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How to invest with the the Acorns app

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Now plastic is used for most transactions, an app can replace the coin jar.

It's called Raiz Invest (formerly Acorns Grow Australia) and enables you to save and invest virtual spare change automatically - and almost without a thought - when you use your plastic to buy coffee, muffin, salad, or anything else for that matter, by rounding up the transaction to the nearest dollar.

How does it work?

acorns app investing

Acorns automatically rounds up the credit or debit card transaction, say for $3.55, to the nearest dollar, $4, and places that extra 45c into the diversified portfolio you've selected from the five options designed and managed by Acorns. Just $5 is enough to start the investment process.

The five portfolio options, built from exchange traded funds (ETFs), are conservative, moderate conservative, moderate, moderate aggressive and aggressive.

The app designers reckon that technology makes it easier for people to save and invest, particularly as most transactions these days are done with a credit or debit card. The app reports the investment in real time and you can see a history of investment and performance in the portfolios through the app on the round-up page. You can view each transaction and see the total value of each round-up and can follow through to the market where it will be invested.

Acorns also provides monthly statements as a PDF, which can be downloaded through the app, as well as a tax statement.

Acorns assures users that information obtained by the app is stored securely on a remote server with data encryption. Nothing is stored on the device so if the phone is stolen or lost, your details are safe.

If something does not gel about your balance or you want to switch portfolios, Acorns says there is a customer service team that can be contacted by phone or via a form hosted on the Acorns website.

How much does it cost?

For balances below $5000 the annual account-keeping fee is a flat $15. For amounts over $5000, Acorns charges 0.027% of the balance a year.

It is worth comparing this to what it would cost to go through an online stockbroker for the amount you have in mind as an annual savings and investment target.

Additional voluntary deposits of any amount can be made, either occasionally or as a recurring deposit, to boost the balance.

It's a new product in Australia, having been officially launched in February after a testing period, so Acorns could not say what a typical annual balance would be. But within its first month, the average balance accumulated was more than $200.

What is the earnings rate?

On the website there is a projection calculator for various amounts of investment, as well as for the various portfolios, but Acorns says the return won't exceed 10%pa.

It says that over 10 years an investor depositing $100 a month in a moderate portfolio is likely to end up with a projected value of more than $15,000.

How do I get started?

You complete an application form, as with any other financial product. A product disclosure statement is on the Acorns website.

The information required is your legal name, date of birth and address. You have the option of providing your internet banking details. Alternatively you can provide your BSB and bank account number and some personal information.

Technically money can be withdrawn at any time with a couple of swipes of the app wherever there is an internet connection.

But you need to wait a normal settlement period to allow the sale of investments - on average, four to seven days.

Pros

  • It's a simple and painless way to start investing with small amounts of money.

Cons

  • Unless you use your card a lot or make extra contributions, the portfolio will hardly make you rich.
  • While the app itself is free, the fees can eat into your savings.

My call

If you are a frequent card user, this product is worth a go, if only to see how much you can save over, say, a year by accumulating your virtual spare change from each transaction.

As you see the balance growing, you may be inspired to save harder and make extra deposits.

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Comments
Kevin Ng
August 27, 2017 8.39pm

Acorns is a great little investment app when used correctly. Remember there is a monthly fee of $1.25 for investments below $5,000 so make sure your investment is at least above the breakeven point. If we take an average return of investment for index funds lately, it is roughly:

Conservative: $542.25 Moderately Conservative: $464.41 Moderate: $435.32 Moderately Aggressive: $398.91 Aggressive: $357.57

These are just averages though, as ROI is ultimately dependent on market performance. I believe it is worth a try as the return has been around 7% so far since I started 6 months ago and I used the Aggressive strategy. Here is a free $2.50 credit (sometimes $5) if you decide to give Acorns a try - https://app.acornsau.com.au/in...

Happy investing!

Stephen Prowse
December 5, 2017 3.30pm

This product is not really useful for balances under about $500 and preferably around $1000. On a balance of say $200 with a 5% return, the account will go backwards ie $15 fee, $10 earnings, say 1.5% inflation so after 12 months $200 will be worth around $94; so beware and keep funds in a term deposit until there is about $1000 to invest.

Further, Acorns will not supply historical returns on their various portfolios. This lacks transparency.

Having made these observations, I believe it is a good introductory product, but one should do due diligence before investing (as with any product).

GetThatRight
December 10, 2017 12.59pm

Thanks for sharing, really helpful.

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