Since the stock market is going down, I figured now is a good time to do this post. You probably heard the stock market is dropping because we didn’t get any more free money from the government. Another reason is because we are breaking records for COVID-19 cases. I think the election is a small part of the reason. The election isn’t a surprise but maybe some expectations aren’t being met. I think the only time you start to leave the stock market is if you are retiring or if it really is the end of the world. Notice I said start to the leave the market because you are only protecting some of your money and if it really is the end of the world you probably don’t need to worry about money.
It doesn’t matter why or when the stock market drops if you are using an app like Acorns to invest in ETFs and mutual funds. Acorns has a feature that re-balances your account when it stops hitting performance targets. This is good if you do not want to constantly check your account. I opened my Acorns account because I was looking for a way to save money with a better rate of return than most savings accounts. Most savings account will give you less than %2 if you are lucky but more likely close to .50%. As of today, my Acorns account has returned 4.16% over the past year (pretty good considering it’s 2020) and 7.17% over the entire life of the account.
I watched the video about the app by Graham Stephan He tells you in the beginning of the video that he just read what the website will tell and made some assumptions. He doesn’t have much experience with the app at the time of the video. A lot of the information he provides is help but it’s just him reading about the app. It’s basically a guide for people too lazy to read for themselves. His first complaint that he is so dramatic about is the $1.00 a month fee for most users. It is free if you are in college. If you watch Graham’s videos and see all the ads, it’s clear he doesn’t work for free. I googled his name and apparently he is a realtor and he does not do that for free but $12 a year to Acorns is crazy talk.
Graham’s math is silly. He mentions that you need a 24% return to break even on the $1 fee if you only invest $50. I’m here to tell you that if you plan to only invest $50 for an entire year than there is probably no company involved in stocks that can help you. This is how I know he hasn’t used the app. He thinks a 1.2% loss ($12) on $1000 is a lot without even considering the gains that would offset the loss. He mentions you can get the same thing from a Vanguard index fund and briefly flashes 0.04% fee but you need $3,000 to get started, not $50 or $1,000. Also, I have invested in Vanguard in the past through my Wells Fargo 401k account and the fees are way higher than what I have been paying Acorns over the years. If you simply look at the Vanguard website you not paying less than $20 to get started. I’ll throw in some lazy math considering I joined at the end of January in 2016 I have paid close to $48 but I have made $167.26 in dividends alone. If you consider the money generated and 7.17% return over the life of the account it is a good deal. The most important thing is a I signed up for this account to help me save more money easier.