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 I 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 and 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 is 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 and 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 and 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 50 cents of 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 50 cents on your behalf and then 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 50 Cent's left over on 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 and 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 7,000 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 mentioned all the time on this channel and 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 and betterment and m1 finance to name a few and 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 wolven 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 20 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 gotta 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 discussed 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 are and I'm done and 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 $1 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 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 $1 to $2 you get all of what I just mentioned plus what's called acorns later which is basically just their version of an IRA and 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 $30 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 I'm at a 12 now this is what happens when I get to a 12 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 YouTube or making videos in their garage so let's start this with the $1 a month automatic round up investing feature now first of all I want to mention that this is free for any college students under the age of 24 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 50 normal transactions in a month and through that you invest $50 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 $50 investment assuming that's costing you $1 a month which let's be real chances are it's probably not gonna happen like even if you've invested a thousand dollars worth of spare round-up change paying $12 over the course of a year would equate to a 1.2 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 points four percent and then you also have fidelities 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 3,000 dollars though I will admit they do have a good value now secondly with their $2 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 round up feature then you would need three thousand dollars invested in the Roth IRA basically just to match what vanguards 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 $1 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 10 to 12 dollar monthly maintenance fee for absolutely nothing if you hold less than like $1,500 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 go and take out cash like just consider that a lie Bank which is my favorite bank of all time ATM fee reimbursement up to only $10 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 84% of Americans save less than 15% of their income and 58% of Americans don't even have $1,000 in their savings account so we could definitely agree that America has a savings problem and the majority of people out there just lacked 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 a corns really solves this problem by making investing very easy and very simple without ever having to think about it and 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 100 percent in an SP 500 index fund but their version of aggressive really incorporates real estates and 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 any time 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 $1 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 aren't mathematically you're probably just better off using some self-control and investing that money in fidelity instead without paying a $1 a month fee because when it comes to that fee that $1 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 than acorn slowly becomes more and more worth it as the $1 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 acorn so I went into it thinking it's kind of gimmicky product and 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 $1 a month in terms of their free index funds now is the $1 a month worth it for the roundup feature and 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 that's the 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 just for the sole purpose of being able to do it a referral link you know me like I 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 there's no harm and throwing it in there so if you want to use that the link to that is in the description and you'll get $5 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 Stefan 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 Stefan 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 her 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

Channel: Graham Stephan

Views: 1,571,700

Rating: 4.9493866 out of 5

Keywords: acorns, acorns investing, acorns investment app, acorns review, acorns vs robinhood, acorns vs stash, how to invest, investing for beginners, investing strategies, investing in stocks, investing in real estate, investing 101, investing in your 20s, real estate, real estate investing, real estate investing for beginners, passive income, robinhood, passive income ideas, how to retire, financial independence, roth ira, how to become a millionaire

Id: Y0amF_F6EvI

Length: 15min 31sec (931 seconds)

Published: Fri Jul 05 2019