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Tuesday, 12 September 2017

Acorns - 12 month wrap up

Acorns are offering double sign up bonuses for September, which has drawn eyes there way and lead to them being crucified in the media with sensationalist headlines. But after a almost a year I feel like I've got the right to say, they ain't that bad. In fact, the returns are decent, the apps easy to use and the mindless investing structure is a great starting point that everyone should get behind.

If you need convincing, here's an almost 12 month wrap up.

I opened my Acorns account in October last year while sitting at my desk. I found I had developed this habit of going out for overpriced lattes simply to get away from my desk and chat with my coworkers. Once I had my account up and running I started depositing $5 each time I was invited out for coffee. The same amount of money way leaving my pocket, but I was much happier with the outcome. I'd rather buy time away from my desk permanently than a few manufactured minutes.

(BTW, this review will make a bit more sense if you've read about Acorns before, you can head over to my earlier review for a bit of background.)

However, a couple of weeks later I realised that I had an account balance of $25, and I'd just paid my first monthly fee of $1.25. For some super quick maths, that's an annual fee of $15, or a ridiculous 60% of my account balance.

Here is where everyone gets mad at Acorns. If you are only putting round ups in your account, then the fee structure is going to kill you. With round ups alone after a year my account would barely be hitting $200, because I'm not a big spender.

Round Ups are Acorns prime draw card. They track your spending and 'round up' each transaction. Spend $1.10, Acorns will take 90c. Except they don't, they wait for you to hit $5 worth of Round Ups, then take $5 each time. It's not exactly what they advertise, but it's still sneaky background investing that (most) people won't notice.

Except as I said, the fees on a small account are appalling and this is what most people are complaining about.

However to bring your fees down to a reasonable amount, you only need $400-$500 in the Acorns bank. While I was sitting in the passenger seat of a camper van in Tasmania I plumped my account up with a few easy button presses and dropped my annual fees down to 3.75%. The Acorns app is so easy to work with I did this even while my internet connection was dropping in and out.

Now let's be honest, that's still not a great annual fee. My Vanguard account pays a measly 0.75% per annum. However to open a Vanguard account, I would need to find $5,000 and a lot of people just starting out don't have that kind of money lying around.

When I started looking at investing I had $1,000. I definitely didn't have the confidence to drop $5,000 on Vanguard. That is the market niche that Acorns fills. Yes, the fees are higher than Vanguard, but the return (even after the fees) is going to be better than a bank account.

Remember that historically the share market returns 7% per annum after inflation. Ignoring inflation, the returns are closer to 10%. Even after paying 3.75% in fees, Acorns will return more than a bank account, but importantly it is hugely educational.

In my last monthly update I noted that I was losing more money each day than the cost of a cup of coffee, because the market was falling. A couple of years ago this would have been terrifying and a sign of a losing investment. I know now that it's simply the ebb and flow of valuations. One day I'll be down $10, the next day I'll be up $15.

And for people who haven't read this and are still paying the huge fees - well their big lesson will be how excessive fees destroy your investments.

For people starting out with investing, Acorns provides a solid return and a great education at a rather low risk.

Acorns performance

In the past I've reported returns of over 10% on my Acorns account, even after fees. However the times, they have a-changed and the last couple of months have not been kind. However this isn't just a straight sales pitch, this is a realistic outline. In the first six months I was up 10%. Now I'm only up 2.32%. If I wrote this review a month ago it would have been better. I'm reasonably confident in a month or two the numbers will move back upwards.

   
You can see on these charts when I dropped in $400 to plump up my account, and when I switched from adding $5 a week, to $75 a week in July.

In fact, the markets are changing so much that since I took these screen shots two days ago my returns since opening have bounced back up to 3.14%/ The longer that my account is around, the less bouncy these returns will be.

So if you're new to investing, I absolutely think you should sign up for Acorns. With this referral link you'll get a $5 bonus, which covers your first four months of fees. Build your account up to $500 as quickly as you can, then set a regular weekly investment that you can handle. If you start out with $5 you'll invest $260 in a year without even noticing. If you can push that up to $20 a week, you'll have $1,000 at the end of a year, without even noticing.

While you're learning to invest you can open the app each day and watch the charts bounce up and down. It's a great lesson for investing for the long haul and not worrying about day to day swings.


2 comments:

  1. Acorns is a rip off and a disgrace. Anyone with enough money to invest to get the fee down to a decent percentage has enough to buy a vanguard ETF through an online broker where the fee for Vanguard Australian Share Fund is 0.14%. Most people who use this app will likely not be very financially literate and will not understand how the extremely high fee percentage is working against them.

    The level of greed shown by this company would make me stay away from them just on moral grounds. When they were originally advertising they stated that there would be no fees for accounts with small balances. By the time they launched the dollar signs were flashing as they realised how much they could take from people and the no fee accounts were nowhere to be seen. They can go to hell.

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    1. Tell us how you really feel

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