★ Rockstar Review: Acorns App (Spare Change Investing)
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[This week’s review is by Ty of GetRichQuickish.net]
Acorns – The Piggy Bank for Adults
Piggy banks works well with kids because the idea is so simple and easy to understand. You put your spare change into the bank and over time, as you continue feeding the pig, that change adds up to a substantial amount.
Acorns is like a piggy bank for adults. Defined as a ‘micro-investing’ service, Acorns allows you to invest your spare change into a portfolio of index funds. Whenever you make a purchase using your connected bank account, that transaction gets rounded-up to the nearest whole dollar amount and then the ’rounded up’ change is invested for you.
Spend $1.75 and invest $0.25. Simple. Each one of your transactions also becomes a micro-investment and because you’re dealing with spare change, everybody can afford to invest. You are also free to withdraw your money whenever you’d like (though keep in mind you’re buying/selling investments which will need to be reported come tax time).
In addition to round-up investments, you can also make lump sum deposits into your Acorns account, or even set up a recurring investment – like $25 every other Friday.
Signing Up for Acorns
Creating an account took me less than five minutes to complete from my mobile device (the process was just as quick and easy on a PC). While signing up you’ll need to do and provide the following:
- Provide a valid email address, which later serves as your account login ID.
- Create a robust password.
- Agree to Acorns’ terms and conditions.
- Answer several questions about yourself, like what’s your income, net worth and employment status? (Acorns uses this information to recommend an index fund portfolio which your round-up will be invested into.)
- Link your bank accounts to your Acorns account (through the Acorns secure interface, you’ll provide your bank account username and password).
- Lastly, you’ll be asked to provide your personal information like name, phone number, mailing address, and social security number (this information is required by law whenever you open a financial account).
Acorns User Interface
You can access your Acorns account via a web-based app or through a mobile device app on your tablet or smartphone. The mobile app is superior to the web interface in terms of functionality and ease of use, so that’s what I’m going to focus on here.
From this dashboard you’re able to access the following:
- Round-ups is where you’ll be see historical transactions in your account.
- The Invest/Withdraw tab allows you to make lump-sum deposits and set up recurring deposits to your account.
- History tells the story of your Acorns account, including total amount invested and withdrawn, dividends earned, total account gain/loss, found Money, referral bonuses.
- The Performance tab shows you how your portfolio is performing. You can view this in 1 day, 1 month, 6 month, 1 year, or All time historical views.
- Found Money is a new Acorns feature where you can earn money by shopping with Acorns’ partners.
- Grow is the Acorns blog and news portal.
- Invite Friends, Get $5 is the Acorns referral program.
- Settings is where you can manage all aspects of your Acorns account.
Investing Your Spare Change
Money makes its way into your Acorns account in one of three ways:
- Through transaction round-ups
- Through lump-sum deposits
- Through recurring deposits
Round-ups can be done automatically on 100% of your transactions or, if you prefer the manual approach, you can log in to your Acorns account and manually approve specific transactions that you want to round up, and exclude those which you don’t.
That’s too much work for me, so I’ve automated the process and all my transactions get rounded-up automatically. On those occasions when an even dollar amount is spent you can direct Acorns to either ignore it or round it up by a full dollar (I’ve chosen to do a full dollar round-up).
Acorns also offers you the ability to look back at historical transactions from each one of your linked accounts and choose whether or not you’d like to round them up. I happened to create my account mid-month and chose to round-up all of my transactions from the beginning of the month. Doing this allowed me to start with about two weeks of historical transnational worth $24.25 in round-ups. I only looked back about two weeks, but you can go back as far as you’d like to.
To round-up historical transactions, simply click on the “Round-ups” tab from the app menu, scroll through your transactions and touch the transactions you’d like to round-up.
In addition to the transactional Round-ups, Acorns also offers users the ability to do single, lump-sum deposits. These deposits can be done at any time and for any reason. There isn’t a limit on the number of deposits you can make via this method.
Personally, I like to use this feature to lock in any ‘savings’ that I get in my day-to-day life. For example, during the work week I usually eat out for lunch, which costs be about $10 each time. This adds up quickly, so when I bring my lunch from home I like to do a lump-sum deposit to capture that $10.00 that I saved by brown bagging it.
To make lump-sum deposits, simply click on the “Invest/Withdraw” tab from the app menu, type in the lump-sum you’d like to save, and click the ‘invest’ button.
The last way for money to find its way into your Acorns account is through a recurring deposit. This is as straightforward as it sounds. You can schedule a lump-sum amount to be deposited on a regular daily, weekly, or monthly basis.
To schedule a recurring investment, click on ‘Settings’ from the app menu and then select ‘Recurring Investment.’
Once you’ve created your account and chosen how to get the money flowing, all that’s left for you to do is sit back and watch your spare change add up. Due to the “micro-investing” nature of the Acorns program, you’re dealing with small numbers that will build slowly, much like an acorn growing into a mighty oak (yeah, I went there!). This isn’t huge money we talking about here, but that’s exactly why I like Acorns so much.
Because you’re investing spare change, it’s a painless and easy way for you to do *something,* which is great for those of us looking for creative ways to squirrel away cash (yup, totally went there again).
Investment Options & Portfolios
Round-ups are moved into your Acorns account in $5.00 increments. So if the value of your last six round-ups is $4.15, that money will remain in your bank account until you’ve got another $0.85 in round-ups. Once that $5.00 threshold has been met, the money will flow into your Acorns account and get invested in your portfolio.
There are five portfolios available to you which range from Conservative to Aggressive:
- Moderately Conservative
- Moderately Aggressive
When creating your Acorns account, you’ll be asked a series of personal questions. The answers you provide are used to recommend an investment portfolio. Acorns recommended a Moderate Portfolio for me, but my risk tolerate is pretty high so I chose to go with an Aggressive portfolio instead.
To change portfolios, select ‘Settings’ from the app menu, then choose ‘My Acorns Portfolio.’ Swipe left and right to see your options.
Here are the breakdowns of each portfolio:
Conservative Acorns Portfolio
The Acorns Conservative Portfolio “seeks to provide investors with current income and preservation of capital.” The investment breakdown looks like this:
- 40% Government Bonds
- 20% Corporate Bonds
- 15% Large Company Stocks
- 11% Real Estate Stocks
- 9% Small Company Stocks
- 5% Emerging Market Stocks
Moderately Conservative Acorns Portfolio
The Acorns Moderately Conservative Portfolio “seeks to provide investors with current income and capital appreciation.” The investment breakdown looks like this:
- 26% Government Bonds
- 23% Corporate Bonds
- 15% Small Company Stocks
- 14% Large Company Stocks
- 14% Real Estate Stocks
- 8% Emerging Market Stocks
Moderate Acorns Portfolio
The Acorns Moderate Portfolio “seeks to provide investors with capital appreciation and current income.” The investment breakdown looks like this:
- 20% Corporate Bonds
- 19% Government Bonds
- 19% Small Company Stocks
- 16% Large Company Stocks
- 16% Real Estate Stocks
- 10% Emerging Market Stocks
Moderately Aggressive Acorns Portfolio
The Acorns Moderately Aggressive Portfolio “seeks to provide investors with capital appreciation.” The investment breakdown looks like this:
- 25% Small Company Stocks
- 22% Real Estate Stocks
- 14% Emerging Market Stocks
- 13% Government Bonds
- 13% Corporate Bonds
- 13% Large Company Stocks
Aggressive Acorns Portfolio
The Acorns Aggressive Portfolio “seeks to provide investors with capital appreciation.” The investment breakdown looks like this:
- 30% Real Estate Stocks
- 25% Small Company Stocks
- 20% Emerging Market Stocks
- 14% Large Company Stocks
- 6% Corporate Bonds
- 5% Government Bonds
Found Money and Grow are two features I want to point out, and are both relatively new to Acorns.
Found Money is a shopping portal that will add money to your Acorns account when you shop and buy with retailers that Acorns has partnered with. Acorns has several well-known partners, and while I’ve not personally used this service, it does look intriguing. If I ever decide to ‘cut the cord’ on my cable TV then I’m sure I’d sign up for Hulu – why not sign up via Acorns and have 20% of my Hulu bill automatically invested back into Acorns for me?
Grow is Acorns’ blog/magazine and is geared toward new investors. The financial content on the site is well-written and easy to grasp. Recently Acorns integrated the Grow content into the mobile app, which is a nice addition.
How Acorns Makes Their Money (a.k.a. Fees)
Creating an account is free and you pay nothing if you have an account balance of $0, so there is no risk at all in signing up. If your Acorns account has a balance of less than $5,000 the fee is $1.00 per month. If your account has more than $5,000 then the fee is 0.25% per year.
FYI: Students (under the age of 24) can use the service for free if they register using their .edu email address.
$1.00 per month isn’t going to break anybody’s bank, but when you look at those fees as a percentage of your account balance, Acorns can be relatively expensive for some. For example, if you’ve only got $10.00 in your account then that seemingly small $1.00 fee becomes a 10% fee.
The 0.25% fee for account of $5,000 or more isn’t great, but isn’t terrible either. Acorns wasn’t designed to be your main investment vehicle, so as long as you’re using the service as a way to make your own savings more efficient by capturing your spare change, then I’m okay with the fees.
What About Security?
Acorns provides bank-level security on their servers, which are also protected with physical security. The website and app are secured with 256-bit encryption and, in the unlikely event that something does happen, rest easy knowing that your money is SIPC insured for up to $500,000.
For good measure, your account has multi-factor authentication and automatic logouts should you leave your account open for too long without any activity.
I really like Acorns and think that you will too. The micro-investing nature of the service means you’re not going to rapidly accumulate wealth, but it also makes saving painless. The small dollar amounts with no minimum investment required is a great way for beginners to dip their toes into the waters of stock market investing.
Interested in checking Acorns out?
Sign up here.
Author bio: Ty is a married father of four, living on a single income in the Seattle area and trying to Get Rich Quick’ish and retire early after a late start to the financial independence game. You can find him at GetRichQuickish.net.
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