June 11, 2018

OpenInvest Review: Is App Safe?

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Do you have ethical concerns that keep you from investing? Rather than making the measly interest that savings accounts offer, you can participate in socially responsible investing with OpenInvest.

OpenInvest is another robo-advisor vying for your investment dollars. They try to lure investors in with their all-inclusive fees and customizable portfolios. It's not the lowest cost investment platform out there, but it is one of the few platforms offering socially responsible investing.

What makes OpenInvest stand out (aside from its ethical portfolios) is the fact that they invest in stocks and bonds rather than ETFs. You get to pick and choose the investments that suit your needs and your passions. This allows you to keep your money invested in only those companies that you feel align with your beliefs.

Just like many other robo-advisors, OpenInvest offers management of your investments by their software program. Everything is automated once you set up your portfolios. This gives you a hands-off approach to investing.

How Does OpenInvest Work?

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OpenInvest builds you a portfolio that includes at least 60 stocks and a handful of bonds. By default, your money intended for bonds is invested in the Vanguard Total Bond Market ETF. As an ethical investment company, though, OpenInvest also offers the option to invest in a "green" bond fund.

What is a green bond? A green bond helps fund the development of brownfield sites. These are underdeveloped or abandoned areas. The tax-exempt funds help to build green or sustainable buildings.

You create your own portfolio by selecting the things that mean the most to you. OpenInvest will create a portfolio for you, but if you don't agree with a specific company's beliefs, you can omit them from your portfolio and add another. Right now, OpenInvest has approximately 12 causes to choose from, but they continually add more.

Who Is OpenInvest Best For?

OpenInvest is best for the socially responsible investor. In other words, the investor who truly cares about the companies they invest in and the causes they support. OpenInvest offers a variety of accounts, including:

  • Taxable
  • IRA
  • Rollover IRA
  • Custodial accounts

What Are the Fees?

OpenInvest seems more expensive than many other robo-advisors because they charge 0.5% per year of your assets under management. They also charge an additional 0.22% if you invest in a green bond fund.

But, there's a catch—and it's a good one. OpenInvest covers all expense ratios and transaction fees. All additional fees are covered under the 0.5% annual fee. If your existing broker charges a fee to transfer your assets, OpenInvest will even reimburse you.

The Platform and App

OpenInvest offers both an online platform and a mobile app. The app mimics the platform exactly, giving you the ability to invest or check your portfolio on the go. Something OpenInvest likes to boast about is the fact that you can see how your investments directly impact the causes you invest in right on their dashboard.

Reasons We Like OpenInvest

  • You can invest in causes that mean something to you. The ability to focus your investments on causes that you have a passion about is a unique feature that OpenInvest offers. It may open the option of investing to more people who otherwise withhold their funds from investing in companies whose beliefs don't align with their own.

  • You can customize your own portfolio rather than being restricted to preset portfolios. The ability to pick and choose your own stocks rather than being stuck with preset portfolios offers the flexibility many investors desire.

  • You won't pay any extra fees. It is easy to get caught up in the "low advertised annual fee," only to be duped by extra fees, but OpenInvest promises to cover all fees within the one annual fee.

  • You get voting rights just like a stockholder. You are able to vote your shares at the annual meetings, helping to choose board members and/or vote on major policies. This is usually not a feature offered by robo-advisors.

  • OpenInvest offers tax loss harvesting. Reducing your tax liability by selling losing stocks to offset the capital gains is an included service with OpenInvest. Not all robo-advisors offer this service to every investor.

  • OpenInvest automatically rebalances your portfolio. If things start to get off track, the software program will rebalance your allocation to get your portfolio back where you intended it.

  • You can mix and match your various values, and OpenInvest will create a portfolio accordingly. If you have several causes you are passionate about, you can pick and choose investments from each category to create a customized portfolio.

  • You have as many as twelve themes to invest in. OpenInvest continually adds themes and updates their offerings, but some of the most popular themes right now include Reduce Carbon Emissions, Reduce Fossil Fuel Producers, and Battle Deforestation.

  • You can view the impact of your investments on a social and environmental level. In addition to the financial performance, you can monitor your real-time social and environmental performance right on your dashboard.

  • You get a hands-off investment approach. You can invest in things you believe in without having to manage the investments yourself. The automated system keeps track of your investments, adjusts them accordingly, and even responds to your changing needs.

Reasons You May Want to Look Elsewhere

  • They don't manage 401(k) accounts, just IRAs. If you are looking for help with your 401(k) account, you'll have to try a different robo-advisor. The only retirement accounts OpenInvest offers are IRAs.

  • You don't get a lot of diversification. A majority of the investment will be in large cap stocks. You do have the option to invest in bonds, but if you want any type of growth, you'll likely focus on the stocks, which don't allow too much diversification.

How It Compares

OpenInvest vs WealthSimple
WealthSimple isn't strictly a socially responsible investment company like OpenInvest, but they do offer a socially responsible portfolio. They offer four portfolios to choose from, of which one is socially responsible. They don't have a minimum required deposit and charge 0.5% of assets under management (up to the first $100,000 invested).

OpenInvest vs Swell
Investors can buy socially responsible stocks with Swell, just like with OpenInvest. Swell does charge a higher annual fee of 0.75%, but they only require a minimum $50 deposit to get started.

OpenInvest vs Robinhood
Beginning investors can enjoy the benefits of Robinhood as they don't require a minimum investment and they don't charge any fees. You won't find a portfolio of socially responsible portfolios to choose from, but if you have little money to invest, it can be a good place to start.

Bottom Line

OpenInvest is a refreshing type of investment for the impact investor. If you want to invest in socially responsible investments but want the hands-off approach of a robo-advisor, it could be a good choice for you. As always, weigh the options for several robo-advisors to make sure you are maximizing your investment dollars and minimizing the fees you pay.

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