Does Acorns Actually Work?

Acorns is a popular micro-investing and savings app.  I've been using it for the past 12+ months and I wanted to share my results so you can get a better idea as to whether or not you should use it.

So read on to find out more about Acorns and why I think it is the future of investing.

If you've been using Acorns let me know how you've been doing in the comments.

What is Acorns?

The premise behind Acorns is simple – it invests spare change from everyday purchases into a diversified portfolio.  You link Acorns with your bank account and it tracks the purchases you make.  It will round up each purchase to the nearest dollar and then transfer the difference into your Acorns investment account.

You investment account has been put together with the help of nobel prize winning economist Dr. Harry Markowitz.  Basically your funds will be invested across a very diverse range of assets.  You can choose which portfolio you want to invest in based on how aggressive you want to be with your investing.

Why Acorns is Better than a Savings Account

So if you were to put your money in a savings account in 10 years time, it will be worth less than it is today.  That's inflation for you!   In order to profit, you need to stay ahead of inflation.  The inflation rate varies but a good rule of thumb is, if your investment is gaining less than 3% per annum, you're actually losing money.

This is something that most people don't realise.  They should be teaching this at school!  Saving for the sake of saving doesn't actually work.  It may have worked 20 years ago when banks offered real interest on savings account.  But these days most savings account either offer no interest or at the VERY best it's only around 1% per annum.  Way below inflation.

Acorns performs much better.  Your money is invested in assets that should increase in value over time.  You should beat inflation at the very least and more likely you'll beat it by a significant amount.   Sure, some years you might not  – recessions happen, stock market crashes happen too.  But over a longer period you'll see consistent gains.

Have I had success with Acorns?

The ultimate test of acorns is whether or not I've made a profit.  I've been using acorns for more than a year and I'm happy to report back that I've made a handsome return.

Since I've started using the app I've seen a massive return of 26% ($358.06!!).  That's on a balance of around $2500 that I've saved simply by having the app installed.  Imagine if your bank had paid you an extra $300 for simply having $2k in your bank account.

I've invested in the most aggressive portfolio option.   This might not be suitable for everyone.  But I'm young with fewer overheads so I can afford to see larger swings in my portfolio.

So yes Acorns has worked really well for me.  And there is no reason why it won't work for you either…

How to have success with Acorns too

Here are some general tips on having success with Acorns.  Please note that this is for informational purposes only and not investment advice.  You should do your own research.

  • Choose a portfolio that matches your age.  Generally speaking older individuals are looking to maintain their capital and not have aggressive growth.  So you'd choose a lower risk portfolio.  Young people should be aggressive and aim for capital growth.  You may see some big swings, but at a young age you can afford this.
  • Don't be tempted to withdraw.  Acorns works best when the dividends are reinvested back into your portfolio.  This is a compounding effect and will multiply your earnings.  So resist the temptation to withdraw your gains.
  • It's best to start with $100+.    You can start on Acorns with just $5.  I would recommend trying to get your balance up above $100 as fast as possible.  Acorns charges a $1 a month fee.  So in order to make sure your gains are larger than the fee you need to have more capital saved.   Don't worry if you're below $100 – everyone needs to start somewhere.

You can sign up for acorns for free here

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