both stocks and bonds. This ETF has more bond exposure than stocks.

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Stash Team

1Stash through the “Diversification Analysis” feature does not rebalance portfolios or otherwise manage the Personal Portfolio Account for Clients on a discretionary basis. Each Client is solely responsible for implementing any such advice. This investment recommendation relies entirely on the responses you’ve provided regarding your risk tolerance. Stash does not verify the completeness or accuracy of such information. Investing involves risk, including possible loss of principal. No asset allocation is a guarantee against loss of principal. There can be no assurance that an investment strategy based on the tools will be successful. Diversification and asset allocation may not protect against market risk or loss of principal. This information should not be relied upon as research. Carefully consider any ETF’s investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the ETF’s prospectus which may be obtained by visiting the ETF’s prospectus pages. Carefully review and consider the information available on the Stash App about each investment recommendation, in any applicable ETF prospectus, and in any applicable public company filing or report before making any investment decision. These investment recommendations are constructed to provide clients with explicit guidance on how to allocate to a globally diversified set of investments for the purposes of long-term investing. Clients make contributions to their Personal Portfolio account and are responsible for directing purchases and sales of specific investments. For clarity, while Stash provides investment recommendations to Clients, Stash does not have authority to execute its investment recommendations on behalf of any Client without such Client’s consent and approval of each specific transaction through the Personal Portfolio Invest account.
The Diversification Analysis is based on a Client’s portfolio composition compared to a suggested allocation. The Diversification Analysis calculates the Client’s overall portfolio diversification and is used to reduce risk by encouraging the Client to diversify further. The calculation is performed by assessing the Client’s portfolio holdings and grading each asset held by its underlying exposures. The asset is graded by qualities such as asset type, regional exposure, and percentage allocation within the portfolio. For each risk profile available on Stash, a desired portfolio allocation is created by the Stash Investment Committee. The desired allocation is used to compare to the Client’s portfolio in efforts to provide advice on how to improve diversification.
2All investments are subject to risk and may lose value. All product and company names are trademarks ™ or registered ® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.
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