Acorns Review: Can You Invest a Little?
One of the cornerstones of a happy life is having backups. A rainy day fund. What-If cash. Granted, before starting to save your nest egg, I recommend eliminating high interest debt, but that will be a story for another day. I'm sure you've seen several ads claiming you can "Invest pennies and save!" or similar headlines. They are more common now than they were when I signed up for Acorns in 2014.
The concept is simple: Acorns will round up all purchases made with registered credit/debit cards, and withdraw that amount from a linked checking account into your Acorns account every time it adds up to $5. You will select one of five ETF portfolio options, ranging from Conservative to Aggressive, i.e. low risk/low reward and high risk/high reward. I personally went with level 2 out of 5, Moderately Conservative. The choice is up to you when you sign up, and you can change it at any time.
Acorns was my first foray into this type of investing, not including the 401K I had at some point. I know it can be scary, potentially seeing thousands of dollars slowly or quickly evaporate. Acorns is a good gateway into this I believe.
DISCLAIMER: All investments carry risk. I do not guarantee any gain or loss with this program. The more aggressive portfolio you select, the higher the risk. Seek the guidance of a certified financial planner if you are concerned about any potential investment.
Simple enough right? This is an easy way to put some money away, without it being that big of an impact on your budget. You can also set up automatic daily, weekly or monthly deductions from your checking account to your Acorns account in multiples of $5. Of course, if you are completely strapped for cash, I would not recommend any such program, as you should work on your budget first. Otherwise, the deductions that Acorns makes from your account can be so small and infrequent, that it would be hard to notice. To quote the famous infomercial phrase: "Set it and forget it!" This is a good option, and I got lured in with the pitch almost three years ago.
I started my account with $20, and a total of four linked cards. I just set it, and I checked every couple of months. There were some good months, there were some bad ones. Just the way investments work. I went in with the idea that I would not take out the money due to market losses, as I also wanted to gauge my own tolerance in investing. It's a lot easier to start here, then to buy thousands of dollars in a stock of a hot company or IPO, and see it fluctuate hundreds of dollars per day, not knowing when to drop it.
This is after two and half years, with the last four months of that time investing an extra $5 a week. It is a great tool, but nothing is free. Acorns charges $1 per month to "Manage" your account. If you go over $5,000 invested, they will charge 0.25% per year. These types of fees are normal in mutual funds and such. So is Acorns worth it? Yes and no. Consider the following:
-It is recommended you start with at least $20, then deposit the round-ups into your account. If you do this, unless you make a ton of transactions, I can't see you depositing more than an additional $20 or so a month.
-A $1 monthly fee would equate to 1% a month on $100, or 12% per year. Remember that regardless of your investment growing or shrinking, the fee stays.
-How much is the automation worth to you? When I started, I saw a huge value in it, as I was struggling to put any money away. I honestly started it back then because I figured I would save/earn enough money to buy whatever the next Playstation or Xbox was when that time came. I didn't fully think it through. Technically though, it would have worked.
So the important question: did I make any money from my investments? In a literal sense, deducting fees and portfolio gains/loses, no, I about broke even with everything I put in. However, would I have this money set aside somewhere if I hadn't started this? Probably not. In that regard, Acorns is a huge success for me. Plus, this is one of the cheapest way you can get a view at how portfolios work. There is a wealth of content on Acorns site that will make this a worthwhile experience if you don't know much about these terms.
If you want something with absolutely no risk, check with your bank. There are some, like Bank of America, that offer something exactly like this, but the money goes into a savings account. It would only check accounts with that bank though, whereas Acorns can link with any credit/debit card.
Overall I think that Acorns is a great way to make some extra beer money, and learn a lot about stocks, bonds and other asset classes. If you do pull the trigger, I recommend starting with at least $50 initially invested, that way the initial few months won't include a fee that are such a high percentage of your overall investment. Also, try not to look at it. I'm sure it's hard, but I think one of the best qualities of a system like this is semi stealth wealth building. Check it every few months, and be pleasantly surprised, and just let the money grow. Or take it out in case of an emergency, or amazing reward for yourself.
