In this Acorns review, we will discuss the ubiquitous investment app that has become a hit with millennials. We will discuss the pros and cons of using the app and if the app lives up to the hype? Learn everything about the Acorns investing app in this Acorns review.
Acorns’ claim to fame is that it lets people invest their spare change automatically by rounding up purchases they make with a linked debit or credit card.
This automatic investing feature has become popular with younger investors who account for most of Acorns’ nearly five million-strong customer base.
But is Acorns all that it’s cooked up to be? We will tell you in this Acorns review.
Acorns Investing: What Is Acorns?
Acorns is a fin-tech (financial technology) firm based in Irvine, California. Founded in 2012, the firm specializes in micro and Robo-investing.
With almost five million customers, over $1.2 billion in assets under management, and multiple celebrity endorsements, the app is gradually becoming a force to reckon with in the micro-investing niche.
Micro-Investing And Robo Investing: What Are They?
Micro-investing is a new investment trend in which, rather than buying an entire share, people are allowed to purchase fractions of it.
For instance, if you want to buy a stock that costs $100, but you have only $20, you can buy a fraction of that share for $20. Paying $20 means you’ll own just one-fifth of that stock.
The purpose of micro-investing is to allow people with limited resources to partake in the stock market.
Robo-investing is the art of using a data-driven, automated investment platform–such as Acorns and others– to invest in the stock market. Robo-investing requires little to no human interaction.
How Does Acorns Work
As mentioned before, Acorns’s distinguishing feature is allowing users of their app to automatically round up their purchases and invest the change in a diversified portfolio of Exchange Traded Funds (ETFs).
Here’s how that works. When you sign up for Acorns, you have the option to link your debit or credit card to your Acorns account.
Whenever you use your linked card to make a purchase–say you purchase something for $4.25–Acorns will round the payment up to $5.00, and save the $0.75 change in your investment account.
You can then use the amount accumulated in this account to make daily, weekly, or monthly investments.
Creating Your Acorns Investment Portfolio
Creating an Acorns portfolio is easy and straightforward. Acorns will ask you a series of questions to determine your investment goals relative to your current financial situation.
Once you answer those questions, Acorns will then recommend a mix of Exchange Traded Funds that will become your portfolio.
According to the Acorns website, all of their portfolios have been structured with Exchange Traded Funds from well-known investment management companies.
Opening An Acorns Investment Account
Opening an account with Acorns begins with providing your e-mail and selecting a password. You will then have to link your debit card to your profile.
After you link your debit card, you will provide some personally-identifying information to confirm who you are.
Once your identity is confirmed, your account gets opened, and you can start investing.
Who Should Use The Acorns Investment App?
The purpose of micro-investing, which is Acorns business model, is to democratize the investment landscape and allow anybody, regardless of their income, to invest in the stock market.
Acorns For People With Little Or No Money
With that said, the Acorns investing app is most suitable for people of limited means who are looking for an affordable way to invest.
Acorns Investment App For Millennials
The app is also suitable for young tech-savvy millennials who want the ease and flexibility of investing on the go.
Acorns Investment App For New Investors
As you may know, the Acorns investment app has a straightforward user interface that allows automatic investing. This feature is suitable for new investors who may find the complex interfaces of Fidelity or E-Trade to be daunting.
How Much Does Acorns Cost
As long as your investment account is less than $1 million, The Acorns app will not charge you a trading fee. However, they do charge a monthly subscription fee for their various tiers of service: Invest, Invest + Later, and Invest + Later + Spend.
Acorns Subscription Fees
Invest – $1 monthly subscription fee – This is the most rudimentary investment account that Acorns offers. With this account, you can only invest.
Invest + Later – $2 monthly subscription fee – This is a mid-tier investment account. With this account, you’ll have access to an investment account and an Individual Retirement Account (IRA).
Invest + Later + Spend – $3 monthly subscription fee – This is Acorns top tier account. In addition to everything that comes with the mid-tier Invest + Later account, you will also get an Acorns checking account, which comes fully equipped with a debit card.
What Is Acorns “Found Money?”
Acorns Found Money is a feature that allows Acorns members to earn cash-back on purchases made at over 350 Acorns retail partners.
These partners include reputable companies like Walmart, Nike, Macy’s, and hundreds more.
To benefit from this feature, you need to use your Acorns-linked debit or credit card to make the purchase. Once you earn a cashback, Acorns will credit your Acorns Invest account within 60 – 120 days.
Pros & Cons Of Using The Acorns Investment App
Depending on your financial situation and your investment goals, there can be some advantages to using the Acorns investment app. Conversely, there are also limitations to using the app, and we will list them in the table below.
Pros Of Using Acorns
- Provides easy entry to stock investing
- Automatic investing
- Spare change investing
- No trading fees
- Informative blog for investors
- Acorns has a checking account.
- No minimum requirements
Cons Of Using Acorns
- As a percentage of your account balance, Acorns can be expensive
- Investing spare change does not produce any significant returns
- Simplistic interface.
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Can You Invest Large Sums Of Money With Acorns?
Acorns is primarily a micro-investing platform which means they are better suited for investing small amounts of money–spare change.
The investment interface is very rudimentary and does not provide the kind of rigorous analysis needed to determine if you should invest in a stock.
Acorns pre-selects all of the stocks in its portfolios from various asset classes that include government bonds, corporate bonds, and real estate.
When you invest, Acorns selects the stocks for your portfolio, giving you limited say in the kinds of stocks in which you are investing.
This kind of arrangement, in which you have no direct control, is not suitable for investing large sums of your money.
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What Are The Risks Of Investing With Acorns
Though Acorns claims that its micro-investing strategy was developed with help from Nobel Laureate, Harry Markowitz, the father of modern portfolio theory, that doesn’t make it impervious to the inherent risks of investing in the stock market.
Regardless of the platform you use, there’s always a risk that you may lose money on the stock market. Investing with the Acorns app does not remediate that risk.
Is Investing With Acorns Worth It?
Investing with Acorns is worth it if you’re not using them as your primary mode of investing in the stock market.
It makes more sense to use the platform only as a secondary investment platform, solely to invest your spare change and get cashback on your purchases.
There are multiple online investment apps out there that offer far more than Acorns. Acorns is hardly the investment platform for a serious investor.
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Acorns App Review Summary
The Acorns app is a micro-investing app that’s famous for investing your spare change.
Though the app is popular with young people, most critics believe it is not suitable for serious investors.
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