Version Reviewed: 1.03
App Reviewed on: iPhone 5s
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Money management and investing in the markets can be daunting for even some of the more seasoned adults, let alone 20-somethings and those making their first long-term financial decisions. With all the heavy fees and blind trust in traders with sometimes dubious intentions it can seem like the risks far outweigh the potential rewards. Acorns is an ambitious app that aims to gain a following by removing all of the hassle of financial planning; even if that means over-simplifying the process.
I will say that Acorns does a lot right. The app looks great and navigating throughout the windows is a joy, even if the initial task of finding where all the windows are can be a bit arduous. The simple graph on the front page gives users a simple summary of how their investment is doing, and a more detailed breakdown can be found by simply swiping to the left. Money can be invested either by direct transfer or by linking a bank account and letting Acorns round up purchases made via credit or debit card. This means on a $5.88 purchase, $0.12 would be siphoned into Acorns.
At it’s core, Acorns is simply an investment app. The user gives the company any amount of money over $5 and Acorns chooses where and how much of that money is invested across a handful of opportunities. These are fractions of shares of large companies, shares of small companies, emerging markets, government and corporate bonds, and real estate markets. There are five portfolio profiles that are optimized with input from Dr. Harry Markowitz, the father of Modern Portfolio Theory. These profiles vary from the long term/low risk Conservative to the high-risk/high-reward Aggressive. The percentage of funds invested in each of the six markets directly correlates to how aggressive the portfolio profile.
For example, the Moderate profile invests 16% of investments into large company stocks, 19% in small company stocks, 33% in corporate bonds, 6% in government bonds, and the remaining 16% in real estate stocks. This is in contrast with the Conservative approach, which invests much more heavily in government bonds, and the Aggressive that has a higher percentage of small company and real estate stocks.
The fees for using Acorns are extremely low when compared to much more established trading firms, but for those investing long term the $1 a month fee can actually begin to cut into any earnings. There is also an annual 0.5% fee that, for most users, will not be too painful. The problem that I found is that by investing for the long term, the first handful of months will actually be a small loss because the total earnings can be below a dollar unless a sizable initial investment is made. Another thing to consider is that this is still a risk, no matter how conservative the portfolio. I use a moderately conservative portfolio for half my time and the moderately aggressive one and I ended up losing a small percentage of my initial investments with both plans (not including the monthly fee).
For those committed to the long term, Acorns is a solid investing app and giving it a try for a handful of months with a decent investment is very low risk thanks to the ease of free deposits and withdrawals.