If you’re looking to invest your spare change automatically, Acorns is a great place to start. This app purchases investment using the spare change from your bank account and round-ups of your purchases. If you allow it to withdraw from your checking account, Acorns will buy stocks and ETFs for you.
Since 2012, Acorns has been a free app and has raised over $200 million in venture capital. In 2016, it reported a revenue of $100 million. They have a successful business model and are likely to grow even further in the future.
Acorns is available for iOS and Android.
Every purchase is rounded up to the nearest dollar and transferred to your “Investing Account” (linked to your bank account). Contributing to your account each month depends on how much you spend and how much you keep in your account.
Using Acorns for investing
Acorns currently only offer two investing options, which are “round-ups” and “sweep” accounts. By setting a dollar amount each month, round-ups create automatic contributions until you reach your goal. Acorns keep track of what purchases you’ve made and keep a running total of all your purchases. When it’s time to round up, it’ll take the money from your previous purchases and invest it. With sweep accounts, all new cash received goes into the account as soon as you reach your monthly goal. Sweep accounts work like round-ups, except they immediately remove money from your account once your reach your goal.
How Acorns works
You will need to have an investment goal set to use the service. The minimum is $5, but you can choose between $5, $10, and $15 as your goal. Acorns will then take funds from your bank account and add them to your Acorns investing fund. You permit them by linking up a checking account and permitting them to withdraw funds from that checking account. Your account will start at $5, and the app will literally build up from there. If you want to save more or withdraw more, it’s easy to do so — increase your goal or decrease your budget.
Once that’s all set up and the link established, you can then check your balance on the app and view all of your transactions in one place. You can also adjust or change any information on your profile settings page to tailor how Acorns works best for you, or switch between accounts and even change how contribution rounds work. Remember: before any money goes into an investment, it needs to come out of the account you linked up with Acorns, where you have access to it.
Acorns are free to use. It charges a flat fee of $1 per month and $2 per month for accounts between $5,000 and $1 million. There is no fee to withdraw money if you have less than $5,000 invested, but if you withdraw money when your total balance reaches more than $5,000, there will be a charge of $25.
Pros of the Acorns app:
Acorns is a great way for beginner investors to get their foot in the water, as it requires little-to-no knowledge of how to invest in the stock market. If you’re like most people, you don’t have the time nor dedication to sit down and figure out how to invest your funds. That’s where Acorns comes in handy — it takes care of your investments for you and keeps track of everything, so you can sit back and watch your money grow.
You can also tailor how much or how little you want to invest based on your goals. For example, maybe there’s an expensive purchase that you’re saving up for and want to be able to check on its progress easily. You can set a budget for that purchase, and then you can invest all your money in the stock market. If you don’t want to do that, no worries – you can keep all of your spendings on that item separate from your investment money.
Cons of the Acorns app:
There are four major cons for investing using Acorns, ranging from the fairly minor (the app is closed source) to the very serious (it has been hacked). The first major con is privacy. Users’ data is stored on their local device and accessible by anyone who has access to it. This is a major problem if the device is stolen or lost. The next major con is that the app is closed source, which means there’s no way to verify that it’s doing what it claims to be doing with user funds. Next, Acorns has been hacked multiple times in 2017, which could result in users losing money. Lastly — but not to be overlooked — it isn’t actually an investment of your funds by yourself, so you don’t have control over your own investable assets. Acorns do.
If you aren’t ready to dive into the stock market but still want to create an investment portfolio, the Acornsapp is a great option. It is a simple way to get started investing, and it’s straightforward to use. However, if you already have knowledge of investments or are looking for more control over your funds, this may not be the best option for you.
While Acorns can benefit new investors who don’t want to learn how different investment strategies work or how much risk they’re putting themselves in with each trade — it can also be risky using an app like this. You are giving someone else control of your funds. This can be problematic, especially if you don’t plan what happens if the app isn’t working correctly or there is a security breach. Also, as someone looking to invest at least $1,000 or more, this may not be the best option.
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