One of the biggest money myths is the idea that you need a lot of money to invest.
But thanks to many new and innovative companies, investing is easier than ever. No matter how much (or little) you have, you can start investing now with the right tools.
One of the most interesting financial tools introduced in recent years is Acorns. This app allows you to automatically invest your pocket change, making it perfect for newbie investors. No matter your situation, there’s a good chance you can afford to invest if you use Acorns.
Acorns offers you the chance to set up an investment account with what amounts to pocket change. The app connects to your other financial accounts and tracks your spending. Every time you make a purchase, Acorns will automatically round the amount up to the nearest dollar and invest the difference.
There is no minimum required to open an account and you can start investing with as little as $5.
Pros of the Acorns investing app
The main advantage of the Acorns app is the fact that you can get started with a small amount of money.
Acorns makes it easy to invest without thinking about it. Open an account with $0 and set the account to automatically invest your pocket change from rounded-up purchases. Once your account reaches $5, you can start investing it.
Another upside to using Acorns is the Found Money program. Acorns partners with companies such as Hulu, Blue Apron, and Airbnb to give you cash back on purchases. When you make purchases with these companies, they’ll invest up to 10 percent of your purchase price in your Acorns account.
Acorns’ automated approach lets you invest and start growing your wealth without the need to think about it. Set up your account, link your checking account and credit cards, and Acorns does the rest with pre-made portfolios.
Cons of the Acorns investing app
Acorns is limited when it comes to account offerings. Your only choice is an individual taxable account; if you were hoping to open a tax-advantaged retirement account with Acorns, you’re out of luck.
It’s also important to note that Acorns charges a somewhat hefty fee. For account balances under $5,000, Acorns charges $1 a month. That may not sound like much, but you could likely find smaller fees with other robo-advisors.
For example, say you have $800 in your Acorns account. If you pay $12 in management fees each year, that translates to an annual fee of 1.5 percent — a fairly steep charge. However, the fee drops to 0.25 percent when your account balance reaches $5,000. This is more in line with other robo-advisors.
How Acorns works
Acorns simplifies and automates the investing process. When you sign up, you choose which portfolio you want to invest in.
The service builds portfolios out of ETFs representing six asset classes. ETFs, or exchange-traded funds, represent collections of assets that share certain characteristics. ETFs trade on stock exchanges, just like stocks.
Unlike buying individual stocks, however, ETFs provide diversity to your portfolio. These asset collections consist of real estate, large companies, small companies, government bonds, corporate bonds, and emerging markets.
Using these asset classes, the experts at Acorns construct five different portfolios, each based on a different risk tolerance. Portfolios that are more conservative feature higher concentrations of government bonds. More aggressive portfolios have a higher percentage of stocks and emerging assets.
Acorns builds its portfolios using ETFs from well-known companies including Vanguard, PIMCO, and BlackRock.
The portfolios are assembled by a team of experts advised by Dr. Harry Markowitz, the Nobel-winning father of Modern Portfolio Theory — the asset allocation model most used by investing professionals today.
How to use Acorns
The Acorns investing app is straightforward and easy to use. It only takes a few minutes to set up your account.
Start by entering basic information, then connect your bank accounts so the app can track your purchases. Using your regular credentials to get into your bank account, Acorns will check your transactions periodically.
After you are connected, you will provide information that all financial service providers are required by law to collect from you, including your name, birthdate, address, Social Security number, phone number, etc.
Next, you’ll provide information about your investing time frame, income, employment, and other items. This helps Acorns figure out which portfolio would be best for you.
Based on your answers, Acorns can decide which of its portfolio types is most likely to fit your risk profile.
You also have the chance to set up recurring monthly contributions, starting as low as $5 per month. Setting up monthly contributions on top of your purchase roundups can help your investment grow more quickly.
Finally, you’ll add your bank’s routing number and your account number. This allows Acorns to make transfers.
You can make adjustments as needed by logging in and using the intuitive dashboard. A dropdown on the left side makes it easy to navigate and update your preferences. No matter what information you are looking for about your Acorns account, the online platform makes it easy to find.
You can also download the Acorns app for Apple and Android mobile devices. This makes it easy to manage your account no matter where you go. The mobile app is just as intuitive and easy to use as the web app.
Acorns fees and eligibility
You must be a U.S. resident and at least 18 years old to sign up for Acorns, and you’ll need to provide identifying information. Because Acorns only offers individual taxable accounts, you don’t have to meet requirements for tax-advantaged accounts or worry about joint or custodial accounts.
The fees for Acorns are straightforward. You pay $1 a month when you have a balance of less than $5,000. Once your balance reaches $5,000, you switch to an annual fee of 0.25 percent. This annual management fee is in line with other robo-advisors.
As mentioned above, $1 per month is somewhat steep, especially if you have a low balance. If you are only investing pocket change, that $1 can take a pretty hefty chunk of that from your account.
Acorns has a special promotion for students, however. If you sign up with a valid .edu email address, you can use Acorns fee-free for up to four years from the date of registration.
Who is Acorns best for?
Acorns is best for new, hands-off investors without a lot of money to commit each month. If you can’t meet the minimum investment requirements for other robo-advisors, it might be worth paying the $1 per month fee just to get started.
However, if you work for a company that offers a 401(k) option — especially one with a matching contribution — you might be better off with that instead.
Acorns can work well for those who want to start investing automatically but don’t have a lot of money. It can also work well for those who don’t want to spend a lot of time on investment management.
Acorns customer service
Have some questions that weren’t answered in this Acorns review? The app’s customer service team offers a contact form that allows you to send in any questions you might have. You can visit the support page for answers to common questions as well. Acorns also has a separate Twitter account designed for support-related questions.
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