Acorns app let’s you take investing baby steps with pennies a day – but with some caveats

Are you a nervous beginner investor, who is filled with anxiety at the thought of opening a brokerage account? Well, you’re in luck! Thanks to technology, you can break the fear barrier with ease.

I’ve recently come across an app that I really like for newbie investors, called Acorns. The idea is very simple, pretty genius, and allows the most nervous noob to start buying stocks with minimal effort.

Basically, here’s how it works. You install the Acorns app on your iPhone or Android, and link it to your bank account and credit cards – as many as you like. The app then monitors your transactions and rounds them up to the nearest dollar. So, if you spend $1.75 at Wawa, it round that up to $2. It then withdraws the balance – in this case 25c - from your bank account, and puts it into your investment account. When these small amounts accumulate to $5, that money gets invested into an ETF-based investment portfolio of your choice (what is an ETF, you ask? See here for answers!).

The app doesn’t take money from your credit card, because, of course, it doesn’t want you to be borrowing money to invest – there’s no way your investment return would be greater than your credit card interest rate. The app offers 5 different portfolios for different risk profiles – if you’re aggressive, you go heavy into small company stocks and emerging markets, if you’re conservative, you get more government bonds and blue chip stocks. Your dividends are automatically reinvested, and the ETFs that Acorns puts your money into include popular funds from big hitters like Vanguard, Pimco, iShares and others – all solid options.

The fees for your Acorns account are quite modest - $1 a month plus 0.5% per year of however much you invest in a month. Say you open your account with $100 – you’ll pay $1.04 a month for your Acorns account for basically unlimited trading. If you start with $5,000, the fee is $3.08 a month. Not bad, when you consider that most brokerages charge around $10 per trade.

From my perspective, this app solves a lot of the problems that new investors have. First, it’s SUPER simple to use, just fill in a few forms, and voila! This demystifies investing, which is good for the soul of a would-be smart money manager.

Second, it makes investing painless. If you average, say, two transactions a day for an average of 50c a pop into your account, you’ll be investing $60 a month. You can almost certainly afford this, but it will add up! Over a year, you’re looking investing $720, and the portfolios offer growth of about 4-5% a year, so you’ll earn a solid $30 on your investment (less about $14 for the fees, so you’ll net about $16, which is an inflation-beating 2.2% return). Over time, you could build up a very nice little nest egg just nickel and diming it with this app.

Third, the costs are low. Sure, you don’t have a ton of flexibility and you can't trade individual stocks. But who cares? It’s a very cheap way to trade small amounts, and the more you invest the better the deal will be.


There are, of course, some caveats. If you are investing very little – like $20 a month – then the fee structure looks a lot less attractive. Try to shoot for $100 a month; you can add cash directly to your account if you don’t hit your target with transactions alone.

Also, this is NOT a retirement plan. This is a way to get your feet wet in investing and overcome your resistance to taking charge of your own savings. Please do not wander around the world saying “Well, I read on Smart Girl Money that all I need is an Acorns account and I will RETIRE LIKE A PRINCESS.” No. You won’t. This is baby steps – a good place to start, not your final destination.

What do you think? Will you give it a try?