Acorns Review: Effortless Investing Beginners

Acorns is more than just a nifty financial app; it’s a savvy companion for budding investors. With a low minimum investment of just $5 and no initial account minimum, Acorns is both accessible and user-friendly. Its groundbreaking spare change round-up feature transforms your everyday spending into an effortless investment strategy. Believe it or not, those spare cents add up quickly, just like your savings. But what’s truly exciting is how Acorns consistently enhances its services and mobile experience, constantly introducing new features to its top-notch app, making money while you sleep a reality. Acorns’ mission is clear: simplify investing for millennials and young adults alike.

This investment app achieves its mission in two ways: enabling small investments and doing the heavy lifting, allowing you to be hands-off without requiring you to become a financial expert to open an investment account.

For seasoned investors, Acorns may seem a bit too straightforward, although it can still be enjoyable. However, for beginners, it provides precisely what’s needed to commence your journey as an investor.

Let’s dive deeper into how Acorns works and address some essential questions.

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How Does Acorns Work?

Minimum Deposit: $0 ($5 to initiate investments)
Fee: $3 – $5 per month
Apps: Available on iOS and Android
Best For: Novice Investors

In a nutshell, Acorns operates as follows:

• Acorns Collects Your Spare Change: When you open an Acorns account, you link your everyday credit or debit card. Each time you make a purchase with this card, Acorns automatically rounds up the transaction to the nearest dollar. For instance, if you spend $3.75 on a coffee, you’ll be charged $4, with the extra 25 cents saved for future investments.
• Acorns Invests Your Savings: Initially, Acorns accumulates your change, but once your investment account reaches $5, your money can start working for you. The app employs a computer algorithm to invest your funds in Exchange-Traded Funds (ETFs) according to the principles of Modern Portfolio Theory. It may sound complex, but it’s straightforward. You have the flexibility to choose your investment approach from five different tiers of strategies, including options for retirement savings or a taxable account.
• Withdraw Funds: Once your invested change has grown, and you wish to use some of the money, you can transfer funds from Acorns to your bank account. This transfer typically takes three to six business days. Alternatively, if you prefer instant access to your money, you can opt for an Acorns Checking account, part of the Acorns Personal package, costing $3 per month. Acorns Checking includes a robust metal debit card that automatically rounds up transactions in real-time, allowing for quicker investments.

Acorns Investment Tiers

Acorns allocates your spare change and other deposits across five different asset classes: real estate, government bonds, corporate bonds, large-company stocks, and stocks in small companies. You can customize the distribution of your funds across these asset classes by selecting one of the following five tiers:

• Conservative: Emphasizes government and corporate bonds, offering stability and minimal risk.
• Moderately Conservative: Balances bonds with large company stock-fueled ETFs for stability.
• Moderate: Combines bonds and large company stocks with a mix of new company stocks, real estate stocks, small company stocks, and international stocks.
• Moderately Aggressive: Assigns a smaller portion of your portfolio to bonds, favoring large and small company stocks, real estate, and emerging market stocks.
• Aggressive: Invests none of your funds in bonds, allocating approximately 10% to emerging market stocks, 20% to international stocks, and the remainder to established stocks and real estate.

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Rebalancing Your Portfolio Acorns regularly rebalances your portfolio to maintain your preferred asset allocation. Over time, individual components of your investment portfolio may outperform others, leading to an imbalanced portfolio. For instance, a stock market rally could cause your allocation to become stock-heavy. In such cases, the platform will sell a portion of your stock-based portfolio to purchase shares in bond funds, restoring equilibrium. Acorns typically rebalances portfolios quarterly, but additional adjustments may occur with fund deposits or withdrawals.

Features Acorns continually enhances its range of services and features. Notable offerings included in an Acorns subscription are:

• Bigger Round-Ups: Instead of rounding up to the next dollar, you can opt to round purchases to the nearest $10, ensuring larger contributions to your investments. For instance, an $8 fast-food meal would result in a $10 charge, with $2 saved. Additionally, you can choose to round up to the next even number or the next multiple of 3.
• Acorns Earn: This program partners with leading retailers such as Apple, Macy’s, Blue Apron, Barnes & Noble, Lyft, and Walmart. When you shop using a credit or debit card linked to your Acorns account, these retailers match a portion of your rounded-up deposits as cash back.
• Smart Deposits: Acorns allows you to schedule deposits and allocate a portion of your paycheck to Acorns Early, Later, and Invest when establishing direct deposits.
• Acorns Potential: This service enables you to explore hypothetical scenarios, aiding in better investment decisions. It’s both fun and educational to experiment with different scenarios.
• Gift Cards: An excellent way to introduce investing as a gift, especially during graduation time.

Cost Acorns has a straightforward pricing structure:

• Acorns Personal: Priced at $3 per month, this account includes the core investment app, Acorns Later (an IRA account), and Acorns Checking, featuring a debit card, ATM reimbursements, and direct deposit allocations to your investments.
• Acorns Personal Plus: For $5 per month, you gain access to the personal account’s features, along with premium financial advice and tools, including Q&As with financial experts.

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Is Acorns A Good Investment?

Acorns unquestionably offers a captivating product. It’s safe, secure, and user-friendly, with a low minimum investment of $5 and no initial account requirements. However, this investment platform won’t be a perfect fit for everyone. Here’s a quick guide to help you decide whether to open an account:

Start an Acorns Account If: You likely wouldn’t invest without the service Acorns provides. It offers a cost-effective way for you to embark on your investment journey. Once you experience the enjoyment of investing, you’ll naturally want to explore further.

Consider a Different App If: You seek a broader range of investment options or lower fees for smaller balances. Platforms like Wealthfront or Betterment might be better suited to your needs.

Acorns vs. Stash

Acorns isn’t the sole option for micro-investing apps. Stash, another top investment app, provides a comparable service at a similar price point. Here’s a brief comparison between the two:

• Fee Structure Threshold: Stash offers two plan tiers, each with a variety of features. Their lowest tier also costs $3 per month, while the highest-tier for families is $9 a month.
• Minimum Balance Required: Acorns allows you to open an account with no minimum balance, but you can’t start investing until your account balance reaches $5. Stash, on the other hand, requires a $1 deposit to open an account.
• Range of Options: Stash offers a wider array of portfolio options, including individual stocks. However, Stash doesn’t actively manage your investments; it provides guidance and connections to investment opportunities. If you prefer fully automated investing, Acorns is the better choice. Stash also allows you to open up to two custodial accounts ($9 per month) for your children.

Acorns Review: Summary

In summary, Acorns serves as a fantastic gateway for aspiring investors. Its simplicity and user-friendliness make it an excellent starting point. While it may not cater to the demands of experienced investors seeking advanced features, for beginners, Acorns provides an accessible and enjoyable path to investment.

Note: Please perform your research and consider your financial circumstances before making any investment decisions.