Taking A look At Micro-Investment App Acorns
Increasingly, dividend income investors are being offered new and exciting ways to invest in the stock market that previously did not exist. Companies that have been around for a while such as Ameritrade, Scottrade and Schwab have all brought stock trading to the masses via the Internet and web apps all the while reducing transaction costs dramatically. Newer brokerages to hit market such as Sharebuilder enabled the option of purchasing fractional shares as well as free dividend reinvestment for the first time. No longer were dividend income investors bound by share price as a limiting factor for investment as half, quarter or even tenths of a share could now be bought. Fast forward several years and even newer methods for investing have cropped up. Companies such as Loyal3 have now enabled commission free trades and starting investments as low as $10. Gone is the excuse many people have claimed about not having enough money to invest or that it was simply too expensive to do so. Further, Motif Investing now enabled any investor to automatically create their own portfolio of stocks and purchase ten, twenty or even thirty stocks all at once for one low commission. There is no question that the power has shifted from the large brokerage firms to the individual investor as options for investing in the stock market have never been cheaper nor easier than ever before. I remember my first stock trade paying a very standard commission of around $50. These days, we shudder at the thought of paying over $10 a trade.
Clearly, the choices for new investors are numerous when starting to build out an income producing investment portfolio. While doing my usual daily read of financial and investment blogs I came across another new player in the brokerage market that I have never heard of that seems quite interesting for anyone looking to start an investment portfolio. Simply known as Acorns, this mobile investment app enables you to make regular small investments into a basket of funds from the everyday purchases you make by rounding up each amount to the next dollar automatically. For example, say you spend $1.49 for a taco at Taco Bell, the app reads that as $2.00 and pushes 51¢ into your Acorns account. The money is linked from your credit or debit card.
While the ability to invest in individual stocks is not currently available you do have the option to select how conservative or aggressive your investments will be. Acorns takes your investment balance and automatically invests it among six investment funds that include, Large Company Stocks, Small Company Stocks, Emerging Market Stocks, Government Bonds, Corporate Bonds and Real Estate Stocks. The specific ETFs that Acorns invests in are, PIMCO Investment Grade Corporate Bd ETF (CORP), Vanguard S&P 500 ETF (VOO), iShares 1-3 Year Treasury Bond (SHY), Vanguard Small-Cap ETF (VB), Vanguard REIT ETF (VNQ) and Vanguard FTSE Emerging Markets ETF (VWO).
While Acorns may not be for everyone, the benefits of this investing method may be huge for younger individuals without a lot of money who wish to make regular investments in the stock market automatically. Acorns has no minimum to start, no commissions to invest or re-balance and the ability to reinvest dividends automatically. We are all acutely aware of the power of making small contributions over time to our investment portfolios and one cannot discount the power of simply making small contributions on a daily basis to an overall portfolio balance. On average, users are investing around $3/day in roundups alone.
Acorns makes money by charging a monthly $1 fee as well as a management fee that ranges from .5 percent to .25 percent of your portfolio value. While the fees are very reasonable, Acorns is not the best value around for larger portfolios. The best benefit of Acorns is its unique ability to make an investor continually contribute to an investment portfolio by changing the perception of spare change and by enabling those pennies, nickels and dimes to work for you in a more worthwhile way.
What do you think about Acorns? Please let me know below.
Disclosure: Long NONE