Acorns is a low-cost, low-complexity passive investment platform that appeals to a wide range of investors. However, while the app’s user interface and educational content are geared for newer investors, the flat-fee structure makes it more expensive for those just getting started (competitor Ellevest has a similar problem). As a result, we advise potential clients to evaluate their enthusiasm for Acorn’s passive savings technique against the possibility of increasing charges. It’s probably better for people that need a little push to save a little more.
You might assume you need a huge wad of cash to start investing, but fintech (financial technology) companies have changed the investing landscape for the better. Now, you can invest a little at a time, putting your spare change into stocks, bonds, and other securities. With diversified portfolios, you can watch your money grow, whether you have $5 a month to put aside or $500.
Enter Acorns, an online investment platform that takes the guess-work out of investing. It’s just one of the fintech companies making a big splash by helping users more easily get into investing money through fractional shares (small portions of shares in a company). It’s a compelling way to save for the future, but it’s not for everyone.
Who Should pick acorns?
The robot-advisor capabilities of Acorns make the most sense for someone attracted to the platform’s “round-up” savings claim to fame: Purchases in connected accounts are rounded up to the nearest dollar, and the remaining balance is kept in an investment account. So, for example, if you paid $4.50 for a cappuccino with a connected credit card, $.50 would be set aside for investing. You could be tempted to save for retirement with Acorns if you’ve had success with this pro-savings gimmick.
Other Robo-advisors, on the other hand, offer more comprehensive services at a lesser cost. Therefore, only those who believe Acorns will entice them to save more should apply.
The process of Acorns.
- Invest: This’s a taxable investment account in which you can invest in exchange-traded funds (ETFs) based on your risk tolerance and financial objectives. Round-ups and dollar-cost averaging are two techniques to keep the account funded indefinitely. (Of course, you can always add money later if necessary.) You may set up recurring contributions to your account for as little as $5 with the latter. As previously stated, the former invests “spare change” from a linked account.
- Later: Retirement is referred to as “later” by Acorns. (We found this vocabulary a little perplexing: your “Invest” money aren’t intended for day-trading or immediate use.) You’re supposed to invest for the long term, and selling your investments too frequently might be costly. Perhaps Acorns should assume that its consumer base understands what “retirement” entails.) In any event, “Later” is simply a mechanism to deposit funds into an IRA required for any robot service.
- Spend: Here checking account that includes a debit card and waives several fees, including one for maintaining minimum balances. Some ATM fees are also reimbursed. Smart Deposit is another tool that allows you to automatically drain money from a direct deposit in your Spend account into other accounts, such as Invest. (Though it isn’t quite “smart” because you’re deciding how much goes where).
- Found Money: It is an online marketplace that gives you a modest percentage back on your purchases at hundreds of big shops, including Walmart. The money you save when you shop on Found Money goes into your Invest account.
- Early: Acorns’ most expensive tier includes access to a UTMA/UGMA account, allowing parents to open up accounts for their children externally dealing with complex paperwork.
Advantages of Acorns.
- The best approach to invest is to get started right away — Acorns attempts to make this as simple as possible. With no account minimum, you can begin to make periodic contributions right away. You can also round up your purchases on connected accounts to invest even if you don’t consider yourself an investor.
- Setting up your savings is simple, thanks to an intuitive interface, and you won’t be swamped with a confusing selection of ETFs. In addition, you’ll spend relatively little in fees if you stick to a core account without ESG funds. If you require a slight push to get begun, Acorns’ automated service makes much sense.
Disadvantages of Acorns.
- Acorns have a few significant flaws. The first is the tiered charge structure, which is prohibitively pricey for folks who are just getting started with low balances. It’s a lousy deal to pay $36 a year to access an IRA when you only have a few hundred dollars invested. While many Robo-advisors have a $500 or $1,000 account minimum, Betterment offers a no-minimum, lower-fee option.
- It’s a hard pill to take that you have to pay $3 to obtain access to your checking account, and there’s no way to talk to a real-life financial advisor.
- Meanwhile, while some parents may prefer having a UTMA/UGMA account, anyone saving for college may wish that 529 reports were available. Furthermore, there are no tax-loss harvesting capabilities, which will be helpful once you have more money in your account and balance the tax consequences of selling winners.
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