“Set It and Forget It” with Micro Investing

Update: Acorns Australia is now called Raiz.

Investing your money can seem daunting at first, but it really doesn’t have to be too difficult or complicated, nor do you have to worry about deciphering copious amounts of boring financial jargon.

In fact, with today’s technology, you can pretty much adopt a “set it and forget it” strategy, where your investments are completely automated, and you don’t have to worry about the intricacies of stock-picking.

Introducing Acorns – An Easy-to-Use Micro Investment App

If you’d like to get your feet wet with investing, I recommend Acorns (which I personally use), a micro investment app that has blown up in popularity since it was first released in 2012. There are a variety of apps on the market that allow you to do this, but Acorns is currently the largest and most popular company in this space.

The company markets itself by saying that it invests the change from your daily purchases, but since you have moi to explain it for you, I’ll give you a quick run-down on the process.

How Acorns Works:

  • The app connects to your bank account and tracks your expenses.
  • Every time you spend on something with a debit/credit card, it automatically rounds the amount up to the nearest dollar and invests the difference.
    • If you were to spend $12.70 on a meal, Acorns will deduct $0.30 from your account and invest it on your behalf.
  • You can also set recurring investments of $5 for example, to be invested into the market at your selected intervals, whether it’s weekly, bi-weekly or monthly, etc.
  • You could choose to make a one-off lump-sum investment of any amount.

Note that the minimum amount that you can invest is $5. So every time you spend on something, the rounded amounts are held until they add up to $5, upon which Acorns will then invest that amount into the market.

Long-Term Strategy, and Instant Diversification

It’s important to remember that it’s unlikely you’re going to make quick and large gains with micro investing. This is a long-term investment strategy, and works best if you can hold on to it for at least a couple of years.

The great thing about Acorns is that you are automatically diversifying your portfolio as Acorns splits up the money you invest into ETFs that comprise of various indices.

For example, in Australia, Acorns invests your money into Asian, Australian, European and American-based ETFs. In this way, your money is being diversified across a number of markets, which considerably lowers your risk.

The Benefit of Using Acorns:

  • It has a user-friendly interface
  • You can start investing with just $5; perfect for students and those who do not have a large disposable income or do not want to risk too much money at the initial stages.
  • Allows you to completely automate your investments
  • You can still apply theories like Dollar-Cost-Averaging (I explain this term below)
  • Allows you to withdraw your money at any time
  • It’s completely free if you sign up with a student email!

Here’s What I Recommend Doing

  • Once you have your account approved (usually takes a couple of days), you should set up recurring investments of a small amount that you can afford.
  • This allows you to take advantage of Dollar-Cost-Averaging, and also builds up your investment portfolio over time, leaving you with a chunk of money at the end of the year.
  • Setting up the recurring investments is easy, and once you’ve done that, your investments are completely automatic!

To learn more about Acorns, you can check out their website, or if you sign up with my referral link, Acorns rewards both you and I with $2.50 debited into our accounts. For the month of September, that bonus has been doubled to $5.

I also found an article on Investopedia that you might be interested in. It explains How Acorns Works and Makes Money.

Quick Dive:

Dollar-Cost-Averaging (DCA)

The term I used earlier, Dollar-Cost-Averaging, is a technique that investors use to average out their buying price. DCA involves investing a fixed amount of money, e.g. $25 a month, every month.

This allows you to average your cost, as you buy more shares when the market dips, and buy less shares when the market rises. Over time, your buying price will lie somewhere in the middle. The reason for doing this is because it is hard to time your investment.

For example, if you invest $100 in January, you have no idea what the market will do over the next few months. If could end up moving down and back up again (meaning you’ve lost precious buying opportunities as the market took a dip).

On the other hand, the market could continue on a long-term uptrend, and sure, your initial investment of $100 did grow, but you could have caught the upward trend by investing more money over time.

The idea of investing used to be this perplexing concept that seemed very far out of reach for the average person. The concentration of power was evident in Wall Street, monolithic banks, brokerage firms, and upscale investment houses. To make matters worse, placing trades used to be inconvenient and slow, and you needed to already be relatively well-off, as the capital requirements to get into the game were high.

Lucky for us however, the investment landscape is drastically changing. Investing is now more accessible than ever before with the advent of micro investing, discount brokers and regulatory changes to the system, which have significantly reduced costs for individual investors.

For the sake of transparency, this is not a paid endorsement, Acorns is an app that I genuinely like and think would be useful to you. I do however, benefit from sign-ups using my referral link, and it also gives you the same sign-up bonus of $2.50, or the promotional $5 for the month of September 2017 [Win-win for us both! ;)].

As always, drop me a line by sending me an email using the Contact page or leave a comment!


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