Investing is generally seen as the domain of the rich and wealthy. A new app wants to change that, however, by putting the ability to invest in the hands of just about anyone. Acorns is a smartphone app that enables users to make small investments.
Acorns has been in stealth development for two years, but its creators have recently announced the closure of a B round of funding to the tune of US$5.5 million. That brings the total funds raised by the app's makers to a princely $8.3 million and suggests that it isn't just a nifty idea on paper, but is something that investors think has genuine potential.
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The app provides a means of making regular aggregated sub-dollar investments in fractional shares with high frequency, an approach, the company says, that has not been previously possible. Colton Dillion, CMO of Acorns, explained to Gizmag that users select a desired risk-level, from conservative to aggressive, and a portfolio balance based on that risk-level. Acorns automatically manages the portfolio once it is selected and users can re-assess their risk tolerance if conditions change.
According to Colton, Acorns only offers certain pre-selected portfolios of exchange-traded funds. "It does, however, highlight top-performing equities in each fund to better help the customer understand their ownership of those equities," he says.
The app employs a proprietary brokerage and advisory engine designed to make micro-investing economically feasible. There are no minimum account balances or commissions on trades and Acorns is hoping that this will encourage a new generation to start investing early and often.
Users need only have an online bank account and some basic information about themselves to get set up with Acorns. Any amount of investment can be made at any time and users can set up automatic lump sum investments, on a daily, weekly or monthly basis if they so wish. It is also possible to round-up credit and debit card purchases to the nearest dollar and then automatically invest the change.
Walter Cruttenden, co-founder and CEO of Acorns, explains that, for many people, traditional investing strategies aren’t realistic or economical.
"By breaking the increments into almost unnoticeable amounts of money, we open up new avenues to save and invest," he says. "And by sweeping these funds into a well-diversified portfolio, people can realize the benefits of compounding, dollar-cost averaging and portfolio rebalancing that comes naturally with high frequency investing. We believe micro investing can help people build a better financial future without conscious effort.”
Colton is similarly confident about the technology's potential. "There are many opportunities for investments now that the smartphone is becoming more and more ubiquitous," he says. "Transaction sizes and costs can get smaller and smaller, and the opportunity for any investor can get larger and larger. The smartphone will bring a world of investing to anyone who can afford the contract, and maybe even beyond."
Acorns is expected to be available by the end of June.