I wanted to answer the question “Is Acorns a good investment”? And the best way to do that is simply share my results and compare to some other ways you could be saving for your future. I've been using Acorns for the past year and here's how it's gone:
What is Acorns
Acorns is an app that automatically invests your spare change for you. Everytime you make a purchase, Acorns rounds up to the nearest dollar, and transfers that small amount into an Acorns investment account.
This accounts invests in a broad range of assets – Mainly ETFs and Bonds. You can choose how aggressive or conservative you wish to be. As a youngish guy, I've chosen the most aggressive portfolio. Older people might be suited to something more conservative.
Acorns investment strategy was put together by Nobel prize winning economist Dr. Harry Markowitz.
I really like Acorns because you can get started with as little as $5. Compare that to just a fes years ago when buying into this type of portfolio would have required thousands.
My Last 12 Months Using Acorns
So how has Acorns performed in real life. Over the past 12 months (from the date of this post) I've seen a gain of 4.15%. This obviously isn't a huge return. But it should be noted, that markets have been hammered lately. My all time gain is 16.81% which is much much better. This just goes to emphasize that a diverse portfolio will go up and down, but over a longer period of time, it should match or beat the market.
Is Acorns a Better Investment Than…
So how does Acorns compare to some of the other options people use to save and invest:
The problem with savings accounts is the interest rate is a complete joke. In America for example, a Chase savings account will give you 0.01% interest! In Australia, although it's over 100x better than that it's still not great at around 1.25%. Both of these figures are below the inflation rate. That means if you're money is in a savings account it is actually losing money year on year. You'll be able to buy less and less each year with that same amount of cash. So while you think you're saving, you're actually not.
99% of people aren't very good at picking stocks. If you had picked any stock in 2017, you would have probably made a profit. That's because there was a bull run. But people get fooled into believing they have some special gift. The reality is you were just in the right place at the right time. So while 1% of people may get lucky with a small pick of stocks, the vast majority of people won't outperform a diverse ETF.
Acorns is just one of a growing number of apps that are making investing easier. Acorns is currently only available in Australia and the U.S. But there are a variety of apps available in different countries. Make sure when picking an app they have low fees (Acorns charges $1 per month), and have a trusted reputation.
Do you use Acorns? Let me know how it's been working out for you in the comments