Acorns is a personal finance app that allows users to automatically invest their spare change from everyday purchases into a diversified investment portfolio. But can using Acorns really make you money?
Yes Acorns can make money by using their platform to invest your money. Overall, while there is no guarantee of returns with any investment, using Acorns can be a good way to get started with investing and building wealth over time. It’s important to carefully consider your investment goals and risk tolerance before selecting an investment portfolio, and to be aware of the fees associated with using the app.
Acorns was the first app I used on my journey towards financial independence. I still use Acorns to this day to invest my money in a well diversified portfolio.
Sign up for Acorns and receive a free $5 dollars to start you on your journey to financial independence.
How does Acorns Work
Acorns uses a process called “round-ups” to automatically invest your spare change.
For example, if you make a purchase for $3.50, Acorns will round up the purchase to $4.00 and invest the extra 50 cents into your investment account.
This process can help you build up a small investment over time without having to think about it.
As well as round-ups you can invest as little as $5 dollars anytime you want, or set up a recurring deposit and invest automatically on a weekly or monthly basis.
Acorns invest your money into a diversified portfolio of stocks called an ETF (Exchange-Traded Fund). Depending on your risk tolerance your portfolio can be invested into a mixture of bonds, company stock, and bitcoin ETF’s.
Time in the Market
The key to the stock market is not timing to buy, but your time in the market.
Long-term investing is key to success in the the stock market, while it’s natural to want to see immediate returns on your investments, it’s important to remember that investing is a long-term process.
It can take time to build up a significant investment, and the stock market can be volatile in the short-term.
By investing for the long-term, you may be able to weather short-term market fluctuations and potentially earn higher returns over time.
Dollar Cost Averaging
The strategy I use to invest in the stock market as well as cryptocurrency is dollar cost averaging. Regardless of the price of the investment I put a portion of pay check into investment every month whether my investment is up or down
Dollar-cost averaging is a investing strategy in which an investor invests a fixed amount of money at regular intervals, regardless of the price of the investment.
This approach aims to reduce the impact of volatility on the overall investment by spreading out the purchase of the investment over time, rather than buying all at once.
Here’s an example of how dollar-cost averaging might work:
Suppose an investor has $1,000 to invest in a particular stock. Instead of buying all $1,000 worth of the stock at once, the investor could implement a dollar-cost averaging strategy by investing $100 per month over a period of 10 months.
If the stock price increases over the 10-month period, the investor will end up paying a higher price per share for some of the shares, but if the price decreases, the investor will end up paying a lower price per share for some of the shares.
The goal of dollar-cost averaging is to smooth out the impact of price fluctuations and reduce the risk of buying at the wrong time.
It can be a useful strategy for investors who are hesitant to invest a large sum of money all at once, or who are uncertain about the direction of the market.
However, it’s important to note that dollar-cost averaging does not guarantee a profit and does not protect against loss in a declining market.
Consistency while Investing
One of the benefits of using Acorns is that it allows you to build up an investment over time without having to think about it.
By consistently investing small amounts on a regular basis, you may be able to build up a significant investment over time.
While there is no guarantee of returns with any investment, using Acorns can be a good way to get started with investing if you’re new to the process or if you have a limited amount of money to invest.
Risk Tolerance
Acorns offers a variety of investment portfolios to choose from, ranging from conservative to aggressive.
The portfolio you choose will depend on your risk tolerance and investment goals.
In terms of returns, it’s important to understand that investing always carries some level of risk.
There is no guarantee that you will make money with Acorns or any other investment platform. However, historically, the stock market has provided good returns over the long-term.
According to data from the S&P 500, a broad measure of the stock market, the average annual return over the past 90 years has been about 10%.
This means that if you had invested $100 in the stock market in 1930 and left it there until 2020, your investment would have grown to over $500,000.
Of course, past performance is not indicative of future results, and it’s important to understand that investing always carries some level of risk.
However, by investing with Acorns, you are diversifying your investment portfolio, which can help to reduce the overall risk of your investments.
Diversification
One of the benefits of using Acorns is that it automatically diversifies your investment portfolio across a range of different assets.
This can help to reduce the overall risk of your investments and potentially increase your chances of earning a positive return.
Acorns also provides exposure to cryptocurrency you can allocate a portion of your portfolio to be invested into the ProShares Bitcoin Strategy ETF (BITO)
Power of Compounding Interest
Another factor to consider is the power of compound interest. When you earn interest or dividends on your investments, that interest is reinvested, which can help to compound your returns over time.
Acorns automatically take your dividends and reinvest them to put the power of compounding interest to work.
This means that the longer you invest, the more your money can potentially grow.
Conculsion
So, can Acorns make you money? Yes, but it’s important to understand that investing always carries some level of risk and there is no guarantee of returns.
However, by using the Acorns app to automatically invest your spare change and by diversifying your investments, you may be able to grow your wealth over time.