Financial investing is the last thing on most college students’ minds considering the cost of living and student loans. Acorns, a comprehensive, straightforward investing app, is working to fix that. Monthly investments start as low as $5, while extra change is added from your debit and or credit card purchases as a sort of everyday investment (similar to a virtual piggy bank).
Acorns operates with ETFs or Exchange Traded Funds, also known as stocks and bonds. Stocks are shares of ownership in a business (think Apple Inc.). Bonds are a debt investment where an investor loans money to a government or business organization for a defined period of time and interest rate (think The Treasury). The Acorns team works with your bank account to make those investments on your behalf. Investments are done through portfolios. Portfolios are basically a break up of different sectors of investments (small business, gov. etc.). Investment portfolios at Acorns were crafted by Nobel Prize-winning economist Dr. Harry Markowitz to include both stocks and bonds for investing.
Acorns will also provide you with information along the way to see how your money is being invested based on your investment interests (see how it works below). Some have found that system to be mindless investing in a way that is helpful and profitable. Others have critiqued the investing app to be limiting in the sense of long-term growth. In layman’s terms: Acorns is ideal for college students who aren’t fixated on their 401k’s (just yet).
Here’s how it works:
You’ll be asked a few questions about your investment interests and desired aggression. Next, you’ll connect your bank account and debit/credit card to your profile. Acorns will use that information to suggest a monthly investment amount for your portfolio. That amount will be supplemented by “round-ups.”
Let’s say you make a purchase for $1.50. Acorns will invest the rounded dollar change amount of .50 cents into your round-up account on the Acorns app. When your roundups reach a total of $5, Acorns will invest that money into your investment account. Both the investments you make and the round-ups accumulated have their own separate pages on the Acorns app for easy tracking of both.
Risk & Benefits
The team at Acorns is transparent about explaining the risks involved when investing. For instance, you could have $50 in your Acorns investment account one day and $47 or $30 the next day depending on the aggression level you’ve selected for your account. Selecting moderate investing in your settings could decrease the risk of losing big on your investments, although investing at any level results in benefits and costs. Users can also track their investments using the performance screen which identifies the gains and losses of investments you’ve made over a 30-day period. If at any time you’d like to increase your investments or remove funds, Acorns allows you to deposit or withdraw money from your Acorns account at any time.
In the case that you are still unsure about investing or using the Acorns app specifically, the team at Acorns has simplified resources and videos on investing 101. Whether or not you decide to use the Acorns app, their materials are a great start towards financial literacy. And did we mention you can invite your friends to the App for an extra $5?! Email us your thoughts and responses and we might publish them here!