Buzz
Microinvesting platforms such as Acorns, Clink, and Stash have gained significant attention in the fintech world, offering users the opportunity to invest small amounts into ETFs with minimal fees. However, depending on your financial goals, traditional banking and investing methods might be more effective.
Here’s a quick overview of the major microinvesting platforms mentioned earlier:
Acorns*: Link your bank account to the app, and it will round up your purchases, investing the spare change into ETFs based on your risk profile. For example, if you spend $0.90, it will invest the additional $0.10 to make up $1. You can also set up monthly deposits, like $10 or $20. The Found Money program adds funds to your account when you shop with one of Acorns’ partners. Fees are $1 per month up to $5,000, then 0.25% of your balance.
Clink: Unlike Acorns, Clink allows you to automate investing a percentage of specific purchases. For example, after dining out, you can have Clink invest 20% of your bill into your portfolio. Transfers can also be scheduled. Its fee structure is identical to Acorns’: $1 per month up to $5,000, then 0.25% annually. (Note: The CEO of Clink later shared that 2017 returns ranged from 6.63% for the Very Conservative fund to 17.74% for the Very Aggressive fund.)
Stash: Stash requires a minimum deposit of $5 and offers access to around 40 different ETFs. The app targets those with particular investment interests, such as the “Clean & Green” portfolio that focuses on companies involved in solar, wind, and other forms of renewable energy.
An important reminder: This isn’t free money. If you’re living paycheck to paycheck or aren’t keeping track of your spending, be cautious with these apps. They’ll withdraw funds from your checking account, and they aren’t liable for any overdraft fees.
These apps allow you to make small, automatic contributions into individual non-retirement accounts. However, they are not intended for active investing. For that, you would need to consider online brokers like Ally, E*Trade, or Fidelity, or apps like Divy. Unlike traditional robo-advisors, such as Betterment and Wealthfront, these apps do not offer investment options in retirement accounts, trusts, or 529 plans.
When do these apps deliver a return? It’s difficult to predict. For example, Acorns’ fund options are decent (you can view the returns for the Vanguard S&P 500 ETF here). However, if you're only investing spare change, the monthly fees may offset any gains you make.
"If you're new to saving and investing, these apps make it easy to get started when opening a traditional brokerage account feels daunting," says Julie Ford, a certified financial planner at Ford Financial Solutions, LLC. "I've also seen them help users feel a sense of accomplishment and motivate them to continue saving as they witness how small efforts can add up over time."
If you have access to a 401(k), it’s a better idea to prioritize maxing out your contributions (the limit is $18,500 this year) to take advantage of the tax benefits before considering these apps. However, if you're young and eager to learn, these apps can be useful.
If your goal is simply to save money, which seems to be the case for some users, there are better alternatives. Apps like Clarity Money, Digit, and Tip Yourself make it easy to set aside small amounts that really add up over time. Personally, I use Digit, though Clarity Money offers similar features, and some in the Mytour office swear by Tip Yourself. The trade-off is that you won’t earn returns like you would with Acorns and others, but your funds are more readily available (it takes several days to access your money from investing apps, compared to just a day or two with savings apps).
*To get a feel for the app, I created an Acorns account while writing this article. So far, I haven’t earned anything from it.
