Acorn's Investment Strategies: Funds And Portfolios

Acorns is an investment app that allows users to invest their spare change by rounding up purchases made with a linked credit or debit card. The app offers five default smart portfolios built with the help of Harry Markowitz, ranging from conservative to aggressive. All of Acorns' funds are index-based Exchange-Traded Funds (ETFs) from either iShares or Vanguard. The app also offers a sustainable ESG portfolio option.

Acorns' investment in ESG portfolios

Acorns offers four different ESG portfolios, composed of Exchange-Traded Funds (ETFs) that invest in companies rated for their approach to environmental, social, and governance (ESG) issues. These ratings are provided by Morgan Stanley Corporate International (MSCI) and are a comprehensive measure of a company's long-term commitment to socially responsible investments and ESG investment standards.

The four Acorns ESG portfolios are designed with a focus on diversification and risk tolerance, similar to the Core portfolios. They are built with iShares by BlackRock, a leading innovator of sustainable ETFs. The portfolios are designed for investors who want to invest more of their money in companies with higher ESG ratings than their peers.

The ETFs in the Acorns ESG portfolios include:

• IShares ESG Aware MSCI USA ETF (ESGU)
• IShares ESG Aware MSCI EM ETF (ESGE)
• IShares ESG Aware MSCI USA Small-Cap ETF (ESML)
• IShares ESG Aware 1-5 Year USD Corporate Bond ETF (SUSB)
• IShares ESG Aware MSCI EAFE ETF (ESGD)
• IShares 1-3 Year Treasury Bond ETF (SHY)
• IShares MSCI USA ESG Select ETF (SUSA)
• IShares U.S. Treasury Bond ETF (GOVT)
• IShares MBS ETF (MBB)
• IShares ESG Aware USD Corporate Bond ETF (SUSC)

Acorns' ESG portfolios allow investors to align their investments with their values and support companies that are making a positive impact on the environment, social issues, and governance practices. By investing in these portfolios, investors can promote sustainable and responsible business practices while also seeking potential financial returns.

Acorns' investment in Bitcoin ETF

Acorns, a micro-investing app, has recently introduced the option for its customers to invest in a Bitcoin-linked exchange-traded fund (ETF). This allows customers to gain exposure to Bitcoin without directly purchasing Bitcoin tokens. Instead, customers can invest in Bitcoin futures, which are considered less risky than investing in the cryptocurrency itself.

Acorns' Bitcoin ETF option is called ProShares Bitcoin Strategy (BITO). Customers can invest up to 5% of their Acorns Invest portfolio in BITO, depending on their investment profile, including details such as age, income, and money goals. For example, customers in the ""Conservative" portfolio can allocate 1% of their overall portfolio to BITO, while those in the ""Aggressive" portfolio can allocate up to 5%.

Acorns' Bitcoin ETF option provides customers with an easy and convenient way to invest in Bitcoin. It streamlines the process by eliminating the need for extra apps, digital wallets, and passwords. Customers can simply add the Bitcoin ETF to their Acorns portfolio through the app.

The addition of a Bitcoin ETF to a customer's portfolio can help to further diversify their investments. By investing in assets with low correlation, such as Bitcoin, customers can reduce their risk and potentially weather market changes over time.

It is important to note that cryptocurrencies like Bitcoin are highly volatile and considered high-risk investments. Customers should carefully consider the risks and their investment goals before adding a Bitcoin ETF to their Acorns portfolio.

Acorns' investment in retirement accounts

Acorns offers a range of investment options for retirement accounts, including Individual Retirement Accounts (IRAs) and 401(k) plans. With Acorns, you can invest in traditional pre-tax accounts, such as 401(k)s and IRAs, which are funded with money you have yet to pay taxes on. Contributions to these accounts are typically deducted from your taxable income, but you will owe income tax on any withdrawals during retirement. Additionally, there are age requirements and penalties for early withdrawals associated with these accounts.

Another option is a Roth IRA, which offers more flexibility as you can withdraw your contributions at any time without incurring a penalty. Roth 401(k)s and Roth IRAs are funded with after-tax money, so there is no upfront tax deduction. However, once you reach a certain age and holding period, you can make tax-free withdrawals.

Acorns also provides an easy retirement investing solution called Acorns Later. This service offers access to three types of IRAs: SEP, Traditional, and Roth. Acorns Later accounts are SIPC-protected up to $500,000, providing peace of mind for investors. Additionally, Acorns Gold subscribers can benefit from a 3% IRA match on new contributions to their Acorns Later retirement account.

When it comes to investment strategies, Acorns offers five default "smart portfolios" ranging from conservative to aggressive. These portfolios are built with the help of Harry Markowitz, the father of Modern Portfolio Theory. The app will suggest a portfolio based on your savings goals and risk tolerance, or you can choose one yourself. Acorns also provides the option to invest in sustainable ESG portfolios.

In terms of specific investments, Acorns primarily invests in Exchange-Traded Funds (ETFs) from well-known providers such as iShares and Vanguard. These ETFs cover a range of asset classes, including stocks, bonds, and real estate investment trusts (REITs). The app helps you pick an investment portfolio based on your age and risk tolerance, and it automatically rebalances your portfolio as you age to stay aligned with your investment goals.

Acorns' investment in kids' futures

Investing in a child's future is an important part of financial planning for parents and caregivers. Acorns offers a few different ways to do this.

Firstly, Acorns Gold unlocks investment accounts for kids. The Acorns Early account is a UTMA/UGMA custodial account (Uniform Transfer to Minors/Uniform Gift to Minors). This type of account is more flexible than a traditional college savings account, and the funds can be used in various ways that directly benefit the child, such as a first car or extra-curricular activities. Acorns Early accounts are SIPC-insured up to $500,000.

The second option is a 529 account, which is specifically for investing in a child's education. While the definition of what counts as education has expanded to include colleges, universities, trade schools, private K-12 schools, and $10,000 of student loans, it's still not as flexible as the offerings of brokerage and custodial brokerage accounts, which can be used for any kind of expense. 529 accounts are also subject to gift tax, although a special provision allows a person to gift five years' worth of contributions at once, without making additional contributions for the next five years.

The third option is an Individual Retirement Account (IRA). IRAs are traditionally for adults, but they are available to anyone with an earned income, including children. Contributions are limited to the amount of money the child earned in a given year (up to the $6,000 limit). IRAs can provide decades of tax-advantaged growth for children and allow them to benefit from years of compounding. However, withdrawals before retirement age may result in a 10% penalty and be taxed.

Finally, parents can choose a traditional brokerage account, which gives full flexibility and broad investment options. There's no maximum to the amount of money that can be invested, but there are also no real tax benefits. All increases in the account value will be taxed.

Acorns also offers a debit card and learning app for kids called GoHenry.

Acorns' investment in debit cards

Acorns is an investing app that allows users to automatically invest their spare change by rounding up purchases made with a linked credit or debit card. The app monitors your bank account and automatically invests the change from your daily purchases. For example, if you buy a coffee for $2.75, Acorns will round up to $3.00 and automatically invest $0.25.

Acorns offers its own debit card, the Acorns Visa™ debit card, which is issued by Lincoln Savings Bank or nbkc bank, Members FDIC for Acorns Checking account holders. The card is a heavy-metal, laser-engraved, matte, Acorns-green finish with an oak branch and the user's laser-engraved signature.

The Acorns debit card allows users to instantly invest their spare change with every swipe of their card. This feature is called Real-Time Round-Ups®. Previously, users had to wait for their Round-Ups to hit $5 before the money was invested, but with the Acorns debit card, the spare change is instantly invested so it has more time to grow.

The Acorns debit card also allows users to get paid up to 2 days earlier with direct deposit, and invest their money faster. It also has a Paycheck Split feature built-in, which allows users to invest a piece of every paycheck automatically into all their Acorns accounts.

The Acorns Checking account has no overdraft fees and offers access to 55,000+ fee-free ATMs within the AllPoint Network. Acorns Checking accounts are FDIC-insured up to $250,000, and offer fraud protection, 256-bit data encryption, and an all-digital card lock.

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