April 7, 2015
Acorns, an innovative investment app, has raised $10.5 million in fresh funds, as reported by VentureBeat. Acorns has been a mobile only play so far. The company is reported to be working on a web app and international support. Before this investment, the company had raised $9 million since its inception.
Acorns, the micro-investment mobile app, allows its users to round their purchases, made from credit and debit cards, up to the nearest dollar. A purchase of $59.34 would result in 66 cents being transferred to the user's Acorns account. The funds collected through these small changes are added to the user’s diversified investment portfolio. These savings are then invested in exchange-traded funds. It is like having an investment manager working for you all the time, costs you nothing, and doesn't ask you to invest a grand or two, rather just pennies and petty change every time.
Acorns charges just $1 per month for accounts with an accumulated balance under $5000. There are no fees for withdrawals and no minimum amount that needs to be kept in the Acorns account. Acorns has more than 250,000 active users. As for the investment portfolio aspect of its services, the app allows its users to select the level of riskiness for their portfolios. Acorns automatically manages the funds, moving and balancing them through appropriate allocations across stocks, bonds, etc.
The company explains its investment methodology as follows:
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 their recommendation and you’re free to change it at any time.
Portfolio Construction: Diversified portfolios are constructed by considering various asset classes and the 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.
The Acorns accounts are insured by the Securities Investor Protection Corp (SIPC) for up to $500,000. Acorns offers bank level security leveraging security support from McAfee and privacy verification by TRUSTe. Acorns uses 256-bit SSL encryption and employs multi-factor authentication for account safeguards.