Investing Money is a crucial step towards building financial security, and platforms like Acorns have made it more accessible than ever. Acorns offers various investment products and features designed to help individuals grow their wealth. However, it’s essential to understand the important disclosures associated with these investment products. This article, brought to you by money-central.com, will break down the key disclaimers and information you need to know before investing money with Acorns. It’s important to remember that investment products are not FDIC insured, have no bank guarantee, and may lose value.
Understanding Investment Risks
Investing money always involves risk, and Acorns is no exception. A fundamental principle to remember is that investing involves risk, including the loss of principal. This means that you could lose the money you invest. It’s not like keeping money in a traditional savings account. Acorns investment accounts are not bank accounts, and therefore, your investments are not FDIC insured and do not have a bank guarantee. This is a standard disclaimer for investment products, highlighting the inherent risks involved in the market. Before you start investing money, carefully consider your investment objectives, risk tolerance, and Acorns’ pricing structure. Acorns Advisers, LLC is an SEC-registered investment advisor that provides investment advisory services, while brokerage services are offered by Acorns Securities, LLC, an SEC-registered broker-dealer and member of FINRA/SIPC.
Key Features and How They Work
Acorns offers several unique features to facilitate investing money, each with its own set of disclosures. Understanding these features and their associated risks is crucial for making informed decisions about investing money.
Round-Ups® Investments
One of Acorns’ signature features is Round-Ups®. This feature allows you to automatically invest spare change from your everyday purchases. When you make a purchase with a linked card, Acorns rounds up the transaction to the nearest dollar and invests the difference. It’s important to note that Round-Ups® investments are transferred from your linked funding source (checking account) to your Acorns Invest account, where the funds are invested into a portfolio of selected ETFs. If you don’t have enough funds in your linked checking account to cover these Round-Up investments, you could incur overdraft fees from your bank. Only purchases made with accounts linked to the Round-Up feature are eligible. Round-Up investments are typically processed when your pending Round-Ups reach or exceed $5.
Acorns Checking Real-Time Round-Ups®
For users with an Acorns Checking account, Real-Time Round-Ups® offer an even faster way to invest money. Acorns Checking Real-Time Round-Ups® invests small amounts of money from purchases made using an Acorns Checking account into the client’s Acorns Investment account. This requires both an active Acorns Checking and Investment account in good standing. Real-Time Round-Ups® investments are accrued instantly and invested during the next available trading window.
Acorns Earn
Acorns Earn provides a way to earn bonus investments while you shop. Acorns Earn provides subscribers access to shop with partners and earn bonus investments into your Acorns Invest portfolios when purchasing items from partner brands. These rewards are investments made by Acorns Grow, Incorporated into your Acorns Invest account. It’s important to be aware that Acorns may receive compensation from these business partners, creating a potential conflict of interest. This means Acorns might have an incentive to promote partner businesses over non-partner businesses, even if the latter might be more suitable for you. While this is a valuable feature, remember you are not obligated to purchase from Acorns’ partners.
Portfolio Recommendations
Acorns provides portfolio recommendations based on your financial profile and risk tolerance. A properly suggested portfolio recommendation is dependent upon current and accurate financial and risk profiles. If your financial situation, goals, or risk tolerance changes, it’s crucial to update your information in the Acorns app or website to ensure your portfolio remains aligned with your needs.
Subscription Fees
Acorns operates on a subscription model. Acorns Subscription Fees are assessed based on the plan of services in which you are enrolled. It’s worth noting that for accounts under $1 million, Acorns does not charge transactional fees, commissions, or fees based on assets. Similar to Acorns Earn, Acorns may receive compensation from partners, potentially influencing their promotions, and creating a conflict of interest. As a subscriber, you are not required to purchase promoted products or services.
Acorns Checking and FDIC Insurance
While Acorns offers checking services, it’s crucial to understand its relationship with FDIC insurance. Acorns is not a bank. Acorns Visa™ debit cards and banking services are issued by Lincoln Savings Bank or nbkc bank, members FDIC. While Acorns Checking clients avoid overdraft, maintenance, and in-network ATM fees, FDIC insurance only covers the failure of an insured bank, not investment losses. Balances in Acorns Checking accounts are held at Lincoln Savings Bank or nbkc bank and are FDIC-insured up to $250,000 per depositor, per insured bank. Acorns Checking itself is not FDIC-insured. These banks may use a deposit network service, meaning your funds could be held at other FDIC-insured institutions. You can find a list of these institutions at the provided link in the original article.
Early Payday
Acorns offers an Early Payday feature, allowing you to potentially access your paycheck up to two days early. Early Payday depends on the timing of the submission of the payment file from the payer and fraud prevention restrictions. Funds are generally available on the day the payment file is received, which could be up to 2 days earlier than the scheduled payment date, but timing can vary.
ETFs and Investment Costs
Acorns invests your money in Exchange Traded Funds (ETFs). The ETFs comprising the portfolios charge fees and expenses that will reduce a client’s return. Before investing, carefully consider the investment objectives, risks, charges, and expenses of these ETFs, which are detailed in their prospectuses. Always read the prospectus carefully before investing money in any ETF.
Bitcoin Exposure (BITO)
For investors interested in cryptocurrency, Acorns offers indirect exposure to Bitcoin. Acorns does not provide access to invest directly in Bitcoin. Bitcoin exposure is provided through the ETF BITO, which invests in Bitcoin futures. This is considered a high-risk investment due to Bitcoin’s volatile nature. Investing in Bitcoin ETFs may not be suitable for all investors and should only be considered if you understand and accept these risks. If you seek direct exposure to Bitcoin, you should consider alternative investment options.
ESG Investing
Acorns offers ESG (Environmental, Social, and Governance) investment strategies for socially conscious investing. The ESG investment strategies may limit the types and number of investment opportunities available, as a result, the portfolio may underperform others that do not have an ESG focus. Companies chosen for ESG portfolios may not always exhibit positive ESG characteristics and can fluctuate based on market conditions. ESG criteria consider a company’s environmental stewardship, social responsibility, and governance practices.
Acorns Invest
Acorns Invest is the core investment account offering. Invest is an individual investment account which invests in a portfolio of ETFs (exchange traded funds) recommended to clients based on their investment objectives, time horizon, and risk tolerance. This is the primary account for general investing money through Acorns.
Acorns Later (Retirement Accounts)
For retirement savings, Acorns provides Acorns Later accounts. Later is an Individual Retirement Account (either Traditional, ROTH or SEP IRA) selected for clients based on their answers to a suitability questionnaire. Consult a tax advisor for any tax-related questions about retirement accounts. Acorns also offers a Later Match feature for certain subscription plans, providing a match on contributions to Acorns Later accounts, subject to specific holding periods and subscription plan requirements.
Acorns Early (Custodial Accounts)
Acorns Early allows you to invest for children. Acorns Early Invest is an UTMA/UGMA investment account managed by an adult custodian until the minor beneficiary comes of age, at which point they assume control of the account. Money in a custodial account legally belongs to the minor. Acorns offers an “Early Match” promotion for certain subscription plans, providing a match on deposits to Acorns Early accounts, subject to holding periods and subscription plan requirements.
Custom Portfolios
For users seeking more control, Acorns offers Custom Portfolios. Custom Portfolios are non-discretionary investment advisory accounts, managed by the customer. These are not standalone accounts and require an Acorns Invest account. Custom Portfolios are not for instant trading, and those seeking more control over order placement may need to consider other investment platforms.
Acorns Gold GoHenry Benefit
Acorns Gold subscribers may receive a benefit related to GoHenry, a financial education app for kids. The Acorns Gold GoHenry Benefit is available only to Acorns subscribers who subscribe to the Acorns Gold Plan and is for the monthly GoHenry Child or Family Plan Membership Fee, subject to specific terms. Users are still responsible for other GoHenry fees not included in the membership fee.
Index Investing
It’s important to clarify that you cannot directly invest in a market index through Acorns. It is not possible to invest directly in an index. Acorns invests in ETFs that track various indices, providing index-like exposure, but not direct index investing.
Compounding
Compounding is a key concept in investing money. Compounding is the process in which an asset’s earning from either capital gains or interest are reinvested to generate additional earnings over time. While compounding is a powerful wealth-building tool, it’s important to remember that it does not ensure positive performance, nor does it protect against loss. Investment results will vary due to market volatility.
Diversification
Diversification is a risk management strategy used in investing money. Diversification and asset allocation do not guarantee a profit, nor do they eliminate the risk of loss of principal. While Acorns portfolios are diversified across different ETFs, diversification alone cannot prevent losses in a down market.
Important General Disclaimers
Beyond feature-specific disclosures, there are general disclaimers to keep in mind when investing money with Acorns. The information provided by Acorns is for informational purposes only and should not be considered an offer, solicitation of an offer, or advice to buy or sell any security or investment product. It is not tax or legal advice. Past performance is no guarantee of future results. Acorns also reserves the right to restrict or revoke any and all offers at any time.
Conclusion: Investing with Acorns – Stay Informed
Investing money through platforms like Acorns can be a convenient way to start building wealth. However, understanding the disclosures and risks associated with these investment products is paramount. Remember that investing money always carries risk, and you could lose money. Acorns is not a bank, and investments are not FDIC insured. Before making any investment decisions, carefully review all disclosures on the Acorns website and consider consulting with a financial professional to discuss your specific financial situation and goals. For additional important risks, disclosures, and information, please visit https://www.acorns.com/terms/.
