In this Acorns review, we’ll check out the investing app features, pros, and cons, so you can start investing with as little as $5 today.
What is Acorns Investing App?
Acorns is a micro-investment app that aims to inculcate the habit of savings in the younger generation, and maybe even those of the not-so-young demographic, by allowing you to round up your debit or credit card spends. Combining the benefits of an automated investment advisor and savings platform, Acorns helps those new to the fold of investing to become regular investors and at the same time build a sizable corpus for use in those rainy days.
Acorns was launched on 26th August 2014 by Walter and Jeff Cruttenden with a mission to make investment accessible to everyone. Although there are many investment apps currently available, Acorns stands out from them in more ways than one. Apart from the fact that the entire investment process is entirely automated, the timeframe for your investment is also flexible. Further there is a customer support team to help you in case you run against any hurdles.
Acorns is fundamentally the digital equivalent of a piggybank where most people store their spare change; gradually after some time, these accumulate to give a considerable sum of money. Acorns takes the concept up one notch by allowing you not only to save your spare change, but to grow it by investing in financial instruments that are suitable to you. The app targets new investors by simplifying and automating the investment process for them and hence encouraging more people to build a habit of investment.
So, is Acorns right for you? Let’s delve deeper.
How to Start Investing with Acorns?
Starting to use Acorns is simply as easy as downloading the app. Once you have the Acorns app installed, you will need to provide the app some information regarding your investment preferences. Based on your input, the app will suggest an investment portfolio that would be best suited for your financial situation. Acorns currently allows investments in the following types of portfolios:
- Conservative Portfolio
- Moderately Conservative Portfolio
- Moderate Portfolio
- Moderately Aggressive Portfolio
- Aggressive Portfolio.
After choosing the portfolio that you find most suitable to you, you’ll need to link you debit and credit cards with the Acorns platform. This will enable Acorns to round up your spending to the nearest dollar and accumulate the difference in your Acorns account. Once the total reaches at least $5, your savings will be invested into your portfolio. Acorns also works by rebalancing your portfolio based on the market conditions and your investment status.
Acorns Investing Features
Acorns is a quality rich platform that gives its users access to a large number of features. Let’s take a look at each.
Acorns Core
This is the investment feature that allows you save your spare change and invest it in a portfolio of your own choice. Acorns core is the fundamental investment model that the service builds up on.
Acorns Later
This is the second investment mode that you can opt for. Acorns Later is designed for helping investors make savings for their retirement. For this you need to get a recommendation for an IRA with Acorns. The signing up process is simple and allows you to choose an IRA and portfolio that best matches your requirements. As the prime objective of Acorns Later is to build up a nest egg for your retirement, the investment calculation naturally changes dynamically with your current age by factoring in the time till retirement. You also have the option of changing your IRA should you choose to do so. Investment amounts start at $5, which makes it affordable for a wide circle of the population.
Acorns Spend
Acorns Spend is a checking account facility that provides you with a secure debit card for integrating your spends and your savings. Apart from immediate roundup deduction, the feature has several other benefits such as zero minimum balance requirement and overdraft fees, unlimited number of ATM reimbursements, and also the advantage of Found Money. You are also provided with the benefits of direct online deposits and transfers.
Found Money
Found Money is a feature that allows you to garner cashbacks into your Acorns Core account whenever you shop with a Found Money partner store. This extra money is then used to add to your investment corpus. Acorns has referral relationships with a large number of leading brands and stores to allow you to reap the benefits of this feature.
Round-up Multipliers
This feature allows you to multiply your rounded-up amount by two, three or even ten times. This feature allows you to increase your investment amount automatically with respect to the amount of money that you spend, thus leading to greater savings and returns.
Acorns Gift Cards
This is a novel way to get your friends and family started on Acorns. The system works simply: you give someone an Acorns gift card worth $25 or greater which enables them to get started on the service. This is a great way to get youngsters started on the habit of investing.
Acorns Grow
This is a section of the Acorns service that focuses on educating the users on financial services and instruments. Containing articles and videos on multiple financial topics that are categorized as Saving, Investing, Earning, Spending and Borrowing, Acorns Grow is a useful resource to get started on financial education.
Acorns Pricing and Fees Model
Acorns has a three-tiered pricing model that is differentiated on the basis of the features that you pay to access. The plans can be explained as below:
$1/Month- This gives you access to Acorns Core, which is the fundamental micro-investing feature of Acorns. With Core, you get the benefits of Automated Investing and Smart Portfolios, along with Found Money and a host of associated features and support.
$2/Month- This plan combines the benefits of Acorns Core and Acorns Later. With the $2 per month plan, you get all the benefits of a Core account, together with the Later features like IRA inclusion, Recurring Contributions and Assisted Rollovers.
$3/Month- The $3 per month plan clubs the benefits of the above plans together with the Acorns Spend feature. With this, you get access to all the Spend features such as encrypted digital transactions, ATM facilities, custom Spend Strategies and more.
Be advised that the above plans are only for investments lower than $1 million. In case you wish to invest $1 million or more, you need to talk to an Acorns representative directly for further guidance.
Also, for college students who have a valid (.edu) college email id, Acorns does not charge anything for a Core account up to the first four years. To get this benefit, students must set their employment status to student and register with their .edu email id.
Acorns does not charge any form of transaction fee or trading fees.
Is Acorns Right for You?
Although anyone can use Acorns to start investing, the service is mainly targeted towards college students and newcomers to the investment ecosystem. The app makes the investment process seamless for those who have little to no experience of the investment market and yet want to build up a portfolio to meet their financial goals. As most aspects of the service are automated, this makes it easy for people who do not have much time to study the markets and take decisions.
Also, Acorns is suitable for those who want to start saving early on in their career. Further, if you are looking to invest some amount each time you spend, this app can make the process easier for you.
What Are the Pros and Cons of Acorns Investing?
As with most automated investment apps there are multiple factors to consider for Acorns. The following is a list of some pros and cons which you should keep in mind.
Pros
Zero Minimum Balance – Acorns does not require a minimum balance for you to open your account. This can be great for investors who do not have much money to spare. Keep in mind that you would need to accumulate at least $5 or more to start investing though.
Customized Portfolio – The app takes your financial details and preferences into account and automatically suggests a suitable portfolio for you.
Reduces Complexity – Acorns takes the hassle of understanding the market off your shoulders by automating the entire process. This lets you invest your money with the least possible effort.
Fee Waiver for College Students – Acorns does not charge any fees up to four years for college students; this makes it attractive for students who can build up a habit of saving and investing with their spare change.
Easy to Set Up IRAs – Acorns simplifies the process of setting up an IRA with just your spare money. This can be helpful for individuals who do not have the means to make minimum IRA deposits.
Burden-Free Investing – Acorns allows its users to invest without feeling the pinch in their pockets. Since you would only be investing the rounded up spare change from your spending, you are less likely to feel the burden of investing a lump-sum amount.
Cashbacks – The Found Money feature allows you to get cashbacks each time you spend with a partner. This ultimately translates to more money that is invested in your favor.
Cons
High Fees – The Acorns fees structure is actually pretty steep for small investors. If you are investing very small amounts, $1, $2 or $3 per month could translate to a pretty large percentage of your investment over the year.
Restrictive Portfolio – Even though Acorns suggests a portfolio based on your recommendations, more seasoned investors may consider the choices too restrictive.
Low Returns – The returns that you can acquire through Acorns may not be large enough to further your future goals.
Common Acorns Investing Questions
Here’s a few of the most popular investing questions for Acorns investing apps and accounts.
Where Does Acorns Invest My Money?
All Investment Portfolios offered by Acorns are composed of six Exchange Traded Funds or ETFs. ETFs are composed of stocks and bonds. This is where your money is invested across a range of industries, from corporations to real estate.
Is Acorns Going To Help Me Retire Comfortably?
Most likely, No. The Acorns investment model is actually best suited as a tool to save and invest your loose change. You cannot expect this to return sizable gains that would allow you to comfortably retire. It’s best to view Acorns as a way to take the first steps in the investment world, or as a side-income source.
I Don’t Have A Smartphone? How Can I Start With Acorns?
You can start with Acorns by creating an account on their website, acorns.com from your PC. All the data is stored in the cloud and you can access it from any device of your choice.
How Safe Is Acorns?
Acorns uses security and encryption measures that are comparable to those used by banks. Further, your investments are SIPC protected. They also use multi-factor authentication to protect your transactional and personal information.
Final Thoughts
Overall, it can be said that Acorns is a good option for college students to instill a habit of investing early on in their life. The spare changes can quickly accumulate over time. But remember that Acorns is primarily an investment platform, and for small amounts the charges can eat into your savings. So, make sure the returns are worth your while when you choose to use this service.