Reports estimated that nearly around half of American never carry cash while moving out and prefer to pay with the help of debit and credit cards. Therefore gone are those days when people tended to throw those coins into piggy banks for longer period as this is no longer an effective way to collect your savings. But what if this whole process is done automatically electronically? By automatically investing the money (coins) somewhere each time when you swipe your card? And that is where Acorns comes into the screen, an app committed to doing only this thing. This app rounds offs the transactions made by user to the next dollar and thus investing the total sum collected in different portfolios.
What is Acorns?
Acorns Investment boasts of being the very first mobile investment application that lets you to open an account via your Smartphone. All at the ease of your mobile phone, you simply need to connect your bank accounts and invest some penny from your day to day transactions. An Acorn is a creative and new platform that allows you to invest your excess money with the aim of either collecting or building your wealth or to reach any short term saving goals that you have.
Essentially the best thing about acorn is its ability to invest very little amounts of money. You can even invest small bucks in it. These are added in your account whenever you do a transaction and invested via acorns, so this assures that you are not dealing with huge sums of money. Basically app offers a great base for those people who don’t have any kind of expertise in it and need a bit of recommendations whenever they start their work.
You can choose from five different reasons for investing:-
- Major purchase
- Long-term investment
- Short-term investment
At the end your Social Security number will need to be submitted there, which will be used for your ID verification, for preventing fraud and sending tax reports.
How to Work on Acorns?
Acorn account interface is made of such an ease that even a simple person without much knowledge of finance could use it all you need to do is complete a short sign up process. Download the app and then follow the steps given below to complete three step signing process:-
- Assigning a round up account
- Checking account
- Investment account
- Long-term investment
- Short-term investment
1. Choose a Round-Up Account
Now all of you must be thinking what is a Round-up account? It is actually that will be taken into consideration and will be checked for you and the transactions made with this account will be rounded off. Acorns currently offer all the popular banks which you can choose such as Wells Fargo, BoA, Chase, Citibank, U.S. Bank, USAA, etc. Now what if you bank isn’t listed in this? They offer you solution for the same all you need to do is tap ok and then type the name of you bank in the next search bar. Further they will want you to log into your bank account via net banking giving you sign in credential which are kept totally safe. Next you are allowed to click the account you’d like to use in your round-ups. You can connect more than one if you’d prefer.
2. Connect Your Checking Account
Now what is a checking account? You might be thinking of all the confusion that might occur between round – up – account and checking account, but acorns has provided solution for this also. It will let you to understand entire thing in proper manner. The checking account is basically the account from which the money is transferred out of into your Acorns account. Now again as in a Round up account you can again choose the existing checking account from the list and all you need to do is sign in to it using your online id and password. For those who don’t have their account listed on that list you need to manually search for your account and put your account number and then sign in. The best thing about Acorns is that it encrypts and protects all of the data with bank-level security.
3. Create an Investment Account
Now comes the third type of account this is your investment account that is the one that will be made up with the acorns. All you need to do is fill in your details with which you want to make the acorns account. Your name, phone number, date of birth (remember you need to be at least 18 years of age to have an acorns account) and choose a security question-answer. Then fill your address and zip code (you also need to be an U.S. citizen to have an acorns account.Once all the signup boxes are checked green, click the “Get Started!” button.
Another advantage offered by acorns is on the phase of pricing. It has quite nominal fees. Only $1 per month is charged on the account balances that have a account balance of less than $5000 and 0.25% per year is charged on account balances with balance of more than $5000. The biggest advantage comes for students who are not charged for any investment and it is totally free for anyone under 24 years of age. For those students who are older than 24 will have to use their education email address while signing up to receive free management tips.
The minimum balance of maintaining an account is nil however for starting an investment the minimum balance required should be $5. Even then the minimal of $5 can also be invested through Acorns so as to earn returns.
Methodology used by Acorns
ETF Selection: Acorns properly asses all the Exchange traded funds (ETFs) on the basis of their size expenses and liquidity offered by them.
Portfolio Selection: Acorns then asses your portfolio properly watching your goals, age, time span, risk tolerance and then choose a proper fund for you to invest in.
Portfolio Constructions: According to your portfolio and ETFs assessed it assigns you the ETF so that you could earn maximum returns. The optimal proportions of these assets are determined using the Modern Portfolio Theory.