How to choose an Acorns Portfolio

Acorns is the micro investing app I use to save my spare change and have it invested in a diverse portfolio.  I've had lots of success using Acorns.  In this post I'm going to share with you what portfolio I've been using on Acorns and how you can choose a portfolio that's right for you.

Acorns will recommend a portfolio for you

First up,  Acorns will recommend a portfolio for you.  And this recommendation could be perfect.  However Acorns doesn't really have any idea how you're going to use the app.  You might already have a large amount of capital which you'll transfer in.  Or you might only be using Acorns for the roundups.  This would affect which portfolio you should choose.  So it's important to know what's in each portfolio and why you would choose it.

What makes up an Acorns Portfolio

Acorns portfolios are made up of ETFs.  An ETF or Exchange Traded Fund, is a fund made up of hundreds of stocks and other assets.  And then this fund is listed on the stock exchange.  The great thing about ETFs is that it gives you instant diversification.  Your Acorns portfolio will be made up of a number of ETFs,  which means your money is actually invested in potentially thousands of stocks and hundreds of bonds.

The conservative portfolios on Acorns will have a higher number of bonds compared to stocks.  Where as the aggressive portfolio will have more stocks and fewer bonds.  Bonds are considered to be of lower volatility.  This means they'll still grow in value but will move around less.  Stocks can be very volatile.  Facebook for example just had the biggest drop in history!  But stocks also tend to grow much more in value.

Here's a break down of the portfolios:

Conservative – 40% Stocks, 60% Bonds

Moderately Conservative – 51% Stocks, 49% Bonds

Moderate – 61% Stocks, 39% Bonds

Moderately Aggressive – 74% Stocks, 49% Bonds

Aggressive -89% Stocks, 11% Bonds

Emerald – This is a special portfolio made up of socially responsible assets.

What ETFs are you investing in?

Acorns will invest your money in Vanguard ETFs.  These ETFs are made up of hundreds (and sometimes thousands of stocks and bonds).  Each ETF is designed to track a particular index or give you expsosure to a specific group of assets.  For example the S&P500 ETF will give you access to the the S&P500.  So if you see on the news that the S&P500 has gone up – the price of that ETF will have also gone up, you will have made a gain.

Better than choosing stocks

In my opinion, investing in a diverse range of ETFs that have been put together by experts is always going to be much smarter than trying to pick stocks on your own.  The majority of people who try and pick stocks in this day and age will lose money.  By investing in Acorns you are diversifying your money across thousands of differents assets.  When the market grows, your investment will grow too.

Choose a Portfolio for Capital Preservation

If you have been investing for a while and already have capital, then you're probably looking to preserve that capital and see some modest gains.  You probably don't wish to drawdown too much from this capital either.  In this scenario you would choose a conservative portfolio on Acorns.

A Portfolio for Capital Growth

If you're young and you probably are if you're using Acorns, then you won't have a huge amount of capital or net worth to begin with.  When your young, it's best to be aggressive and aim for capital growth.  So you'd invest in an aggressive portfolio.  An aggressive portfolio might drawdown (meaning it will be worth less than what you put in) at times, but over the longer term will grow much more (in theory).

It's best not to change regularly

Once you've chosen a portfolio it's best to stick with it for a while.  And by a while I mean a few years.  Acorns lets you change your portfolio at any time, but this doesn't mean you should keep switching.  Remember you're investing.  And not investing for overnight profits.  That's not what Acorns is for.  It's for growing your net worth over the longer term.  The portfolios have been designed for this.

What portfolio do I use

I use the Aggressive portfolio option.  I'm a young(ish) guy.  So my goal is to grow my capital.  I'm not worried if the portfolio moves around a bit.  That's to be expected.  Because I'm looking to build my capital over the next 10 years.

Since I started using Acorns around 2 years ago, I've seen my portfolio grow around 28%.  Which has been an awesome return.  It's also grown big enough so that the $1 monthly fee is easily covered by the dividends i'm getting.  Overall it's been a big success for me.

Let me know in the comments if you've been using Acorns and how you've found it.

You can grab a free Acorns account here


One comment

  1. I have it set to aggressive right now. I realize I got into this a little late….I’m 46, but look like I’m early 30s, so maybe I have some extra life cycles. Anyway, I don’t plan to retire for another 30 years. Unless I win Powerball or Megamillions, then I’m out. But is aggressive bad being older?

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