Acorns

First off I want to be upfront and say I’ve never used this service. There is a big reason why and I will discuss that in the ugly section below. Even though I’ve never used this service I think it fills a great niche in the marketplace. I believe it could be extremely valuable to a lot of people. So what exactly is it?

It is a service that rounds up your debit and credit card purchases to the nearest dollar. Then that extra change is invested into a diversified portfolio of low cost ETFs. It is an ingenious idea that helps encourage people to not only save but to then invest their savings in the stock and bond markets.

Good

There are a lot of good things about this service. First off, it creates an easy, automated way to save money. Yesterday I discussed the out of control debt we are seeing around the world. Acorns provides an alternative to that. It is a way to save without even thinking about it. Also, with most banks rewarding savers with near zero rates, the only place not to loose ground right now is the stock and bond markets. You do take on a ton more risk by venturing into the marketplace but Acorns helps in this area by investing your spare change into a diversified portfolio.

They’ve taken the manual labor out of choosing your investments. You simply pick your portfolio based of the amount risk your willing to take on. Bada bing bada boom, you get a diversified portfolio without even getting off the couch. You can see exactly which funds each bucket is invested in so you now exactly where your money is going. Each one has a different fee for the underlying funds but the fees charged by Acorns is the same no matter what category you choose.

There is also a new program in the works called Found Money. It is currently in Beta and only works with five companies right now. The idea is similar to cash back. When making a purchase at one of the participating companies with your Acorns attached credit or debit card, said company will make an investment contribution to your account on your behalf. Pretty neat alternative to cash back.

There is also Grow Magazine. It is nice they are not only inventing your money but they are also attempting to educate you. Give a man a fish and feed him for a day but teach a man to fish and you will feed him for a lifetime. It is nice that the company is putting this concept into practice.

Lastly, you don’t need anything up front to get started. One of the biggest complaints about online brokers is the large initial investments needed to open an account. This allows anyone to get started even high school and college students who might not have a large stash of cash sitting around. College students also get 4 years worth of fee free investing if they sign up with their .edu email address.

Bad

A small complaint that I have, is one that most people wouldn’t have, flexibility. I love being in the drivers seat of my investments. It would be nice if Acorns allowed you to choose your own percentages for each of the 6 ETFs they invest in. Or even better, if they would allow you to skip a fund or two if you don’t like or need those particular funds. This shouldn’t add any additional costs because Acorns is still only investing in a set number of ETFs. This idea goes against their standardized, easily approachable way to investing but I think it would help to lure more advanced investors.

Ugly

Fees, simply put the fee structure is high. You might say that a dollar a month isn’t much, especially when you consider all you get with this service. But I disagree. I’ve discussed before how fees can derail your investment goals so minimizing them is critical. An even bigger issue, the reason why I’ve not used the service, comes with the fee for higher balances. If your account passes the $5,000 mark, the fee changes to a flat 0.25%. This fee is simply too much. At $10k invested your total fee would be $25, at $25k the fee would be $62.50 and at $100k the fee is $250. This is a lot of money just to cover Acorns fees let alone the fees for each ETF individually. This is the the reason why I’ve stuck with my brokerage account over using Acorns.

Conclusion

I’ve not been able to justify the fees in my own life but this company might be perfect for you. If you struggle to save or if you’ve wanted to invest in the stock market but didn’t know where to start, Acorns makes the process super simple. They are defiantly worth checking out if you don’t want to go it alone with a broker.

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