Acorns – Automatically Invest Your Spare Change | Hacker News Reader

Acorns – Automatically Invest Your Spare Change

acorns.com

41 pointsgregchristian27 comments

Their fees aren't actually that low. In fact with their fee structure and inflation, you're likely to lose money in the long run, or at least underperform against the stock market. It seems like a great idea on the surface though.

The fees are too high. I get that they're much lower compared to what a hedge fund might charge, or even the run of the mill mutual fund, but consider this:

The average investor over the previous 10 years earned a 2.6% net annualized return (http://www.forbes.com/sites/advisor/2014/04/24/why-the-avera...). The performance actually gets worse over longer timeframes.

That means that at the high end of Acorn's fee structure, the average investor is paying almost 20% of his investment earnings on Acorn management fees. That's high!

Considering the platform is all automated (according to Acorn), I'm not sure what part of Acorn's system demands such fees, as really all it's doing is shifting funds around through a set of simple rules (unless I'm not understanding completely?)

What I'd really like to see is an open source passive investing platform which you can hook up to your bank and your broker's API (if both of those even exist), with a config file where you state your preferred portfolio breakdown (i.e. s&p 10%, bonds 10%, stock XYZ 5%, gold 10%, euro 20%) along with specifying frequency and amount of transfers from bank -> brokerage account, which would handle all buying and selling and periodic rebalancing. I wouldn't be surprised if some brokers already offer something similar and with no extra fees on top of normal trade fees.

You should check out Wealthfront. They automate your passive investing for you. No trading fees and only 0.25% fee after the first $10k free.

check out levered returns if you want to do it yourself

A lot of my friends who aren't experienced investors are really excited by this. The fact that they will automagically invest a small amount of money without having to think about moving money or choose what to invest in seems great to them. I personally would rather decide how much to invest and what in myself so I am not particularly interested in paying someone else fees to take this control away from me.

But definitely a cool product for the average person who doesn't want to put any time/effort into investing.

For the person who wants to put time/effort into investing, where you suggest they start?

With your companies 401k or equivalent. Just put whatever percentage you want into a low cost, broad index fund. The most important part is to make this allocation before your paycheck gets cut (i.e. you never see the money).

What about someone like me with no 401k?

IRA or equivalent. If you have no option for a tax advantaged account, the advice to pick a broad unmanaged index fund or etf still holds.

> you never see the money

Also important to add, if you invest with 401k/IRA money, if you don't want to pay a lot of taxes or early withdrawal fees, you won't "see" the money until you retire.

Also make sure to change jobs every few years so you can move money from the 401k to an IRA without a tax hit. 401k's tend to suck - high fees, low returns, little competition. Most of the funds in your 401k are there because a fund salesman took an HR person out to a steak dinner.

When you change jobs, always move the 401k into an IRA and put the money into low cost ETFs.

Unless you have enough income to be over the Roth IRA contribution limits and want to make yearly backdoor Roth IRA contributions (non-deductible traditional contribution followed by a rollover to a Roth IRA). If you have a traditional IRA there can be some tax complications due to the pro-rata rule. If any traditional contributions are instead in a 401k the conversion is a lot simpler, and tax-free.

The other way around it is to open an individual 401k if you have any self-employment income, but that involves a bit more paperwork than an IRA.

The sidebar on /r/personalfinance.

I think the best investment media today is TastyTrade.com. Imagine if CNBC were actually helpful, and if the hosts were real traders who let you in on what they're doing in real time.

They trade options and futures a lot which aren't right for a brand new investor, but it's great content regardless. They talk about pork bellies on Bloomberg and I'm never going to invest in them. They've got a research team, emulating the hedge fund model, and they turn out a research piece literally every day. Check out the podcast.

These guys built ThinkOrSwim, had a $600MM exit, and now they're just giving everything away. They've also built a great (free) options trading platform, Dough.com. Notable if only to show you how these guys run their business.

Also, useful to read Random Walk down Wall Street and understand the efficient market hypothesis.

The book "A Random Walk Down Wall Street" by Burton Malkiel is an excellent place to start.

Open a taxable account at Vanguard and invest however much you want in VTSMX. Done.

For extra credit, switch to VTSAX once you get above $50K.

What are the pros/cons of the various Vanguard options?

I'm in VTI (TOTAL STOCK MARKET ETF) and VXUS (TOTAL INTL STOCK INDEX FUND ETF) because I believe that's what it's suggestion thing said to me, what's the comparison to VTSMX? And what's the difference for VTSAX at 50K?

VTSMX is the same as VTI, just VTI is an ETF and VTSMX is a mutual fund. For most normal cases, it doesn't matter which you have.

Having some international exposure is fine too and diversifies a little, but historically, as long as you don't sell off during a lull in the market, the US total stock market has performed admirably as long as you can hold your shares at least a few years.

VTSAX is the "Admiral" version of VTSMX. Same index, but cheaper to own (they take a smaller amount out of it every year for management fees.)

I wrote this primer on "Public and Private Market Investing" which I think is a good place to start: http://sapan.svbtle.com/musings-on-markets :)

I created an account a month or so ago, but never completed the signup. Why would a service snoop into my bank accounts instead of, let's say, withdraw $10/month via ACH?! I really don't get this "spare change" idea (like BofA's). $10/month sounds much easier to grasp, implement, and it's safer at the end.

They connect to your account using a service like Yodlee, Intuit Aggcat, or Plaid.io. So all they really have access to are your transactions. (I worked with these API's for over 1 year, and can spot that sign up flow a mile away)

They then pull in the transactions for you to round up manually (through a simple select process), and if you choose to round up, they ACH that amount of money over.

Makes sense for people who are not used to saving money or budgeting for financial services.

I understand how they do it and I doubt they will reinvent the wheel (at least I know about Yodlee that's been around for over a decade), but it's still not worthy of exposing my financials for some questionable benefit. If they add a feature to allow automatic investment of predefined small (or big) amounts, they will have my business.

I tried this for a little while but I really did not like how variable the monthly amount was depending on how many transactions I had. It's much easier to budget $X per month.

Their fees seemed higher and fund selection lower than my other banks. Probably I'm just not the target market for this because it's a really cool idea.

Wow does this signup ask for a lot of personal info without making me feel secure about handing it over.

This looked really awesome, until I noticed the fees, which seem really high.

I don't understand how their app knows what I spend elsewhere.

It connects to your bank account and rounds up the transactions

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