As the micro-investing app that’s taken the world by storm, Acorns has made it possible for anyone to invest spare change into a diversified portfolio. But have you ever wondered where Acorns actually invests your money? In this article, we’ll delve into the nitty-gritty of Acorns’ investment strategy, exploring the various assets and accounts that make up their portfolios.
The Acorns Investment Philosophy
Before we dive into the specifics of where Acorns invests your money, it’s essential to understand the underlying philosophy that guides their investment approach. Acorns is built on the principles of long-term investing, diversification, and dollar-cost averaging.
Long-term investing: Acorns encourages users to adopt a long-term perspective, recognizing that investing is a marathon, not a sprint. By investing small amounts regularly, users can ride out market fluctuations and benefit from the power of compounding.
Diversification: Acorns believes in spreading risk by diversifying investments across different asset classes, sectors, and geographic regions. This approach helps to minimize exposure to any one particular market or sector, reducing overall portfolio risk.
Dollar-cost averaging: By investing a fixed amount of money at regular intervals, Acorns users can smooth out market volatility and avoid trying to time the market. This approach helps to reduce the impact of market downturns and ensures that users continue to invest during periods of growth.
The Acorns Portfolios
Acorns offers five pre-built portfolios, each tailored to a specific risk tolerance and investment goal. These portfolios are:
- Conservative: For those who prioritize capital preservation and stable returns.
- Moderately Conservative: A balanced portfolio seeking moderate growth and income.
- Moderate: A diversified portfolio targeting long-term growth and income.
- Moderately Aggressive: For those seeking higher returns and willing to take on more risk.
- Aggressive: The most growth-oriented portfolio, suited for those with a high risk tolerance.
Each portfolio is comprised of a mix of low-cost index funds and ETFs, covering a range of asset classes, including:
Stocks
Acorns invests in a variety of stock-based ETFs, providing exposure to:
- US-based companies (e.g., VOO – Vanguard S&P 500 ETF)
- International developed markets (e.g., VEA – Vanguard FTSE Developed Markets ETF)
- Emerging markets (e.g., VWO – Vanguard FTSE Emerging Markets ETF)
Bonds
Acorns allocates a portion of each portfolio to bond-based ETFs, including:
- Government bonds (e.g., AGG – iShares Core U.S. Aggregate Bond ETF)
- Corporate bonds (e.g., LQD – iShares iBoxx $ Investment Grade Corporate Bond ETF)
- International bonds (e.g., BWX – SPDR Bloomberg Barclays International Treasury Bond ETF)
Real Estate
Acorns invests in real estate investment trusts (REITs) and real estate ETFs, such as:
- VGSIX – Vanguard REIT Index Fund
- RWR – SPDR Dow Jones REIT ETF
Commodities
To provide a hedge against inflation and market volatility, Acorns includes commodities ETFs, including:
- GSC – iPath S&P GSCI Total Return Index ETN
Other Investments
In addition to the asset classes mentioned above, Acorns may also invest in other areas, such as:
Alternative Investments
Acorns offers exposure to alternative investments, including:
- Private equity (e.g., PE ratio)
- Hedge funds (e.g., HFRI Fund Weighted Composite Index)
Socially Responsible Investments (SRI)
Acorns provides options for users who prioritize socially responsible investing, focusing on Environmental, Social, and Governance (ESG) factors. These investments may include:
- ESG-focused ETFs (e.g., VSGX – Vanguard ESG U.S. Stock ETF)
- Sustainability-themed ETFs (e.g., VIRT – Virtus Environmental, Social and Governance ETF)
Acorns’ Investment Partners
Acorns partners with leading financial institutions and asset managers to provide access to a range of investment products. Some of their notable partners include:
- Vanguard
- iShares
- Invesco
- State Street Global Advisors
These partners provide Acorns with a deep pool of investment options, enabling the platform to offer diversified portfolios that cater to a wide range of user needs and preferences.
Acorns’ Investment Process
So, how does Acorns actually invest your money? Here’s an overview of their investment process:
Portfolio Construction
Acorns’ investment team, led by Chief Investment Officer, Seth Wunder, constructs and regularly rebalances portfolios based on the user’s selected risk tolerance and investment goals.
Asset Allocation
Acorns allocates user funds across a mix of asset classes, sectors, and geographic regions, depending on the selected portfolio.
Security Selection
Within each asset class, Acorns selects low-cost index funds and ETFs that track a specific market index or sector.
Rebalancing and Monitoring
Acorns periodically rebalances portfolios to ensure that they remain aligned with the user’s original investment objectives. Their investment team also continuously monitors market conditions, making adjustments as needed to maintain an optimal asset allocation.
Conclusion
Acorns’ investment strategy is built on a foundation of long-term thinking, diversification, and dollar-cost averaging. By offering a range of portfolios that cater to different risk tolerances and investment goals, Acorns provides users with a convenient and accessible way to invest in a diversified mix of assets. Whether you’re a seasoned investor or just starting out, Acorns’ platform is designed to help you grow your wealth over time.
By understanding where Acorns invests your money, you can feel confident that your hard-earned savings are working towards your long-term financial goals. So, take the first step towards financial freedom – plant the seeds of prosperity with Acorns today!
What types of investments does Acorns offer?
Acorns offers a diversified investment portfolio that includes a mix of low-cost index funds and ETFs. These investments are spread across seven asset classes, including real estate, large-cap stocks, small-cap stocks, international stocks, emerging markets, bonds, and commodities. This diversified approach helps to minimize risk and maximize returns over the long term.
By investing in a range of asset classes, Acorns helps to ensure that your portfolio is well-balanced and aligned with your investment goals. Whether you’re a conservative investor or an aggressive one, Acorns has a portfolio that’s right for you.
How does Acorns determine my investment portfolio?
When you sign up for Acorns, you’ll be asked to complete a brief investment questionnaire. This questionnaire helps Acorns understand your investment goals, risk tolerance, and time horizon. Based on your answers, Acorns will recommend a portfolio that’s tailored to your needs.
Acorns uses a proprietary investment algorithm to determine the optimal portfolio for each user. This algorithm takes into account a range of factors, including your investment goals, risk tolerance, and time horizon. By regularly rebalancing your portfolio, Acorns helps to ensure that your investments remain aligned with your goals and risk tolerance.
What is Acorns’ investment approach?
Acorns uses a long-term investment approach that’s based on the principles of diversification and dollar-cost averaging. This approach involves investing a fixed amount of money at regular intervals, regardless of the market’s performance. Over time, this approach helps to reduce the timing risks associated with investing in the stock market.
By investing a fixed amount of money at regular intervals, Acorns helps to ensure that you’re buying more shares when prices are low and fewer shares when prices are high. This approach can help to reduce the overall cost of investing and increase your potential returns over the long term.
How does Acorns handle fees?
Acorns is committed to keeping fees low and transparent. We charge a monthly fee of $1 for accounts under $1,000 and 0.25% annually for accounts over $1,000. These fees are among the lowest in the industry, and they’re designed to help you keep more of your hard-earned money.
In addition to our management fees, Acorns also charges a small fee for investing in ETFs. These fees are passed through to the ETF providers and are used to cover the costs of operating the funds. We believe that our low fees and transparent pricing structure help to align our interests with yours.
Can I choose my own investments with Acorns?
While Acorns offers a range of pre-built portfolios, we also give you the flexibility to customize your investments. Our “Found Money” program allows you to invest in specific ETFs or stocks, giving you more control over your portfolio.
However, it’s worth noting that our pre-built portfolios are designed to provide a diversified investment strategy that’s tailored to your goals and risk tolerance. By investing in a range of asset classes, our portfolios help to minimize risk and maximize returns over the long term.
How often does Acorns rebalance my portfolio?
Acorns regularly rebalances your portfolio to ensure that it remains aligned with your investment goals and risk tolerance. We rebalance your portfolio whenever it drifts by more than 5% from its target allocation. This helps to prevent any one asset class from becoming too dominant and reduces the risk of losses due to market fluctuations.
By regularly rebalancing your portfolio, Acorns helps to ensure that your investments remain on track and aligned with your goals. This process is typically done quarterly, but can occur more frequently if market conditions warrant it.
Is my money safe with Acorns?
Yes, your money is safe with Acorns. We’re a registered investment advisor with the Securities and Exchange Commission (SEC), and we’re committed to following the highest standards of security and transparency. Our accounts are protected by SIPC insurance, which covers up to $500,000, including $250,000 in cash claims.
In addition to our SIPC insurance, Acorns also uses bank-level security measures to protect your personal and financial information. We use 256-bit encryption to secure our website and mobile app, and we require two-factor authentication to access your account. You can rest assured that your money is safe and secure with Acorns.