“The number one problem in today’s generation and economy is the lack of financial literacy”
– Alan Greenspan –
Looking back at my early years, I wonder why it was required that I had to study things like social studies and world history when in fact none of what I was forced to study has any value to my adult years in life. Yet the ONLY financial class in high school that I recall offered was accounting, and that was an elective so it wasn’t required learning.
It really miffs me to know that so many people in society have very little, if any, financial knowledge other than how to balance a checking account. And some people can’t even do that correctly! A huge chunk of banking profits come from overdraft fees.
Our education system is broken and too many kids are entering into adulthood without the real world knowledge that they need to be financially successful. Not only that, they aren’t encouraged to pursue entreprenuership endeavors, but instead indoctrinated into the belief of “get a good education to get a good job”.
Also, kids are led to believe that going into student loan debt of tens of thousands… if not hundreds of thousands of dollars is justifiable to become wage slaves dependent on employment. It isn’t until they graduate from college and attempt to enter the workforce that the reality of loan repayment sets in.
Then if they’re even fortunate enough to find a job in the field that they pursued an education in the first place is questionable. Often they have to settle for a job that they could’ve gotten without going to college in the first place. Oh, and those student loans still have to be paid back and can’t be charged off in bankruptcy!
Once they’ve entered the workforce they are now dependent on their employer for that after tax deducted paycheck. It’s rare that the youth think to put money aside in case of an emergency for unexpected expenses. And lets face it, retirement planning and managing their money like the rich isn’t a top priority for most twenty somethings.
So they’ve started their key working years in debt with student loans. Then there are cost of living expenses such as rent/mortgage payments, utilities, food and transportation to factor in. Typically credit card debt has accrued at this point as well. Credit card companies target students for good reason… they tend to have limited finances.
By the time the desire to build wealth sets in, they’re thousands (often tens of thousands) in debt and have limited, if any money left to put towards that goal. That’s when they turn to the advice of “financial gurus” who never seem to advise them to ALWAYS pay themselves first with the mantra “part of what I earn is mine to keep”. But instead they’re told to get out of debt and then invest in mutual funds that earn 7% (magically in guruland) annually.
Financial literacy is something that we can’t afford to not be teaching/learning. Since we can’t rely on the education system to make it required learning, we have to make it required learning for ourselves. I implore you to make this a priority in your life and encourage everyone that you know to do the same.
The reason I started this blog was to connect with people who are in pursuit offinancial knowledge and building wealth. Especially those who want to do so but can’t either because they are drowning in debt and/or have limited funds to do so.
The world is on the verge of bankruptcy and financial collapse. We as a society need to purge the consumerism obsession lifestyle out of us and make financial stability our mission. The societal financial safety nets of social security and medicare are unsustainable. Social security was never meant to be the sole source of retirement funding, but a supplement to it.
As unemployment surges and people have no financial reserves, they are turning to government assistance programs which are strained and reliant on tax revenues for funding. Food banks are maxed out and charities can only give so much.
So, let’s focus on solutions and strive to teach those willing to learn. Let’s be the change we want to see in the world by forging the path to financial freedom and lift up as many as we can a long the way.
As I like to say… “the journeybegins with the first step”.
If you see value in this article then please be sure to like and subscribe to the blog if you haven’t done so already. I’ll be putting up more wealth building posts in the future and you can have them delivered straight to your email account.
I’ll see you in the next post. Until next time… be sure to comment below and let’s get some dialogue going. I’m curious to know, what’s your opinion on teaching financial literacy?
“Financial freedom is a mental, emotional and educational process”
– Robert Kiyosaki –
Wow… here it is two weeks later since the last Payday Plan Post Time to do an update since the last one and document the planned investments for this payday.
– Designated funds from this payday –
401K contribution $172.10 – current value $15.825.30
Fidelity brokerage account $75.00 – current value $184.92
Acorns Roth IRA $5 – current value $100.13
Acorns investment account $5 – current value $143.44
– A part of what I earn is mine to keep –
You can create your own acorns account by clicking here.
I’m not putting a lot towards investments currently since I’m paying down debts. But the goal is to pay myself first each payday and put that money to work before anything else.
I wanted to catch the ARKF eft for $36.50 last payday, but it never went back down to that level and instead went back up into the $38 range. So I decided to add another $25 to the fidelity account and pick up a share of BIGC (Big Commerce) for $72.81. I watched it go down to the $66 range for two days before popping back up into the $140 range so I’m up huge on that buy at a 93.65% gain since the purchase. There’s been a lot of volatility on the price in an upward trend for three days straight.
I purchased a share of ARKF etf a few weeks back before the first payday plan post at $38.50 and its currently at $40.23. So I’m up 4.49% on that position. I’m thinking about picking up another share or two if it dips back down again.
I’ve been considering starting a small position in another stock or etf so I’ll see where the price goes in the next couple of days and share my decision on the 9/11/2020 payday plan post.
Be sure to keep track with me and if you’d like, share your payday plan in the comments section below.
Until next time…please like, follow and be sure to comment below and let’s get some dialogue going.
“The true investor welcomes volatility… a wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses”
– Warren Buffett –
As I’m writing this post for the blog, I’m watching the share price of one of the stocks I recently purchased soar. The thing is, on the same day I purchased the stock for $72.81, the share price dropped soon after I purchased it and the day after that it went down even further into the $66 range. I was bummed that I didn’t wait another day or two to buy it for cheaper but I also knew the stock jumped up from $24 to $103 on it’s IPO date a couple of weeks ago, so I held strong. Today as I’m writing this the stock price has jumped back up into the mid to high $90’s range and at one point traded at a day range high of $103.90.
If there’s one thing about investing that you need to take into consideration it’s the ups and downs of the market which is known was market volatility. This is where the weak hands get shaken out and strong hands add to positions on downward trends, also known as buying opportunities. Downward trends are where a lot of people make the mistake of panic selling and when the stock price recovers they end up regretting that they sold instead of riding it out.
Now, that’s not to say that selling on a downward trend is necessarily a bad thing either. Pending on the circumstances as to why a particular stock price or the market as a whole is dropping is taken into consideration. There are a number of reasons why a stock could be losing value.
Negative earnings reports
The change of upper management in a company
A dividend cut
Dilution of shares via the issuing of new stock
Shorting of the stock
Market uncertainty
Economic shocks
Those are just a few off the top of my head, but the thing to remember is that before you make an investment, you should always do due diligence before you put your money into it!
The benefit to market volatility and why it’s your friend is because downward trends are buying opportunities for solid investments. Back in mid-march of 2020 in the midst of the covid 19 scare, there was a huge market sell off where the market as a whole crashed. All of the solid stocks like the FAANG stocks Facebook, Amazon, Apple, Netflicks and Google went on sale. A lot of other great stocks and ETF’s dropped as much as 50% at the time and have since recovered to their original pre-crash values.
The thing is, you have to know why you make a particular investment in the first place and realize there will be price fluctuations along the way. This is where dollar cost averaging can be beneficial as you add to your position over time. But you also have to endure the downtrends or be shaken out of your position by panic selling.
When making your investment, don’t try to time the market. Price ranges can swing wildly in just one day as in today as the perfect example. The stock price of the stock I purchased a few days ago has had a daily range today of $75.07 to 103.90 and has been swinging wildly since. So decide on a price that you’d like to buy at and set a limit order in hopes of catching it at that price. You can also sit and watch the price during trading hours and do a market order if the price range is to your liking.
To be clear, nothing is linear when it comes to investing in stocks. Over time, prices tend to gradually go up with solid companies, but in what are called trend channels. That’s a gradual upward trend that has pull backs along the way, but gradually makes higher highs and pull backs tend to drop back down to previous high levels before heading back up again. A bullish trend channel example below:
One last thing, always have an exit strategy in place when making an investment. whether it’s a long term hold or swing trade have a plan in place for how long you plan to hold it and what sell price you’ll liquidate at. For me, I’m rebuilding my stock portfolio for a 15-20 year buy and hold strategy. I’m willing to ride out price fluctuations and “buy the dip” on down trends a long the way.
As I like to always say… “the journey begins with the first step”.
If you see value in the article, please be sure to like, comment and subscribe to the blog ifyou haven’t done so already because I’ll be putting up more wealth building posts in the near future.
Until next time… be sure to comment below and let’s get some dialogue going. I’m curious to know what’s your investment strategy and time line?
“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.”
– Ogden Nash –
Part of the process of building wealth is freeing yourself from financial debt. The grueling process of paying down debt isn’t an easy task, but one that must be completed in order to continue down the path to financial freedom. It’s obvious that the sooner you pay it off, the more you’ll have to put towards your investment portfolio. However, I don’t believe you should wait until your debt free to begin investing.
The process of paying off debts can and often does take years to accomplish. My personal belief is that you should pay yourself first as if you’re one of your creditors and put that money to work for you while the rest goes towards your debt free goal.
As much as I desire to live debt free as soon as possible, I also know the benefit of compound interest working in my favor over time. So I choose to build wealth and pay down debt in tandem. I know that this goes against the preaching of financial gurus like Dave Ramsey who believes you should be debt free before you begin investing. But, I follow the principle of the richest man in babylon that “part of what I earn is mine to keep” and put that to work for me now.
From my experience, the hardest part of paying down debt isn’t a money issue, it’s a self discipline issue. It’s so easy to give into the temptation of “I have to have it now” rather than practicing delayed gratification. But my determination and commitment to building wealth make it easier to resist.
When we decide to go into debt, our present self isn’t taking into accountability to the affects it will have on our future self. We take for granted that we’ll always have an income to make those “affordable payments”. But what we don’t factor in is that unexpected issues occur and if we’re not properly prepared by having an emergency fund set aside while setting up multiple streams of income, we become extremely vulnerable.This is why we’re on the path to financial freedom.
As a reader of this blog, I urge to to set financial goals today if you haven’t done so already. Make those goals definitive and give yourself a timeline to accomplish them. Vague goals like “I want to be debt free someday” aren’t good enough. Strive for specific targets and dates such as “Have the capital one credit card paid off by January 1, 2021”. This way it’s a measurable goal.
The other thing I want to discuss while enduring this grueling task to become debt free is commitment. I think we often confuse determination with commitment, but they are not one in the same. Determination is the unwavering decision making part, while commitment is the pledge to the course of taking action.
Make a pledge to yourself that it’s normal to live in debt is pure B.S.! The only exception that comes to mind is real estate which is considered “good debt” but has it’s risks as well. Otherwise debt is a burden that should be avoided at all costs (pun intended).
It’s grueling, but staying focused on the end result makes enduring the debt elimination process tolerable. There are countless articles, videos and podcasts on click bait title “ways to become debt free”… but the ONLY way to become debt free is to remain vigilant.
One last thing I want to say is that debt free does not equate to being financially free. Just because you don’t have debts to pay once achieved doesn’t mean there still aren’t cost of living expenses that need to be met. Until you have enough income saved and multiple streams of income other than working a job, you aren’t financially independent.
As I like to always say… “the journey begins with the first step”.
Be sure to like, comment and subscribe to the blog ifyou haven’t done so already because I’ll be putting up more wealth building posts in the near future.
Until next time… be sure to comment below and let’s get some dialogue going.
“Wise spending is part of wise investing. And it’s never too late to start.” – Rhonda Katz –
I LOVE fintech and I’ll be posting about that soon. However, in my previous post I mentioned that this post would be about how you can start investing for as little as $5 a month. I think it’s pretty amazing that the innovation of modern technology makes is possible for anyone to invest from anywhere and with little money to start. There once was a time when it required a large sum of money to start and paying expensive brokerage fees on top of that. Now you can purchase equities without fees and do so from your cell phone from anywhere depending on the type of account(s) you have.
I’ll talk about acorns, which requires a monthly fee depending on which account type you set up. Acorns is a micro-investing app that allows you to set up an account in just a few minutes and contribute funds to your account in a few different ways.
Set up a one time contribution.
Set up a daily, weekly or monthly contribution.
Use the round ups feature and contribute spare change from your purchases into your acorns account.
As with anything, there are pros and cons to the acorns micro-investing app to consider.
Pros:
Easy to set up and make contributions automatically.
Can start investing for as little as $5… options vary from one time contributions you can make at your convenience or automatically on a daily, weekly or monthly basis.
Depending on what bank account you have, you can set up the round ups feature to round up purchases to an even dollar and contribute the spare change into your acorns account. This feature is currently limited to specified banks and credit institution accounts.
Dividends earned on investments are automatically reinvested.
Can open up investment accounts for kids and easily transfer the account the the child later.
Can set up an IRA plan for retirement.
Cons:
As with most subscription services, there are fees to consider. Depending on the account type selected will depend on the monthly subscription fee automatically withdrawn monthly from the contributions deposited. Currently there are three plans to choose from… lite ($1), personal ($3) and family ($5). My acorns account is the $2 Plus which is no longer available to new customers.
Limited investment options. Once the account(s) are set up, you then choose from five portfolio types: conservative, moderately conservative, moderate, moderately aggressive and aggressive. IRA accounts are based off your age and timeline until retirement and invested accordingly.
Not able to purchase equities of your choice. Your investment choices are limited to the options available. Investment types and percentages can be viewed by clicking here.
Personally I like acorns and don’t mind paying the $2 monthly subscription fee. I know that there are those who view the fees as eating into the investments, but I view the fees as separate from what’s actually invested. So if I contribute $20 a month I know I’m actually investing $18 of it. I pay more than that for a cup of coffee so to me it’s putting my money to good use on a hands off investment.
The following is an article I found reviewing acorns compared to other investment options available. I think it’s extremely informative and explains things in great detail to better inform you.
All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on TheTokenist.io. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.
Do you have difficulty saving money?
It’s hard to invest when saving is an issue. That’s why Acorns jumped on the scene.
The micro-savings investment app rounds up your daily purchases to a whole dollar amount, and invests your “spare change”. Let’s say you purchase a daily necessity — coffee ☕️ — for $2.43. With Acorns, you just invested $0.57 cents.
Doesn’t sound like a lot? You might be surprised at how quickly it adds up. Users can also invest directly, to make sure a certain monthly contribution amount is met.
If Acorns sounds like a good option, there’s a lot more you need to know. Let’s dive in.
Acorns rounds up everyday transactions, using the “spare change” to fund investments. Those who find it difficult to save on their own love the service, while most people in general are a fan of the flat fee structure.
Investor Warning: Investing with Acorns involves risk, including loss of principal. Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. Prospective investors should consult their own financial and legal advisors about risks associated with securities and the suitability of investing in such securities.
What is Acorns?
Acorn has been in the news a lot lately thanks to CEO Noah Kerner, who has been called a pioneer in fintech for the mobile investment app that invests your change. Round-up investing has never been as easy as it is now thanks to this mobile investing app.
The start-up has become more and more hopeful of an IPO, but for now, its robo-advisor tools are becoming more popular with millennial investors as all eyes focus on investing with AI.
However, fintech is becoming much more than an investment app. With recent investors like Jennifer Lopez and Alex Rodriguez investing in Acorn’s technology, the CEO looks to help everyone invest without even thinking about it.
In June of 2020, Acorns expanded its investment model with Acorns Early. The program allows parents to create investment accounts for their children. To celebrate its launch, Acorns is providing a free account for all children born in the year 2020 — no fees until the child turns 18 and becomes the account owner.
While the app has grown extremely popular, there are some drawbacks to this innovative new investing strategy. We show you why Acorns may not be the right pick for certain portfolios.
Acorns Compared
Accounts & Fees
Management fees
$1, $2, or $3/month
0.25%
None
Account Minimum
$5
$0
$0
Account Types
Individual non-retirement accounts
Traditional & roth IRAs
Cash account
Traditional, Roth, SEP, & rollover IRAs
Joint and individual and non-retirement accounts
Trusts
Individual and joint taxable accounts
Traditional, Roth, SEP & rollover IRA
Trusts
General
Best for
Hands-off investing
Investors who have difficulty saving
Hands off investors
Retirement accounts
Low fees
Socially responsible investors
Promotion
None
1 year of free management, with qualifying deposit
None
Human advisor?
Yes, but only with Betterment Premium (0.40% fee)Rating6.0/10Visit Acornson Acorns’ website9.5/10Visit Bettermenton Betterment’s website9.0/10Visit M1 Financeon M1 Finance’s website
Quick Summary of Acorns’ Features
Management Fees
$0 to open account, $5 required to start investing
$1 a month for taxable investment accounts, $2 a month for IRA account and tax-advantaged accounts, $3 a month for checking account plus retirement and investment accounts
To close your account, investors must pay $50 per ETF to have ETFs transferred to another broker
No charge to sell investments and transfer money
Score: 8.5/10 Acorns is made to be low-cost, so it’s no surprise that they required deposits and monthly subscription fees. While it may not seem like a lot, it could be if you only invest $50.
Expense Ratios
Acorns has average expense ratios that start at 0.03% and go to up to 0.18%
Score: 9/10 The expense ratios can be a little high for Acorns with certain funds, but overall, the company keeps their ETF investment costs low.
Account Types
Individual non-retirement accounts
Traditional IRAs and Roth IRAs
Online checking account with debit card
Score: 6/10 You really do not get to diversify your accounts as much as you would think. There aren’t many retirement or savings plans options either.
Investment Options
7 different ETFs chosen based on risk tolerance
Uses small round-up investments from your accounts to invest in ETFs
Investments are Vanguard S&P 500, Vanguard Small-Cap, Vanguard FTSE Developed Markets ETF, Vanguard Emerging Markets Stock, Vanguard REIT, iShares iBoxx Investment Grade Corporate Bond, and iShares 1-3 Treasury Bond
Offers fractional shares
Score: 8/10 There are over 7,000 stocks and bonds available with Acorns, and you can invest in fractional shares.
Tax-Loss Harvesting
No tax-loss harvesting or tax efficiency benefits
Score: 0/10 You won’t find any of the bells and whistles like with Betterment or Wealthfront using Acorns. This is pretty bare-bones when it comes to investing services and tax strategies.
Rebalancing
Available and free for all accounts
Investors pick from five portfolios and Acorns automatically rebalances, reinvesting dividend payments regularly
Score: 7/10 Threshold-based rebalancing helps keep investors on track, but it’s not as sophisticated as other robo-advisors like Betterment and Wealthfront.
Human Advisors
Not available
Score: 0/10 The service is pretty low-cost and does not ask for much of an investment, but there are no options, not even premium ones, to help out beginner investors. Since this app is based on novice investing, wouldn’t it be better to have some broker assistance or financial planning for an additional cost?
Socially Responsible Investing
Not available
Score: 0/10 If you want this feature, you’ll need to head somewhere else. While you have some flexibility with the “Change Your Potential” tool, it’s not based socially responsible factors.
Instead, you can pick and change investments to simply boost account value. Other options and research into SRI factors are not available.
Acorns Overview
Pros
There is no minimum investment to get started
You can invest your spare change through round-up investments
Service is free for college students
Access fractional shares, gift cards, and over 7,000 stocks and bonds
Five investment portfolios ranging from conservative to moderate to aggressive
Cons
Fees are pretty high for small balances and could impact small business owners adversely
No tax-loss harvesting or tax services of any kind
No financial planners or human advice available
Very little investment options in comparison to other robo-advisors and brokerages
No socially responsive investments and very little flexibility on selections
How Much Does Acorns Cost?
We hate to see it, but Acorns is not exactly cheap unless you invest more than $5. Even though Acorns markets itself as a low-cost way to save, there are some fees, and they can lead to bigger costs depending on your account balance.
Although Acorns presents itself as a cheap investment platform, good options are available only for higher investments.
For example, you will pay $1 a month for “Acorns Core,” which is a taxable account, $2 a month for “Acorns Later,” and $3 a month for “Acorns Spend.” While you gain access to more services and accounts, is it worth paying almost $40 a year if your change does not make you more than $10?
It’s difficult to find any other robo-advisor that charges a flat fee like this because it can be very problematic for low balance accounts.
Here is a visual of what your fees are when converted to percentages of assets:
Account Balance
Acorns
Acorns Later
Acorns Spend
$100
12%
24%
36%
$500
2.4%
4.8%
7.2%
$5,000
0.24%
0.48%
0.72%
$10,000
0.12%
0.24%
0.36%
The fee system is meant to make accountholders invest more, but other competitors such as Better and Wealthfront only take 0.25% of your total account balance. In addition, Stash offers a $1 flat fee for a brokerage account plus a bank account that comes with a debit card. And, if you upgrade to the $3 a month plan, Stash offers you a traditional or Roth IRA, in addition to your other accounts.
There are also other fees that are problematic for Acorns users. For example, if you decide that you want to move your investments out of Acorns and to another brokerage, then you must pay $50 per ETF to transfer any investments.
While this fee is sometimes charged by other brokerages, it’s extremely high for Acorns. For example, if you are invested in all 7 ETFs, then you would spend $350 to move your money. Most firms only charge investors $75 for transfers no matter what the ETFs.
Overall, Acorns may seem sweet and innocent, but there are some steep costs if you are not constantly investing more into your accounts.
What We Like About Acorns
Acorns works by rounding up your change and investing your dollars through modern portfolio theory. This means that diversification is more important than the actual stock selection. This can benefit investors by investing in the best stocks, markets, bonds, and other options available.
The company is also headed towards an IPO, so it has to be doing something right. CEO Noah Kerner believes that Acorns users do not need much to invest, and that’s the beauty of it.
While Acorns feels like it’s affordable, the fees may not be for everyone. However, they do offer some financial breaks to certain users.
College Students Get Free Account Management with Acorns
It makes sense that Acorns would market itself to college students. After all, most of them are probably not thinking about investing, but the lure of turning change into pocketfuls of beer money is a big draw. These millennial investors do not have a whole to invest, which is why round-up investing makes so much sense.
Acorns aptly waives fees for this group as long as students register with an .edu email address. College students get the most advantages when they use this service because it’s completely free, and at graduation, they may have a nice pile of money after fours of rounding up their change.
Automated Investing
It’s easy to save money with Acorns. It’s not complex. The app connects to your accounts for you and rounds up your change, investing in stocks that will likely earn you a small profit.
Sometimes the hard part about saving is actually investing in yourself. Acorns makes this easy to do by automating the process for you. Investors don’t even have to think about it, and so money simply grows over time.
How does Acorns do this? The app connects to your linked accounts and moves all change from every purchase into your investment accounts.
You can connect as many debit cards as you need to, but all the round-up investments come from a linked checking account. Acorns will round up to the nearest $1 and offer you the option to transfer your change into your portfolio.
It’s best to set this process to automatic so that each purchase is earning you an investment, but you can also select manually and view your purchases, then select which roundups you want to send to your investment accounts.
Acorns also allows users to invest larger sums manually as well. For example, you can set up a recurring direct deposit that happens daily, weekly, or monthly. These transfers can be as little as $5.
Found Money
Acorns offers a cash back program that is pretty intuitive and amazing to help their investors grow money out of thin air. The Found Money program allows you to use your Acorns debit card with our chesting account and earn cash back at certain partners.
Found Money program lets you earn your cash back while buying at Acorns’ cashback partners.
These cashback partners include:
Nike
Walmart
Warby Parker
Airbnb
Sephora
Whenever you use your card with a linked payment method at these stores, then your cash back is automatically invested in your portfolio. Again, Acorns excels at allowing you to invest money when you didn’t know you even had any.
Expertly Created, Nobel Prize-Winning Portfolios
It’s easy to sign up for an Acorns account, whether you are online or on your phone. The guide takes you through each step, and then you fill in your reasons for investing.
Based on your answers, Acorns creates a customized plan with a recommended portfolio that was created by experts, which includes a Nobel Prize-winning economist.
There are five different options that you can select for investing:
Long-term investment (retirement)
Short-term investment
Major purchase
Children
General
Once you log in, you can connect your accounts and start earning money from your round-up investments. You can see what index funds you invest in as well and how the market is doing.
Set Up Your Retirement Using Your Change
Acorns offers easy IRA setup and lets you invest in your IRA with small amounts.
This is the best part of Acorns and what it was meant to do. Many younger investors and beginners shy away from long-term investing due to all of the planning and paperwork over setting up an IRA. With Acorns, you can set one up in seconds, and you don’t have to worry about funding it.
The interface makes it extremely easy to link your accounts and start rounding up your spending. As soon as you have $5, it’s transferred into your IRA, and the robo-advisor adjusts your shares accordingly. It could not be more simple to grow a little nest egg.
Where Could Acorns Improve
We do think that the fees are quite atrocious from Acorns since advertising suggests that it rounds up your change without much cost. However, the fees have actually proven to be quite significant to those who do not invest more than their change and also do not deposit any other sums manually into their investment accounts with Acorn.
There are a few more things that Acorns should consider changing:
Difficult to Transfer Accounts
Acorns does not want you to take your accounts away, but that should not be a reason to punish. If you have to leave Acorns, you may not be able to take your investments with you unless you can pay $50 per ETF that you have invested in.
We believe Acorns does this to prevent customers from “stealing” their strategy after a week and just paying a small fee to transfer over like so many do in other brokerages, but it just seems wrong to charge hundreds of dollars or lose everything to cash out.
No Human Advisors
For beginners using Acorns, everything seems so simple, but what if you don’t know what you want to invest in? Are you making the right move by putting your money into those stocks and bonds?
The automated features may be impressive but the human advisor is necessary in some cases.
The robo-advisor will select stocks and bonds based on your answers to a questionnaire, but what if you don’t want to invest in something? What if you aren’t sure how to buy stocks?
You can’t change your selections, and your investing options are extremely limited. You have 7 different asset classes to choose from, but once your picks are made, Acorns expects you not to look into it any further.
That is the goal of a robo-advisor: to provide completely hands-off investing. However, most robo-advisors do include a human touch to ensure that investments are in line with the client’s needs.
There are No Tax Benefits
Tax-loss harvesting is not included with your Acorns account. There virtually is no tax assistance, including no advice or education articles about it.
In fact, Acorns will only send you something about taxes during tax season when you receive a 1099 in the mail. Most robo-advisors today include this service to help reinvest earnings and save clients from capital gains tax.
Smaller Portfolios
Even though Acorns is like other robo-advisors in that it takes inspiration to invest from your questionnaire, the app also uses your data such as income, age, and goals to recommend one of five portfolios. These portfolios range from aggressive to super conservative, meaning only bonds. You can accept the portfolio given to you or you can opt for a different one that is more suited to your risk level.
There are just five portfolio options to choose from. With an aggressive portfolio, most of your investments are in stocks. On the opposite end, conservative portfolios stick to bonds. Here is a quick comparison:
Portfolio
Stocks
Bonds
Real Estate
Aggressive
90%
0%
10%
Moderately Aggressive
72%
20%
8%
Moderate
54%
40%
6%
Moderately Conservative
36%
60%
4%
Conservative
18%
80%
2%
The portfolios on their own are actually much smaller than what you would receive at places like Betterment or Wealthfront. These are portfolios consisting of low-cost Vanguard and iShares ETFs that only cover around five to seven different asset classes. These typically include real estate, small-cap stocks, large-cap stocks (international and domestic), emerging markets, and corporate bonds.
While this can diversify your portfolio, it feels too restrictive to actually have a well-rounded portfolio. If you want more options, then Betterment is likely better because of its many options and larger asset class array.
Acorns Platform, Mobile Access, and Ease-of-Use
Acorns is easy-to-use on the web and on mobile. The navigation is quick and simple, allowing you to review investments, check your accounts, and see your “Found Money.” There is no minimum to open, so as soon as you earn $5, it is automatically put into your diversified portfolio.
On mobile, Acorns users will have an even easier time investing their money and seeing their savings. When you login, there are three panels including Past, Present, and Potential.
These panels give you more insights into your portfolio. Each tab offers more information including analysis and current values of your accounts as follows:
Present Tab
This tab refers users to an overview of their current accounts. You can use this panel to make fast changes to your round-ups, deposits, and see the most recent offers from Acorns’ Found Money partners. It’s the best way to gauge the overall health of your investments with Acorns.
Past Tab
If you want a more in-depth analysis, then the Past tab is the best way to look at all of your previous round-up transfers, check on deposits, look at your earned FoundMoney, and more features.
For example, if a user has earned money from dividends or referrals, then these will be shown in the Past tab, too. It’s easy to see how your investments are compounding and also how quickly your accounts are earning you more money.
Potential Tab
Most investors want to grow their money. The potential tab is where you can see the projected value of your accounts based on your current selections for investment.
If you do not like the projects, you can tap “Change Your Potential,” which will let you alter some investments in order to boost your account value. However, beginner investors do not get much education here, so they have to be careful not to change too much.
In addition to these features, Acorns also offers a blog that provides some knowledge of different investing terms and savings. You can also catch up on the latest investing news and learn what trends are currently swaying the stock market.
There are also a number of different frequently asked questions if you get stuck. Overall, the blog and education section are pretty extensive and will help you learn more if it’s your first time investing in anything.
What Type of Investors Should Use Acorns
Acorns appeals to the beginner investor who does not want to fully understand the market in order to participate. If you don’t have the time to figure out investing, then Acorns will seem simple and quite low cost. Since it mostly relies on the mobile app, it’s mainly geared towards millennials who want to grow money from their purchases with round-up investments.
The Acorns platform facilitates investing for people who don’t plan on becoming professional investors.
If you are a college student, Acorns has significant benefits, and it’s free. You can save for the future one purchase at a time, and it helps you start planning for a new house or even retirement.
Passive investors get a kick out of Acorns because you can set it and forget it. Once you return to check on your investments after a couple of weeks, you may be surprised to see that your round-up investments have earned you $20 to $50 or more.
Investors who don’t have a lot of time also appreciate Acorns because there’s nothing to it. This is one of those completely hands-off investment tools that does not even require you to manually make deposits or check on your investments to ensure that they stay within your risk tolerance. Everything is automated and easy.
For those who are not interested in learning about investing but want to save money, Acorns is the perfect mobile app. You don’t even have to think about investing with this robo-advisor.
All of the investments are made automatically, which lets you save without even a thought. It was also named one of the most innovative companies in 2019.
While Acorns would like it to be so simple, many knowledgeable investors have criticized the platform for the amount of fees and high costs associated with closing your account. While there are no costs for selling and transferring money from your investments, many investors see the inability to transfer investments without paying $50 per ETF as a huge blow.
How will you diversify your strategy when you earn $5,000 or $10,000 with your round-up investments? Acorns may not want you to get that far because you could start to take this investing thing seriously.
Frequently Asked Questions About Acorns
Should round-up investments be central to your investing strategy?
Some people have a hard time saving money even when they make a lot of it. The idea with Acorns is that you don’t even have to think about your savings to start saving.
However, we don’t think that round-up investments are central to a strong investing strategy. You add up your earnings slowly, and Acorns does not offer enough asset classes and flexibility to really provide the best portfolios.
We did the math, and if you invest on average $50 a month through your round-up investments with Acorns, using a 7% market return, then you will have over $3,200 after five years. In comparison to simply sending your change to a savings account at a bank, you probably would only earn $2,500 in five years.
Can you invest larger sums with Acorns?
Yes, it is possible to deposit larger sums manually into your Acorns account, but should you? If you have extra money to play with and your returns have been generous with your Acorns portfolio, you may see nothing wrong with adding $10,000 to your account. In fact, your costs in fees drop considerably when you invest larger sums like this.
However, their investment options simply do not offer what you can achieve with another robo-advisor like Betterment or even a full-service brokerage where you can make more with your money. Acorns has less ways to diversify than most other brokerages, and you don’t have any flexibility to customize asset allocations unless you pick from one of the other five portfolios.
In addition, there are no broker-assisted trades or financial planning help. You are on your own with Acorns, although their education area continues to expand. It’s still not comparable to a service like Betterment or Charles Schwab that would help you with advice.
What are Acorns gift cards?
Acorns announced a new gift card portal in 2019. You can choose the amount and send to your recipient so that they can have that automatically invested in their Acorns account.
All the amounts sent with the Acorns gift card are automatically invested in the recipient’s Acorns account.
There are some restrictions including that you must be a legal US resident and be over the age of 18.
Aggressive portfolios seem to have a higher rate of return, but there is also a lot of risk. Most investors using Acorns are not familiar with some investing terms and may not understand the differences in stocks and bonds as relative to aggressive and passive strategies.
This could lead to bigger losses, but it’s really the fees that are problematic for most savvy investors who say that Acorns is ripping off millennials since they don’t know any better.
Can I withdraw money from my Acorns account?
Yes – Acorns allows you to withdraw money to an external checking or savings account at any time without any fees.
How long does it take to withdraw from Acorns?
Most withdrawals from Acorns will take 5 or 6 business days, after which the funds in question will be available to you in your bank account.
When you place a withdrawal request, you’ll receive a confirmation email within one business day. Once you verify that you’ve placed the request, Acorns will place trades to raise the required amount of cash. Requests that are placed before 11AM PST will typically be processed within the same day.
When that is done, it takes another 3 days for the trades to settle, and an additional day or two for the ACH transfer to be completed.
Is there a penalty for withdrawing from Acorns?
No, there are no penalties or fees associated with withdrawing money from your Acorns account.
Do you pay taxes on Acorns?
Yes, you will be required to pay taxes for investments made with Acorns. Even if you did not withdraw any money or sell any of your investments within a single year, you may still be liable for taxation.
If you’ve received dividends totaling more than $10, sold investments for $20 or more, or withdrawn money from your Acorns account, you will certainly have to pay taxes.
Acorns doesn’t offer tax advice, but they will send you tax forms on an annual basis – just remember to consult a professional and take care of that unfortunate and inevitable bit of business on time.
Which is better: Stash or Acorns?
While Stash and Acorns might look similar at first glance, they do differ from each other in a variety of aspects.
Acorns is a robo advisor, while Stash isn’t. Stash allows you to hand-pick your investments, and also allows for the purchase of individual stocks, while Acorns invests your money solely into ETFs.
Stash has a bigger focus on educational materials – although Acorns doesn’t lag far behind them in that respect. Stash also offers a wider variety of investments to choose from.
On the other hand, Acorns will end up costing you less – their fees are lower, and the rounding-up feature is a quite useful way to passively set aside money for investing. Looking at both services, it’s too close to call. The biggest difference is the approach that you’ll get with either – hands-on and active with Stash and hands-off and mostly passive with Acorns. If you’d like to see an in-depth review of how these two services stack up against each other, check out our comparison of Stash and Acorns.
Competitor Comparison
Compare Acorns
Find out how Acorns stacks up against the competition.
For our Acorns robo-advisor review, here is the criteria we used to rate the company:
Low-to-no management fees: We look at the fees assessed by the robo-advisor, which is typically a percentage of your assets charged annually. This number should be low, equating to less than .23% annually.
Expense ratios: Many mutual funds, index funds, and ETFs have low-to-no expense ratios. Your robo-advisor should invest in funds that do not have high expense ratios. It’s also important to know the average expense ratios by fund type.
Available account types:Robo-advisors should have retirement accounts for tax advantages and taxable accounts to cater to both passive and active investors.
Available investments: What does the robo-advisor like to invest in? Most use a combination of low-cost index funds and ETFs.
Tax-loss harvesting: Robo-advisors should be able to identify losing investments and cut losses by eliminate taxes you would owe on capital gains.
Rebalancing: Automated investing also means remembering goals and bringing back allocations when necessary. Robo-advisors should check this daily and ensure they are investing with your goals in mind.
Human advisors: Some free robo-advisors do not offer any financial advice from a human, so this isn’t always important, but if you are new to investing and want to ensure your money is spent right, you may want this option.
Socially responsible investing:Most robo-advisors have a quiz or survey at the beginning to understand your SRI or socially responsible investing type. These are values that may exclude some industries, such as fossil fuels or guns.
As I like to say… “the journey begins with the first step”.
If you see value in this article then please be sure to subscribe to the blog if you haven’t done so already. I’ll be putting up more wealth building posts in the future and you can have them delivered straight to your email account.
I’ll see you in the next post. Until next time… be sure to comment below and let’s get some dialogue going. I’m curious to know, what tips do you have on how to build your wealth portfolio?
“The big money is not in the buying or selling, but in the waiting” – Charlie Munger –
It’s pay day… YAY! A portion of what I earn is mine to keep. Time to document the investments I’ll be making from this payday…
401k contribution $137.36 – current value $15,416.05
Fidelity brokerage account $50 – current value $38.70
Acorns Roth IRA $10 – current value $89.15
Acorns Invest account $10 – current value $131.56
I’m not putting a lot towards investments currently since I’m paying down debts. But the goal is to pay myself first each payday and put that money to work before anything else.
I’m planning on purchasing another share of the ARKF etf (equity traded fund) and keeping the remaining amount as dry powder for future stock/eft acquisitions. I’ll be setting a limit buy price of $36.50.
The acorns Roth IRA account is age based that’s currently diversified as follows:
iShares 1-3 Year Treasury Bond ETF (SHY)20%
iShares Inv Grd Corp Bond ETF (LQD)20%
Large Company Stocks (VOO)29%
Vanguard Small Cap ETF (VB)10%
Vanguard Emerging Markets ETF (VWO)3%
Vanguard REIT Index ETF (VNQ)6%Vanguard
FTSE Developed Markets ETF (VEA)12%
The acorns investment account is set at moderately aggressive and diversified as follows:
iShares 1-3 Year Treasury Bond ETF (SHY)10%
iShares Inv Grd Corp Bond ETF (LQD)10%
Large Company Stocks (VOO)38%
Vanguard Small Cap ETF (VB)14%
Vanguard Emerging Markets ETF (VWO)4%
Vanguard REIT Index ETF (VNQ)8%
Vanguard FTSE Developed Markets ETF (VEA)16%
You can create your own acorns account by clicking here.
Not only will I be adding to the acorns accounts each payday but I’ve also set it up so that on the 1st of each month $10 will be automatically withdrawn from my checking account and put into the acorn accounts.
I’ll be making this a regular post that will be updated each payday.
Be sure to keep track with me and if you’d like, share your payday plan in the comments section below.
Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it – Albert Einstein –
When it comes to investing money, the best time to start is yesterday. The sooner you start, the more time your investment portfolio has to grow. It’s not so much how much that you have to invest that matters as much as when you begin. Smaller amounts over a longer period of time will grow more than larger amounts later due to the power of compound interest.
If you’re familiar with how compound interest works then great, you understand the value of time and reinvestment. If not, no worries, you’re about to be enlightened to another key principle of how to manage your money like the rich.
So without getting into technical jargon that can get confusing with calculations and formulas, let me put it into simple terms. Compound interest occurs from interest that is earned on an initial investment and then reinvested to earn interest on the interest previously earned. The money that your initial investment created is now working for you to earn more money. In other words, free money earning free money over and over again growing exponentially.
Once you grasp this concept, you’ll never see money the same way again and understand why money is a tool used to build wealth. This is where time is your friend. The interest starts out small but grows large over time just like the snowball rolling down a hill. This is why the sooner you start the journey to building wealth, the better. I don’t know about you, but I love the concept of free money earning free money.
Let’s put this into perspective with a hypothetical investment scenario. We’ll invest our principle and interest 10 times over and keep the numbers simple so it’s easy to follow:
$1,000.00 that pays 5% on the interest earned. Initial investment .05 x 1000 = 50.
1000 x .05 = 50 + 1000 = 1050
1050 x .05 = 52.5 + 1050 = 1102.5
1102.50 x .05 = 55.12 + 1102.50 = 1157.62
1157.62 x .05 = 57.88 + 1157.62 = 1215.50
1215.50 x .05 = 60.77 + 1215.50 = 1282.27
1282.27 x .05 = 64.11 + 1282.27 = 1346.38
1346.38 x .05 = 67.31 + 1346.38 = 1413.69
1413.69 x .05 = 70.68 + 1413.69 = 1484.37
1484.37 x .05 = 74.21 + 1484.37 = 1558.58
1558.58 x .05 = 77.92 + 1558.58 = 1636.50
So our initial investment was $1,000.00 which earned us $50 in interest. Had we just spent the interest earned (poor minded thinking) and reinvested only the $1,000 again 10 times over we’d have earned another $50 each time totaling $500.00 and not had the $136.50 difference. This is the beauty of compound interest. Because we reinvested the initial investment plus the interest each time (rich minded thinking), we made an additional 136.50 more and still have that interest working for us rather than had we just kept the $50 each time.
Now imagine having multiple investments doing this at the same time and consistently reinvesting the gains. This is where discipline and dedication that I talked about in the journey come into play. By leaving your investments alone to grow and not withdrawing from them, your investment portfolio will grow much larger and faster in the long run.
Remember, we’re paying ourselves first when we earn income and putting that to work to earn us more in perpetuity. Starting out small is better than not starting out at all so don’t let yourself get discouraged by not earning a lot in the beginning. Remember… we’re playing the long game here. Trust me, your future self will thank you for your delayed gratification now.
I can’t emphasize enough about the importance of getting into the habit of devoting a portion of what you earn towards your investment portfolio and putting that income to work for you. Anyone can afford $5 a month to get started and the next post I do will be focused on that topic to prove that it can be done thanks to modern day financial technology (fintech).
As I like to say… “the journey begins with the first step”.
If you see value in this article then please be sure to subscribe to the blog if you haven’t done so already. I’ll be putting up more wealth building posts in the future and you can have them delivered straight to your email account.
I’ll see you in the next post. Until next time… be sure to comment below and let’s get some dialogue going. I’m curious to know, what tips do you have on how to build your wealth portfolio?
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