Question from a friend at Cleantechnica. Tell me more about the Acorns idea. In simple language, what’s the deal with this and what sort of track record do they have?
Answer from me. Acorns is actually a financial app with a partnership with CNBC and Blackrock. They are what is called a fintech, short for financial tech company. Acorns gives you a checking account and a debit card. Every time you swipe your debit card, Acorns can round up your purchase to a whole number, and that extra above your purchase goes into an investment account. At certain vendors, they’ll give you cash back, which will go into your investment account, either a percentage or fixed dollar amount of the purchase.
If you like your primary bank, you can link your money by Plaid (another fintech) to your Acorns account, send money for expenses only, invest taxable money into expert picked etf’s, add money into an IRA, or even create a kid’s investment vehicle.
They were using normal ETF’s before (which stands for exchange traded funds), and yesterday they introduced sustainable ETF’s from Blackrock based on MSCI ESG scores. I’ve mentioned before that ESG stands for Environmental, Social, and Governance. These sustainable ETF’s are supposed to give the same performance as the Core ETF’s, and with a lower carbon dioxide footprint. Additionally, they are aiming to plant 500,000 oak trees (as we all know acorns grow into oaks).
As to the track record, they have been around since 2012. They are using Blackrock ETF’s, and publish ways to earn more money on Acorns Grow. To date, they have gathered 9 million accounts so far.
Quote: We believe your money should work for you. That’s why we’re committed to providing everyday Americans with easy access to some of the best investing and money tools around.Acorns website
Here are five reasons I like the service:
Reason 1: By using my debit card, I reduce the amount charged to my credit cards, reducing the balance subject to interest, and making it easier to pay off in full. From my last piece, it makes me think, is this expense necessary? Would I rather pay for the expense in cash or have
Reason 2: Acorns debit card is compatible with Apple Pay. Because of the pandemic, every store has updated to contactless payments or accepts digital wallets. I can keep my info safe, while getting convenience.
Reason 3: It’s simple to use the app and the app is well designed. You decide which plan suits you, $1 per month, $3 a month, or $5 a month. I think that’s reasonable for the service. As mentioned we are using the $3 per month a plan.
Reason 4: Your spare change is tracked real time and invested into your preferred portfolio.
Reason 5: We know they are planting trees to capture carbon dioxide, and investing in sustainable ETF’s. Acorns is aiming to make a difference towards sustainability.
We know for a fact that the top 5 US banks take deposits and invest heavily in fossil fuels while not supporting clean tech companies. Why support their poor behavior? See this piece from Cleantechnica, titled #Fail — Before Epic Tesla Stock Run, 3 Banks Most Funding Fossil Fuels Recommended Selling Tesla [TSLA] Stock. Those banks were JP Morgan Chase, Citi, and Bank of America.
How do the Core ETF’s compare with the new sustainable ETF’s? Let’s take a look for the aggressive portfolio, which is the one we have. There are five pre-built portfolios for Core and four for Sustainable.
VOO is up 11.10%, IJX is up 19.1%, IJR is up 20.5%, and IXUS is up 8.8%. That gives us an overall return of 11.7% year to date for Core Aggressive, which is terrific.
ESGU is up 11.2%, SUSA is up 12.6%, ESML is up 16.0%, ESGD is up 9.35%, and ESGE is up 3.9%. That gives us an overall return of 9.8% year to date for Sustainable Aggressive, which is great. I’ll keep a close eye if this portfolio can close the gap and exceed the Core Aggressive over time.
Acorns notes the following statements about these new portfolios.
ESG Fun Fact: At the height of the COVID crisis, net new assets into ESG ETFs grew by $900 million! Over half went into iShares broad ESG ETFs, like those in Acorns Sustainable Portfolios. This signals that investors are seeking companies with ESG-friendly methods and innovations.
ESG Performance: A study of 3,000 U.S. mutual funds and ETFs found that sustainable equity funds outperformed non-ESG peer funds by a median total return of 4.3% in 2020. There are no guarantees in investing, but experts cite consumer demand for sustainability as a positive, long-term indicator for ESG investing.
ESG funds reduce carbon footprints by an average of 35.5% compared to the broad market!
What are your thoughts? Absolute returns, or is possible to have great returns and make a difference? Let us know in the comments below.
For us, this is a shift that will take place over the next two decades at least. This sector is poised to grow, and we are glad to see Acorns making their initial mark.
If you’re interested in signing up for Acorns, we would appreciate if you use our link to sign up. You get $5, we get $5, win-win.
Join me on Acorns and you’ll get a free $5 investment! https://share.acorns.com/mozartwannabe77
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Thanks for reading!