Acorn Investment: How To Grow Your Money Wisely

Acorns is a micro-investing app that offers a beginner-friendly platform for those new to investing. It is a robo-advisor that allows users to invest their spare change from credit or debit purchases by rounding up each purchase to the nearest dollar. Acorns offers a range of membership tiers, each with its own set of features and benefits. The app provides a simple and automated way to invest, making it accessible to those who are just starting or who don't want to spend a lot of time researching and managing their investments. However, it is important to note that Acorns' fees may be a significant proportion of small investment balances, and there are limited investment options and no tax-loss harvesting strategy.

Micro-investing

Acorns' Round-Ups feature allows investors to round up everyday purchases and invest the "spare change". For example, if an investor makes a purchase for $10.25, the amount is rounded up to $11, with $0.75 being automatically invested. This feature allows investors to start investing by setting aside pocket change.

Acorns offers three membership tiers:

• Acorns Personal for $3 per month that includes a checking account, investment account, retirement account, and Acorns Visa™ debit card.
• Acorns Personal Plus for $5 per month that includes the three accounts from the Personal plan, plus an Emergency fund and Mighty Oak Visa™ debit card.
• Acorns Premium for $9 per month that includes the three accounts, Emergency fund, and debit card from the Personal plan, plus additional investment accounts for children.

The app is ideal for those who are new to investing and want to start small. However, the monthly fee can be steep if you're not investing much, as it may eat up a big chunk of your returns. Therefore, it is important to set up a larger recurring deposit into your Acorns investment account to take full advantage of the app.

Acorns also provides educational resources such as a "Money Basics" blog and Grow + CNBC website to help beginners learn about investing.

Round-ups

For example, if you bought groceries for $30.45, Acorns would round it up to $31.00 and invest the remaining $0.55. The average Acorns user invests more than $30 a month through Round-ups.

You can also supercharge your Round-ups by adding a multiplier of 2x, 3x, or 10x. For example, a Round-Up of $0.25 would add $0.50 to your Invest account with a 2x multiplier.

If you have an Acorns Checking account, Round-ups are transferred with every swipe of your Acorns debit card, instead of waiting until they reach the $5 minimum.

Flat monthly fee

Acorns is a micro-investing app that charges a flat monthly fee of $3, $6, or $12, depending on the subscription tier. The flat fee structure means that instead of paying a percentage-based fee, users pay the same amount regardless of their account balance. This can be advantageous for those with large account balances, as they will pay the same amount as someone with a smaller balance on the same tier.

However, for those with small account balances, the flat fee can be a significant proportion of their portfolio. For example, a $36 annual fee is 3.6% of a $1,000 portfolio. Even with a $10,000 portfolio, the $36 fee is 0.36%, which is above the standard management fee of 0.25% charged by many robo-advisors.

Acorns offers three subscription tiers:

Bronze ($3/month)

• Includes an individual investing account, an IRA, and a checking account.
• Most suitable for those who want to get started with investing and prefer a low-cost option.
• The fee can be a large proportion of the portfolio for small balances, making it less cost-effective than other beginner-focused investment apps with no subscription fees.

Silver ($6/month)

• Includes all features of the Bronze tier, plus a 1% IRA match, an interest-earning emergency fund, and the opportunity to earn a rewards match.
• The IRA match can help to offset the management fee.
• Suitable for those who want to take advantage of the higher-yielding checking and savings accounts.

Gold ($12/month)

• Includes all features of the Silver tier, plus the ability to purchase individual stocks, higher rewards matching, and an Acorns Early account for setting up custodial accounts for children.
• The main perk of this tier is the ability to set up custodial accounts, a feature that is less common among other robo-advisors.
• The higher fee may be worth it for those who want to invest for their children and give them access to bank accounts.

The flat monthly fee structure of Acorns can be beneficial for those with large account balances, as they will pay the same fee regardless of their balance. However, for those with small portfolios, the fee may be a significant proportion of their assets, and there are other beginner-focused investment apps with no subscription fees that may be more cost-effective.

Limited investment options

Acorn's investment options are limited compared to other apps. Its investment selection is limited to ETFs, and it does not offer tax-loss harvesting. It does not allow users to directly invest in Bitcoin or other cryptocurrencies. Instead, users can invest in funds that invest in Bitcoin futures. Acorn's Core Portfolio options are built by financial experts and managed by firms like BlackRock and Vanguard. Acorn's ESG Portfolio is a sustainable investing option that focuses on funding companies that meet environmental, social, and governance standards. While Acorn's investment options may be limited, its platform is ideal for beginners interested in micro-investing and building a diversified portfolio of stock and bond ETFs.

No tax-loss harvesting

Acorns is a micro-investing app that offers a unique feature called Round-Up. After linking your credit or debit card to your Acorns account, Round-Up invests your spare change from every purchase. Your money will be invested once it reaches $5.

Acorns does not offer tax-loss harvesting. Tax-loss harvesting is an investment strategy that can reduce the amount of tax you may have to pay after you sell your investments.

Acorns charges a flat monthly fee, which can be relatively high for investors with small account balances. The fee is $3, $6, or $12 per month, depending on the subscription tier.

If you are considering transferring your investments from Acorns to another brokerage, you should be aware that Acorns charges a $35 fee per ETF to transfer funds to another broker. This fee is on the high side compared to other providers.

Therefore, if you are looking for tax-loss harvesting or broader investment options, you may want to consider alternative investment platforms that offer these features.

Frequently asked questions