Welcome to this post on “Investing for Newbies: Should You Choose Acorns or Another App?” This article is a guest post written by Teenvestor.
What are the best ways to invest your money? There are many different opinions on this topic.
Some people believe that investing is complicated and risky, while others think it’s a great way to learn about finances.
If you’re just starting out with investing, there are plenty of apps at your disposal. One app called Acorns rounds up transactions from bank accounts linked to their account and invests the change in exchange-traded funds (ETFs) for investors for as little as $3-5/month, or a percentage of an investment account balance per year if the account balance becomes sizable.
The beauty of Acorns is that it does all the work behind the scenes so users don’t need any prior knowledge about investments, saving them time and effort!
Read more below if you’re interested in starting an Acorns account or want to find an app that meets your beginning investing needs!
What is Acorns?
Acorns and similar apps like it offer a great way for young investors to start investing.
While you can choose from a number of different ETFs, these apps will take the worry out of finding the right funds for you and make sure to allocate your money properly. Even if you’re just starting out with investing, you shouldn’t be intimidated by opening your first investment account with Acorns as they simplify the entire process, soup to nuts—or acorns, that is.
Acorns started by rounding up transactions from your bank account linked to their app. So, if you spend $3.55 on coffee at Starbucks, the .45 cents will be invested in ETFs aligned with your risk tolerance and investment goals based on the questionnaire you answered at account sign up.
You can choose between many different types of ETFs depending on how aggressive or conservative you’d like to be.
And if your investment account becomes sizeable, the fixed monthly costs become negligible. Other micro-investing apps charge a fixed assets under management fee that costs you more money as your account balance grows.
The Acorns model scales your monthly fixed costs, leaving you coming out ahead if you can set aside enough money to build a sizable portfolio in the robo-advisor app.
The great thing about Acorns is that it takes the worry out of finding the right ETFs, so you can build on your investment portfolio without losing sleep.
This app offers all the benefits of a robo-advisor while focusing on rounding up transactions to make investments more manageable for young investors.
While Acorns does everything behind the scenes, some investors prefer to manage their own portfolios, in which case the service may not be for you.
Acorns’ Strengths
Is Acorns worth it? It depends. Have a look at Acorns’ strengths below:
1. Acorns is a robo-advisor app that rounds up transactions from your checking account and invests the change in ETFs of your choice
2. The beauty of this app is that it takes the worry out of finding the right ETFs, so you can build on your investment portfolio without losing sleep
3. There are many different types of ETFs to choose from depending on how aggressive or conservative you want to be
Acorns’ Weaknesses
1. Acorns charges a high fixed monthly fee if you only use the app to invest your spare change
2. If you have a unsubstantial account balance, Acorns costs more than other investment apps
3. Interested in investing in cryptocurrencies? There are no cryptocurrency funds available for Acorns users
4. If you change your mind about Acorns and wish to transfer your money to another brokerage account, they charge $50 per ETF transfer (e.g., if you have 7 ETFs and you wish to transfer them all, that’s $50 per ETF, or $350).
If you’re looking for an alternative to Acorns, check out Bloom, and investing app built for teens 13+!
How to Start Investing Money
When you first start learning how to invest money, you want to make sure you’re comfortable with the process.
You can start investing money with a simple ETF strategy, allowing you to purchase a diversified investment portfolio with a few taps within your investing app.
Start by browsing investment options on your app, and using what you’ve learned to pick ETFs that match your risk appetite.
Then, invest in multiple low-cost ETFs to add further diversification and alignment with your overall investment goals.
If you’d like to focus on long-term wealth creation, you’ll want a portfolio more heavily skewed towards stocks. If you’re looking for more conservative investments, put the majority of your money in bonds.
Regardless of how aggressive or conservative you want to be, adding ETFs to your investment accounts will allow you to allocate your savings without worrying about market volatility seen in individual stocks.
Also, with the advent of fractional shares, you don’t need to worry about saving up larger amounts of money to buy more shares for your portfolio.
That means you can invest money whenever you have it, however much you have. Apps like Acorns have reinvented investing access, providing anyone fair access to the stock market.
Free investing apps have done this even more so by charging no trading commissions for trades you place on their platforms.
Should You Start Investing with Acorns?
Acorns has a lot of functionality new investors would find useful, namely intuitive prompts asking you about investing goals, risk tolerance, social values (ESG investment options), diversification and automation.
Plus, it introduced the world to Round-Ups, allowing you to automate your saving without changing your behavior.
By attaching the Acorns app to a debit card and/or credit card, you can easily add money to your investment account without actively thinking about adding money each pay period.
Instead, you add money every time you make a purchase. This can help you save without feeling it, making the process effortless.
However, if you’re not interested in just investing spare change, Acorns may be too expensive. If you want to invest more than $5 a day and/or don’t own a debit card or credit card (which Acorns requires), other investment apps like Stash and Betterment may be better options for you.
Ultimately, when it comes to investing money, there are multiple options available to you. If you’re not sure where to start, try one of the many free apps on the market today.
Then, see how much your investment account has grown in 6 months or a year and decide if it’s right for you.
As with any brokerage account, make sure you understand all of the fees before you invest money.
No one wants to pay more than they have to for investing!
Best of luck on your investing journey!