Investing in the stock market can be a daunting proposition: everyone knows you need a diversified portfolio, but how do you get one without turning to an investment banker?
Acorns
, a new investment app, tries to solve that problem with a simple approach: connect it to your credit card and bank accounts, and the app will round up all of your purchases to the nearest dollar and invest them in a portfolio of Exchange-Traded Funds (ETFs) tailored to your preferred level of risk.
The app’s home screen shows a large graph of the value of a user’s portfolio over the course of the day, along with the dollar value of their investment and the amount that it grew or shrank during the day. Users can also view a Positions tab that provides a detailed breakdown of their portfolio, including what funds Acorns has invested in, what they’re worth, how many shares a user owns, and what percentage of their portfolio those shares make up.
Users can view the “Round-ups” tab to see the value of the purchases Acorns has rounded up, and choose to exclude some round-ups if they want. That’s also where people can choose to have Acorns automatically round up purchases or require users’ input in order to set up a contribution.
The app uses “Modern Portfolio Theory” to power its investment decisions. It’s the same framework that powers other new financial management companies like Wealthfront, which similarly offers people the ability to invest in a distributed portfolio of ETFs based on their level of risk. It’s not the only financial product to “round up” users’ purchases, either. Bank of America rounds up purchases made with a customer’s debit card to the nearest dollar and sticks the remaining change in their savings account.
With tax day coming up, it’s important to note that while Acorns gives users an easy way to invest, it’s not tax-free. The money people make in the app is real money, and any gains will be taxed as such.
In a similar vein, Acorns does need to make money, which means they’ll charge a fee of $1 per month on a accounts worth less than $5,000, and take .25 percent a year out of accounts worth more than that. Administration fees are hardly unusual for investment products, but it means that people with low-value accounts will want to be fairly vigilant to ensure that their account still has money.
It’s also worth noting that the service is currently only available through the company’s mobile apps. Acorns is working on a web app, but it hasn’t been released yet.
Impatient investors might get a bit annoyed by Acorns’s current popularity. It took me a week to get my account approved and my initial buy order completely processed. That process was held up because I accidentally mistyped my social security number in the app, something that I wasn’t informed of until after I contacted Acorns’s support team to see what the hold-up was. (A representative for the company said that I would have been contacted via email to correct the error had I not reached out to the support staff beforehand.)
Right now, the company tries to get account approvals done in 1–3 business days, with a similar delay for processing buy orders. In the future, the company hopes to get to a 24 hour turnaround for opening new accounts.
Even with all of its whiz-bang technology, Acorns is still a relatively untested company. I don’t plan to put all of my eggs in Acorns’s basket, but it’s an interesting tool for people who want to easily feed an investment portfolio.
Acorns is available for free on the iOS App Store and Google Play Store.
