Alicia Adamczyk
Microinvesting platforms like Acorns, Clink, and Stash were heralded as the next big things in fintech over the past few years, for allowing users to invest small amounts of money into ETFs for minuscule fees. But depending on what you use it for, you’re probably better off with more traditional forms of banking and investing.
Here’s a breakdown of the three big microinvesting apps mentioned above:
Acorns*: You hook up your bank account to the app, and it takes “spare change” from purchases and invests them for you into ETFs, based on your risk aversion. For example, if you spent $0.90 on something, it would take the $0.10 it takes to reach $1 and invest it. You can also set up recurring transfers to your Acorns account, like $10 or $20 per month. There’s also a program called Found Money, where money is added to your investment account if you buy something from one of Acorns’ partners. You’re charged $1 per month up to $5,000, and then 0.25% of your balance.
Clink: Clink is different from Acorns in that you can automate it to invest a percentage of certain purchases. For example, if you dine out, you can have Clink add 20% of the total you spend each time to your portfolio. You can also specify days for transfers. Its fees are the same as Acorns’: $1 per month up to $5,000 of balance, then charge 0.25% of your total balance annually. I tried to find contact info for Clink and could not (I reached out to the founder on LinkedIn), so perhaps it’s not the one to try. *Ed Note: The CEO of Clink responded after this article was published and said 2017 returns ranged from 6.63% for the Very Conservative fund option to 17.74% for the Very Aggressive option.
Stash: This app has an account minimum of $5, and you can choose from around 40 different ETFs. Stash seems to be aimed at those who have specific investing interests: For example, you can invest in “Clean & Green,” which “includes companies that produce solar, wind, and other forms of renewable energy.”
An obvious but important point: This isn’t free money. If you’re living paycheck-to-paycheck or aren’t mindful of your spending, you need to be careful with these apps and how much money they’re taking out of your checking account (the apps state they’re not responsible for any overdraft fees).
With these apps, you’re making small, automated transfers into passive, individual nonretirement accounts. These are not platforms for active investing—for that, you’ll need to look to online brokers like Ally, E*Trade, or Fidelity, or on an app like Divy. And these are not your standard roboadvisors, like Betterment and Wealthfront, which let you invest in individual and joint nonretirement accounts, IRAs, trusts, and 529 plans.
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When do these pay off? It’s hard to say. The fund options for Acorns, for example, are fine (you can find returns for the Vanguard S&P 500 ETF here). But generally, if you’re only investing your spare change, the monthly fee is going to wipe out whatever gains you’re making.
“If you’re new to saving and investing, these tools make it easy to get started when opening a traditional brokerage account might feel too overwhelming,” says Julie Ford, a certified financial planner with Ford Financial Solutions, LLC. “I’ve also seen them provide a sense of victory and then the motivation to keep saving as people see that small efforts, and small amounts, really do add up.”
If you have access to a 401(k), it makes more sense to max out your contributions to that each year (the contribution limit is $18,500 this year) for the tax advantage before using the apps. But if you’re young and want to learn, they can be useful.
If the exercise is purely a way for you to save money, which it seems like it might be for some people, there are better options. Apps like Clarity Money, Digit, and Tip Yourself make it easy to put small amounts aside (I personally use Digit, though Clarity Money does the same thing and some in the Lifehacker office are big proponents of Tip Yourself) that really do add up over time. The one downside is you won’t benefit from whatever returns Acorns & co. might gain, though your money will be much more easily accessible (it takes several days to get your money out of the investing apps, compared to a day or two with savings apps).
*I set up an Acorns account while writing this to familiarize myself with the app. I haven’t made any money on it.
