Investing with the Acorns App
Lately I have been wondering how to achieve wealth. I write to you frequently about how to make money, however often times making money (especially with a business) doesn’t translate immediately or sometimes ever to achieving real wealth.
With your business you can become financially more well off, but unless a miracle happens and your company explodes, achieving great wealth (wealth that you can pass on, that impacts the social status of your family) will require more to be done.
If you’re like me and you were born into a lower class, the idea of investing may not have been discussed much in your household. I honestly never heard of making investments until I started learning more about earning via entrepreneurship. And I’m not the only one:
All in all only 54% of Americans invest money.
And out of those 54% many of those investments are retirement accounts like 401ks, that they signed up for as a benefit of employment; not because they necessarily wanted to invest in the stock market.
The statistics are worse off for millennials – who are actively choosing at a significant rate to not invest. While there are many social economic reasons why many don’t invest, the bottom line is that investing is a keystone way in which people have traditionally achieved wealth.
More importantly, there is a significant opportunity cost to not investing as soon as possible (the lost of potential revenue and the lost of time to earn.) So I wanted to get started right away and I urge you to do the same if you have not thought about investing.
I decided to begin my investing journey with the Acorns app. I did so after reviewing the Acorns App, Stash App, Robinhood App, and setting up an investment account with Fidelity.
Understanding why I choose the Acorns App to Begin Investing
The Robinhood App and Stash App were both really appealing choices. However, what’s significant about those apps is that you must know how to choose your own stock portfolio. Being a beginner there is a huge risk associated with picking your own stocks. Not to mention you’ll be losing one of the key things investors say you need in order to minimise your risk: diversification.
However, with the Acorns app you’ll be opting to allow them to choose a portfolio that they think is best for you. The portfolios that Acorns choose for you are widely diversified and include up to 7000 stocks and bonds. This is one way that Acorns helps mitigate the risk of you losing your money. They also regularly keep your portfolio balanced (adding different bonds and stocks) to keep you steadily growing.
Is the Acorns App Worth it?
For serious investors the Acorns app may not be worth your time. The business model of the Acorns app is very simple. You tie the app to your bank account or debit card and every single time you make a purchase, the app rounds up your change to invest that spare change into your stock for portfolio. It also has a feature to allow you to set up recurring investments or one time investments. Either way at this very small rate of investing you will not be set to achieve huge returns.
Obviously you can choose to invest more in your Acorns stock portfolio; you could choose to put any amount of money that you want into your portfolio, you don’t have to do the minimum of rounding up.
No matter if you choose to invest only $5 or $5000 the Acorns portfolios are just not meant to provide huge returns. That doesn’t mean that you will not see returns at all. You will definitely see your account grow over time, if you stick with it.
Serious investors have compared the Acorns portfolios to a glorified savings account. Comparing a savings account that you can get from your local bank to your Acorns portfolio isn’t exactly equal though. The rate of return and interest on your Acorns portfolio most often will be better than what you get from a savings account from your bank. So overall, you are gaining more than just having a savings account. Not to mention, with your Acorns portfolio you get the benefits of compounding interest. Which investing greats like Warren Buffet indicate is the key to achieve great wealth.
Anything else I should know before signing up for Acorns?
Another key benefit of Acorns is the ease at which you can withdraw your investment funds from your account. With just a few simple button taps you can cash out your portfolio and transfer all your investment funds back to your bank.
However, transferring your shares isn’t as easy. Let’s say you get started investing via Acorns and everything goes well and one day you want to move to a bigger investment firm. You will only be able to transfer whole shares from your Acorns portfolio at the cost of $50; many of your shares will not be whole shares and those will be cashed out to you before the transfer.
What this means is that unless your account is substantial there could be a heavily penalty to transferring your Acorn portfolio shares. So when you decide to invest with Acorns I recommend sticking with it. Either as a simple alternative to your savings account or at least till your investments are significant enough to be worth loosing some money on the transfer.
Get started invested today!
Like I mentioned the best thing you can do is get started invested as soon as possible. The ease of Acorns makes this possible, not to mention they have a dedicated 24 hour phone support team to walk you through any concern on your account/ portfolio.
I just started with my Acorns account yesterday, you can learn more on my vlog. So I will update you in 3 months on how my investments are going and if I still think having an Acorns account is worth it.
With love as always,