What you MUST know about Acorns Investing

What's the guy's histogram here? So, okay everybody, I'm listening. You guys have been asking me non-stop to make a video about Acorns investing, and I've been ignoring it for quite a long time until today. So here it is! We're gonna be talking about Acorns investing, and you guys know me; when I review something like this, I go all out. I'm up until 2:00 AM, I'm reading all of the boring fine print, I'm immersing myself in the nuances of the product, and I'm doing my best to dig up as much dirt on the company as I can.

And that I did! All I ask is repayment for all of the relentless hours that I've spent researching for this video, staying up way too late and drinking way too much iced coffee. It's just a gentle tap of the like button, just a very firm tap, and you'll be good to go! Okay, there we go. Thank you!

So with that said, this is Acorns investing, and today we're gonna be going over all of its unique quirks and features. Then we're gonna be giving it a Graham score, and yes, Graham, the type of guy to make a Doug DeNiro joke on his YouTube channel. All right, so my not-so-funny jokes aside, what is Acorns investing?

Well, the basic premise here is that they're an app that helps automate your investing. I would say the most notable perk within their app is really within the Roundup feature. This pretty much just lets you invest the spare change from everything you spend by rounding up every purchase to the nearest dollar and then investing that difference.

So for example, if you spend three dollars and fifty cents on a cup of coffee, you can give Acorns the option just to round that up to an even four dollars and then invest that difference of fifty cents on your behalf. You can apply this to pretty much every single one of your expenditures, and it's very easy to see how this can add up very quickly.

You also have the option to use what's called their Roundup multiplier, which lets you multiply your spare change up to ten times. So if you have fifty cents left over from your cup of coffee, you can basically multiply that by ten times and invest up to five dollars on your behalf without even thinking about it. They also give you the option to set up recurring investments on a daily, weekly, or monthly basis.

Again, the entire purpose of this app is really just to help automate your investing and do it consistently. They'll also let you see real-time what your investments could be worth depending on how much money you invest and how often you invest. So again, all of this is really just getting you to see the long term.

Now, in terms of exactly what you, and they say that your investments are diversified across more than seven thousand stocks and bonds and automatically rebalance when the market fluctuates. So basically, they're just investing in broad funds that track the market, very similar to the Vanguard index funds that I mention all the time on this channel.

When it comes to this, Acorns is what's called a Robo-advisor, and this is definitely gaining a lot of popularity lately with companies like Wealthfront, Betterment, and M1 Finance to name a few. A Robo-advisor is exactly what the name alludes to; it's basically an automated software that picks your investments for you based on a small subset of questions that you answer.

Depending on how long you want to invest your money for—like if you need your money in five years and just want moderate low-risk growth—well, then here you go! They've got a predetermined fund for you to invest your money in. Or on the other hand, if you want high growth potential and you don't intend to touch your money for over twenty years, then they have another predetermined fund for you to put your money in.

Or they'll just tell you to smash the like button if you haven't done that the first time. So depending on your answers to the questions, they'll match you with the fund that will align to your goals, all without ever speaking to a financial advisor or a YouTuber.

Now, in terms of simplicity, I've got to say it's very easy to do and it takes a lot of the guesswork out of investing. Now I do, however, have a few small issues with this which we should just get into right now—I don't want to keep anyone hanging.

First, I think it's very important we discuss my least favorite word in the entire U.S. dictionary, and that would be the word fees. I cannot stand the word fee; it just gives me shivers, which is a shame, by the way, because they really like the word free and they're so close together if you just take out the "r," and I'm done!

As you should expect, Acorns is not a free service, and you should know exactly how much they're going to be charging you, unless you're a college student, in which case it is free. In which case, this doesn't apply to you.

So if we go to my computer and we see the pricing tier, we'll see that the basic tier begins at one dollar per month. So with this, we'll get the automated investing where they round up every charge to the nearest dollar and then invest the difference. You also get access to the Robo-advisor, which helps pick your investment fund.

You also get access to what's called Grow Magazine, which sounds to me like the name of a marijuana magazine, but you know, whatever. You'll also get Money, which is basically a collection of retailers that will invest a small percentage of your sale on your behalf. So it kind of reminds me a little bit of the Chrome extension Honey, except the money you save is just automatically invested.

Then if we take it up a notch and you double your monthly payments all the way from one dollar to two dollars, you get all of what I just mentioned plus what's called Acorns Later, which is basically just their version of an IRA.

Then finally, if you're feeling kind of spendy one day, if you're feeling a little bit, you know, luxurious, if you feel like you just want to make it rain, you can spend thirty dollars a month and get all of that plus their checking account with a debit card. Forgot to mention that!

But now, with that said, let's go into the value perspective of all of this and whether or not this is actually worth it. And this is where I get really nerdy; I get so into this sort of stuff, you can tell my excitement just went from a six to a twelve!

Now, this is what happens when I get to a twelve. I get so into this stuff! And again, for this video, let's just make this very clear: that all of this is just my opinion and you should never take financial advice from a YouTuber making videos in their garage.

So let's start this with the one dollar a month automatic Roundup investing feature. Now first of all, I want to mention that this is free for any college students under the age of twenty-four; so if this applies to you, then there's no downside— it doesn't cost anything. Just do it!

Now on the other hand, if you're not in college and you're just using this for the Roundup feature to invest the difference, here's where things start getting a little bit iffy.

Let's just say you have fifty normal transactions in a month and, through that, you invest fifty dollars into the program. Well, in that first month, a one dollar charge would equate to you losing two percent of your money right off the top! Like you need to make a twenty-four percent return in the first year just to break even on your fifty-dollar investment, assuming that's costing you one dollar a month—which let's be real, chances are it's probably not gonna happen!

Even if you've invested a thousand dollars worth of spare Roundup change, paying twelve dollars over the course of a year would equate to a one point two percent loss on your money, which that's a lot! In fact, you need to have three thousand dollars invested with Acorns just to match what you can get already from a Vanguard index fund, which charges you zero point four percent.

And then you also have Fidelity's index fund, which basically just charges you nothing. Now on the other hand, if this is for a person that wouldn't have saved or invested anything anyway if it weren't for the Acorns app, then I absolutely think that a twelve-dollar loss is worth saving more money than they spent if that is that type of person.

But I do have to mention that if anyone has less than three thousand dollars invested, then Acorns is not the cheapest option out there when you compare them with Vanguard or Fidelity. Over three thousand dollars though, I will admit they do have a good value.

Now secondly, with their two-dollar-a-month IRA account—which that didn't make any sense for me to say! That's like me saying individual retirement account account!—so ignore that. Anyway, the value of spending two dollars a month really just depends on how much you have invested.

Now, assuming you're doing this in conjunction with the Roundup feature, then you would need three thousand dollars invested in the Roth IRA basically just to match what Vanguard's management fee would be.

And if you're only using this for the IRA, then you would need six thousand dollars to match what Vanguard would charge as a management fee, which I think is fair, by the way, because you should always aim to have a little bit more money invested in a Roth IRA anyway.

But just be aware that if you have less money than that invested, there are some other cheaper options out there.

And third, when it comes to their checking account, I'm just gonna go ahead and say it: I think it's a decent value! Like, don't get me wrong, I don't think it's amazing, but I don't think it's that bad either!

Like, here's what I mean: paying three dollars a month for a checking account is absolutely unnecessary, but if you're using all of the other features as well, then paying an extra dollar for a checking account per month isn't the end of the world, especially when you consider so many banks out there will charge you like a ten to twelve dollar monthly maintenance fee for absolutely nothing if you hold less than like one thousand five hundred dollars in the account.

So I would say this is not the worst option in the world if you only have a small amount of money available and you already use all of the other features with Acorns.

Now, I also like that their checking account has unlimited ATM fee reimbursement, which could really pay for itself depending on how many times you go to the ATM to take out cash. Like, just consider that a lie.

Bank, which is my favorite bank of all time, has ATM fee reimbursement up to only ten dollars, and this one, Acorns, is unlimited. So if this is a feature that you will use and you don't have that much money in your checking account anyway, then I do think that this is a pretty decent value.

So anyway, looking through everything on Acorns and spending way too much time going through all of this, here are my real honest thoughts about everything. Here's what I think about it:

First, let's address the very sobering realities. Eighty-four percent of Americans save less than fifteen percent of their income, and fifty-eight percent of Americans don't even have one thousand dollars in their savings account.

So we could definitely agree that America has a savings problem, and the majority of people out there just lack financial literacy. And it's easy to see why, because investing could very much be over complicated and overwhelming for most people.

I'm sure it's easier not to think about it with the mindset of "I'll just worry about it later" than it is for them to really nail down their finances and get their together. So in a way, Acorns really solves this problem by making investing very easy and very simple without ever having to think about it.

I think the concept of rounding up is clever! I think it's gimmicky, and I can see how it works. Like, if Americans aren't gonna be saving or investing any money anyway, then they may as well just make an Acorn account and at least save something without even thinking about it, just by setting up an account.

So from that perspective, I really like it a lot, and the more that's on autopilot for most people, the better. The app also contains just a lot of very easily digestible, very good information that I overall just agree with.

And it also appears as though their portfolios are fairly well rounded and diversified, although I have to say their aggressive portfolio really isn't all that aggressive. I would consider aggressive going one hundred percent in an S&P 500 index fund, but their version of aggressive really incorporates real estate, emerging markets, and international companies.

So it's not really that aggressive compared with what else you could be doing—like Bitcoin. I also have to say that I like the fact that you can invest as little as five dollars because this has been one of the biggest complaints that I have received anytime I talk about Vanguard, because most of their funds really have one thousand and three thousand dollar minimums.

So for someone just starting out who doesn't have that amount of money to throw in a Vanguard index fund, investing five dollars at a time is really nice and it's very convenient. However, what I consider a small negative for Acorns is that if you want to invest just a small amount of money in an index fund and you want to do it for absolutely free—not for paying one dollar a month—you can do that through Fidelity index funds.

You'll end up getting a very similar fund without paying one dollar a month and without any sort of minimums whatsoever. So there you go! If you just want to straight-up invest a small amount of money without paying anything, Fidelity is the way to go.

And while we're on the topic of fees and whether or not it's worth it, in terms of Acorns, it really just depends on how much money you have invested. Like if you're starting off with zero and just using the Roundup feature to build up your investments, then chances are mathematically, you're probably just better off using some self-control and investing that money in Fidelity instead without paying a one dollar a month fee.

Because when it comes to that fee, that one dollar a month fee might entirely wipe out any sort of benefit you got in the first place by investing your money. Now if you're investing with more money, then Acorns slowly becomes more and more worth it as the one dollar fee becomes a smaller percentage of the overall amount that you have invested.

But you know what, I gotta say it: using Acorns is a lot better than doing nothing! Like for anyone who's not saving enough money and just doesn't have an interest in investing, Acorns is by far, by far way better! It is the best alternative for someone else who just otherwise wouldn't do anything.

And I gotta say, when I started researching this topic, I didn't expect to like Acorns. So I went into it thinking it's kind of a gimmicky product. The more I looked into it, the more I realized that, hey, you know what? It’s actually decent! I think it's a good service; it gets people thinking about investing and saving their money.

And most importantly, it automates the process, which is what most people need. And it’s from all of that that I could see why they're so popular. However, if we look at this purely from the perspective of fees, you can pretty much get the same thing through Fidelity without paying one dollar a month in terms of their free index funds.

Now, is the one dollar a month worth it for the Roundup feature? I would say that really just depends on the person. I would probably say that for most people, the one dollar a month would save them way more money than they spend out paying that one dollar.

Then to other people who have the discipline and self-control just to set aside that consistent amount every single month: hey, you know what? You probably don't need it, but I would say the majority of people probably do.

And then in terms of their actual portfolio and where your money is going, it's decent. I myself would like to have a little bit more self-control knowing exactly where my money is going rather than just a very broad fund.

Like, I just prefer investing in specific index funds and allocating my money that way. It's a little bit more work—I'm basically buying three funds instead of just buying one—but at least with that, I have a little bit more control of where my money is going.

So even though I made an account with Acorns just to try it out and see what it's like, I'm still gonna be sticking with my Vanguard index funds and my Ally bank account for now. But I gotta say, Acorns is probably really, really, really good for the majority of people out there who just want to automate things as much as they can and who want to use the Roundup feature.

And if you guys are thinking about signing up for Acorns, I figured I would just throw my referral link in the description. You get five dollars when you use it to sign up. This is not sponsored; everyone who signs up with Acorns basically gets a referral link.

It's up to you! I debated whether or not I should throw this in there or not because I don't want you to think that this whole video is just for the sole purpose of being able to do a referral link. You know me! I didn’t do this video with the intent—I did this video with the intention of not liking Acorns, but they're actually pretty decent.

So it's up to you if you want to use the referral link; it's there. If you don't want to use it, you want to use someone else's, that's fine too! I figured, you know what? There's no harm in throwing it in there.

So if you want to use that, the link to that is in the description, and you'll get five dollars for signing up. So with that said, you guys, thank you so much for watching! I really appreciate it. If there's any other topics or videos you want me to make, just comment it down below in the description.

Like I said, I read all of the comments, so if there's any suggestions out there, just let me know. Also, really quick, go and check out my second channel! It's called The Graham Stephan Show. I'm going to be posting there right now four times a week and eventually scaling up to every single day on the second channel.

Just go! It takes you one second. The Graham Stephan Show, add yourself to that, subscribe. There's a video being posted there tomorrow, so if you want to see that video, just subscribe to that. Also, add me on Instagram; I post there pretty much daily! So if you want to be a part of it there, feel free to add me there and subscribe to this channel.

Forgot to say that! Long plugs. Thank you again for watching, and till next time!