When it comes to investing in your finances as a college student, sometimes the only thing you can do is start out small.
Acorns, an innovative new investing app, takes the concept of starting out small to a whole different level. The smartphone app on iOS and Android literally invests your spare change.
The app links up with your credit or debit cards and your checking account. Every time you make a purchase with your card, Acorns rounds up your purchase to the nearest whole dollar and pulls the extra “change” from your checking account.
Using Your Change
With the change Acorn collects, it invests in a diversified portfolio of index funds, ranging from government bonds to emerging market funds and large cap stocks. It allows you to select your desired level of exposure to risk and optimizes your portfolio to maximize your return.
Investing in Your Future
Sure, none of this is new as far as investing goes. You could save money each month and buy into an index fund or even create a portfolio of index funds based on Modern Portfolio Theory.
But, trading fees and transaction costs would prevent you from investing small increments this frequently. Acorns invests in several funds and strategically allocates your assets across these funds to maximize the risk-return trade-off. It also periodically rebalances your portfolio allocation as the tides change in the financial markets.
Acorns charges $1 per month in addition to an annual fee of .25 to .5 percent of your account balance, comparable to the expense ratio of many actively managed funds. It allows you to freely move money to and from the account as well. You can invest more than just your spare change and cash your spare change when you need it.
Not a bad deal for a traditional or online college student, right?
Learn about Investing and Modern Portfolio Theory through GCU’s MBA degree.
The views and opinions expressed in this article are those of the author’s and do not necessarily reflect the official policy or position of Grand Canyon University.