A simple guide to start investing with Acorns

A simple guide to start investing with Acorns

Acorns is a California-based fintech and financial services company providing micro-investing and Robo-investing services for millennials. The company reported serving over 8.2 million customers and handling more than $3 billion in assets under management as of FY 2020.

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Unlike other Robo-investors, Acorns targets micro-investors with limited capital, such as millennials, by automatically investing your spare change once you opt into the program.

When you shop, the Acorns investing app rounds up prices for every purchase to the nearest dollar. The total bill is, therefore, higher with the extra amount paid via the app. However, the retailer receives the correct price amounts with the app investing the difference for its registered members.

To make this possible, Acorns has made it possible for members to invest very modest amounts of money, starting at $5. These amounts can be invested at any time or repeatedly into a portfolio of ETFs chosen for you by the company’s algorithmic technology.

Thanks to Acorns, persons with little capital to spare can now invest. The platform has made saving and investing small amounts of money easy and seamless for anyone who joins.

This article discusses why you should join Arcons. And why now is the perfect time for you to get started.

How Acorns works

Registered Acorns members have two subscription tiers to choose from based on one’s financial investment needs.

The first, Acorns Personal, costs per month to handle your financial wellness through a system-based all-in-one investment solution. These solutions include saving, retirement, checking account, debit card, and tailored money advice.

The other tier, Acorns Family, costs per month in exchange for investment accounts for all the kids in the family. This plan also includes solutions for personal investment, retirement, and checking accounts, among others.

Based on one’s tier, Arcons members receive different account services. While these services are mostly available in both membership plans, members in the Arcons Family tier receive more robust offerings than those in the Acorns Personal plan.

Both Acorns subscription plans require users to link a debit or credit card. This card is used to make automatic micro-investments into your portfolio through price roundups. Acorns automatically invest the difference between your actual bill and the new rounded-up total into your ETF portfolio.

How Acorns manages your money

Besides the micro-investments through roundups, members can also invest small amounts into their Arcons accounts. The minimum amount for such investment is $5.

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Acorns members don’t have to manage their portfolios at all. Instead, the Acorns algorithms compute the best portfolio recommendations to ensure maximum potential returns for each member account based on your risk level.

So, where does Acorns invest your money? The money deposited into your Acorns account is invested automatically into twelve different exchange-traded funds (ETFs). The ETFs deal in select stocks, bonds, and other financial securities.

The company uses five specialty investment products to maximize potential returns on your investment.

Acorns investment products

These specialty investment products include;

  1. Acorns Invest account

The Acorns Invest account puts members’ money into their exchange-traded funds (ETFs) according to individual risk tolerance levels and financial goals. Members fund their Acorns invest accounts through purchase roundups or one-off on-demand and recurring deposits.

The automated roundup deposits only use your spare change during shopping using a linked card, while the deposits start at just $5. The ensuing deposit is invested into 12 ETFs diversified into over 7,000 financial securities. Acorns will automatically rebalance your portfolio to stay within its target allocation.

  1. Acorns Later

Acorns Later is a tax-advantaged individual retirement account that commits your investible balance to a portfolio composed of diversified ETFs. The Acorns Later account invests for your retirement and requires members to enable automatic recurring contributions.

  1. Acorns Spend

Also called Acorns Checking, this account comes with a debit card exempt from several fees, including overdraft and minimum account balance fees. The account even reimburses members for some ATM fees. Its Smart Deposit feature lets users automatically siphon any direct deposit money from their Acorns Spend account into other accounts, like Invest.

  1. Acorns Found Money

This online marketplace offers members a cashback percentage on purchases made at leading retailers such as Walmart. This cashback is irredeemable, however, with the amount passed directly into your Acorns Invest account.

  1. Acorns Early

This UTMA/UGMA account is only available to subscribers of the most expensive Acorns tier. This account allows parents to set up Acorns accounts for each of their children without dealing with the red tape inherent in similar products.

Acorns fees and costs

Even though Acorns Spend is exempt from most fees and costs, other Acorns accounts incur fees and costs.

Despite billing itself as a low-fee investment advisor, Acorns is not the cheapest amongst firms offering similar products. The two membership tiers both charge a flat monthly fee, which has proven to be more expensive than percentage-based fees.

Acorns also uses the iShares ESG Aware MSCI USA from BlackRock. iShares has a set 0.15% expense ratio, five times more expensive than the Vanguard S&P 500 ETF (VOO) used in Acorns’ non-SRI fund. Thus, members are being charged higher costs than they should because of the company’s choice of software.

The most substantial fees and costs on Acorns include its membership fees, overdraft, and minimum account balance fees. However, the built-in fees are even more taxing and drain your account balance the most.

Is investing via Acorns worth it?

Acorns is a reputable and secure investment vehicle for individuals with small investable balances. Thanks to its roundup deposits, it is also tailored to ease the burden of saving money for investment if you’re a low-income earner.

As a member, you also benefit from spreading your risks across multiple diversified funds and ETFs.

The biggest reason to invest with Acorns is that it eliminates procrastination. Even without making an initial deposit, members can sign up and enable the roundup deposits, which slowly fund your Acorns Invest account. Low-income households no longer have to wait for a huge sum of money to invest or save for retirement.

However, Acorns also has some significant downsides. For instance, the Acorns Personal account is not suitable for long-term investing. Most Acorns accounts are taxable brokerage accounts that attract huge taxes alongside fees, making them less appealing for long-term holdings.

Conclusion

Acorns is an excellent option for people looking to maximize their spare change and receive the occasional retailer kickback. The automatic roundup deposits are pivotal in pushing reluctant wanna-be investors to get started, with a real opportunity for your spare change to add up. However, starting with small balances exposes members to high Acorns fees that cut into their investment returns.

author avatar
Michael Solomich

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