My initial impression of Acorns was it made a lot of sense—no pun, intended—since in other places I’d personally experienced small investments turn into large portfolios.
The Irvine-based fintech aggregates and invests user contributions via smartphone app.
Things got real and local when I realized it was co-founded by Walter Cruttenden—his string of successful startups includes a predecessor to Roth Capital Partners in Newport Beach—and his son Jeff.
I opened an account a year ago.
The app sorts users based on their thoughts and feelings about money; think Hogwarts students with slightly less magic: Acorns’ investment categories were designed with the help of Harry Markowitz, who won a Nobel Prize in economics in 1990 for his work on portfolio selection.
Conservative investors get one ruled by an 80/20 breakdown of bonds and stocks; most aggressive is 100% equity; that portfolio never meets a bond at all, let alone one it likes.
All the investments in a portfolio are then put into exchange-traded funds.
Mod Aggression
I got tagged “moderately aggressive”—an 80/20 rule dominated by stocks: 38% large U.S.; 16% international large cap; 26% other stocks.
Acorns rounds up debit card transactions and I kicked in another $20 once a month.
There were a few kinks:
• The desktop site is easier to use than the phone app
• It’s tough to switch from one portfolio to another
• At one point my monthly fee doubled to two bucks
Of course, that last item isn’t a lot but I’d like to know why. An explanation took some digging and I eventually found the increased fee was because I also opened a retirement account.
That happened when I had the idea that maybe these funds should grow in a Roth IRA, which should be a no-brainer for any retirement account started by a young person.
A three weeks-long email thread ensued with unsatisfactory results. A simple phone call could have resolved the matter in a few minutes, but I couldn’t find the telephone number on the mobile app.
Millennial Me
Since opening the account, I’ve accumulated $427.02.
My return in the past year has been 3.1%, or about $13.02. Acorns also pulled $13 in fees in the past 12 months.
That leaves me with two cents to say something.
It means the commission was about 3% of assets, or approximately 290 basis points higher than a typical index fund.
In all fairness, that 3% should decline as the portfolio grows. Still, it won’t be competitive with index fees until it reaches about $30,000 or so, by which point I might move the money to a place with better service, maybe even an active portfolio manager.
Acorns’ foundational idea is investors, many of them millennial generation members, won’t miss the pennies as they accumulate through the month, while Acorns itself earns—well, let’s say 3%—whatever happens in the market.
No wonder investors include heavy hitters like BlackRock and Comcast.
Still, I saved $427 I’d mostly forgotten about. Maybe I can be a millennial.
According to Acorns’ savings projection, I’ve got a shot: my account will grow to about $100,000 by age 99.
Woohoo!
I’ll be lucky to live that long; some do—and my big regret is this program wasn’t around when I was 15 years old.
That would have been a huge oak tree indeed.
Editor’s Note: Peter J. Brennan is the Business Journal’s executive editor and financial reporter. He’s not a millennial.
