I’m constantly searching for innovative financial tools to assist us in achieving our objectives. One of these goals is early retirement. Undeniably, we’re striving to attain that milestone. Currently, we have two separate investment accounts that we’re utilizing for our early retirement plan. However, I’m always eager to discover new strategies to diversify our portfolio. This led me to recently explore an investing application named Acorns, which piqued my curiosity.
SETTLING INTO ACORNS
When registering on Acorns for the first time, you’re required to select your initial monthly plan. I opted for the lowest, the Lite plan, which costs just $1 per month, offering merely a taxable investment account. This was satisfactory for us since we already max out several Roth IRA accounts.
The subsequent plan, Personal, costing $3 per month, offers, in addition to a checking account, an IRA option. The top tier option, the Family plan, costing $5 per month, allows you to open investment accounts for your children, in addition to providing all features of the lower tier plans.
Given that we were exploring another investment option and already possessed other account types, we proceeded with the cheapest, Lite plan. Once your account is set up, you get to decide your contribution amount and frequency. Our investment into this account is not significant, as its sole purpose is for diversification. We were also curious to evaluate its performance before increasing our contributions.
THE CONCEPT OF ROUNDING-UP
Upon initial setup, you’ll learn about Acorns’ rounding-up feature. It allows you to link a checking account or a credit card for this functionality – an option we chose. We wished to connect more than one of each type of account though, which might be a feature of the higher-tiered plans.
Once linked, your Acorns account starts the rounding-up process. Every purchase you make is rounded up to the nearest dollar. When you accumulate $5 in round-up funds, it is moved from your primary funding account to your Acorns investment account.
Furthermore, Acorns allows you to increase your round-up amounts, should you wish to. You can apply a multiplier of 2x, 3x, or 10x on each round-up. We elected the 3x multiplier, which means each purchase triggers a round-up, multiplied by 3, which is then moved from our primary funding account to the Acorns account.
Additionally, for whole dollar purchases, you can select how much Acorns should invest. We opted for the highest amount, an additional $1, which with the 3x multiplier results in us investing an extra $3 on any whole dollar purchases.
HOW DOES ACORNS INVEST?
When you opt for the regular taxable investment account, there are limited portfolio options – five to be precise, each based on your risk tolerance and time horizon. Herein you cannot select individual funds as they have been pre-chosen per portfolio option. This could simplify matters if you prefer somewhat passive investing.
Acorns suggests suitable investment options based on your profile information. Regardless, you have the final say in selecting a portfolio that suits you and can easily switch to a different one with a simple click.
ACORNS: A SUMMARY
Our experience with Acorns so far has been positive. The platform is user-friendly and provides several helpful articles to guide your investing journey. Despite our inability to select individual investments, we are satisfied with the performance thus far.
Acorns has offered an effortless way to diversify our retirement portfolio. We particularly value the round-up feature as it automates savings from our everyday purchases.
Acorns is an excellent fit for those taking their first steps in investing and those who frequently forget to fund their account, or simply prefer a hands-off approach. However, if you desire a more active role in managing your investments, there are myriad other suitable options.
What’s most vital is ensuring that your chosen investment app or platform is a perfect fit for you. If the investment strategy you adopt doesn’t align with your lifestyle, its effectiveness will be undermined, thereby defeating its purpose altogether.
Are you an Acorns user? We’d love to hear about your experience and opinions on the platform’s performance.
