Acorns And The Future Of Micro-Investment


Nobody likes spare change. It turns out that getting rid of those leftover pennies might be easier than once thought.

Acorns, a micro-investment mobile app is allowing its users to round purchases from their credit and debit cards up to the nearest dollar, and have the funds added to their own diversified investment portfolio.

Available on both the App Store, and Google Play, and with a web platform coming soon, Acorns offers an inexpensive, and convenient alternative to traditional investment (on such a scale at least). At a rate of $1 a month for accounts holding under $5,000, it’s a tempting choice.

The app allows its users to select the level of riskiness for their portfolio, and from that point on the system itself takes over, automatically moving funds through various financial fields, including large corporate stocks, emerging business stocks, government bonds, and real estate stocks among other sectors.

The investment methodology is laid out for prospective clients on the company website:

  • ETF Selection: Acorns considers the size, liquidity, and expenses associated with each ETF (exchange-traded fund). These ETFs come from some of the world’s largest asset managers: Vanguard, BlackRock, and PIMCO. Together, these ETFs hold thousands of stocks and bonds of various companies and industries.
  • Portfolio Selection: Acorns considers your financial situation before recommending a portfolio. Your age, time horizon, goals, income, and risk tolerance are all considered. You can choose a more or less aggressive portfolio than our recommendation and you’re free to change it at any time.
  • Portfolio Construction: Diversified portfolios are constructed by considering various asset classes and their corresponding risk, return, correlations, and covariances. The optimal proportions of these asset classes are determined using Modern Portfolio Theory. ETFs represent asset classes in each portfolio.

Launched in 2012 by Co-Founders Walter and Jeff Cruttenden, the company has been able to amass roughly $9 million through three rounds of funding, including a recent Series B cash injection of $6.2 million.

The potential offered through the service includes making investing a more routine, quick process that individuals can tie into their lives in an effective manner, avoiding costly choices they would likely have to make with traditional financial service providers. As Walter Cruttenden noted in a recent interview with Bloomberg, “if you break the increments that people invest into very, very tiny amounts—so they can do it on the fly and in the background of life—they never have to make this decision with $5,000 or $10,000 in a meeting with a broker”.

Security is a prominent concern among users of online payment platforms, and for that reason all accounts on the site are insured up to $500,000 for fraud, and personal information is not shared with third parties.

Acorns manages to capitalize on a common demand for convenience. The fact that the company is active in an industry synonymous for inconvenience, and time-consuming procedures makes it all the more viable an option for the speculative, part-time investor. The company has been growing at a steady pace in the U.S., and could well become a global brand should it manage to become active in foreign markets before competitors are inevitably created, and make their mark.

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