And then buy a mainstream index ETF, such as STW, VAS, SFY or ILC and reinvest the quarterly dividends at $0 cost, forever, by completing a one-page form. You can sign up with a broker that charges $9.50, a 1 per cent one-off fee, to invest the $950. Once your savings reach $950, you can invest in exactly the same ETFs in which Acorns invests, without paying any additional annual fees whatsoever, and which should achieve better long-term returns.
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A few dollars spent in fees now can be thousands of dollars lost through compounding decades from now.Īn alternative to Acorns that would also teach you far better how to invest for the long-term is to invest directly into an ETF all by yourself. You are outsourcing your self-discipline to Acorns and initially donating more to them than they deliver in returns. If you don't trust yourself with a piggy bank, then think of it this way. Like termites hidden from sight, that gnaw away at the structure of your savings, until you discover the effect when it is too late. And such donations to Acorns would amount to many hundreds of thousands of dollars every year. Meaning that over the long-term there is a high probability that account balances of less than $200 will have all their gains eaten up in fees.įor these low-balance accounts, using Acorns is more like donating than investing. After fees that return will have dwindled to 4.28 per cent for those with an account balance close to the median of $241.13.Īnyone with an account balance of more than zero but less than $142.86 would have gone backwards, with the 10.5 per cent return not making up for the fees they were charged.įurthermore, the long-term average annualised return in a balanced investment of the exchange-traded funds in which Acorns invests is closer to 7.5 per cent. These 55,785 micro-investors reportedly achieved between an average of 10.5 per cent annualised return since February 2016, before the $1.25 per month was deducted.
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