E Pros And Cons Of Investing Spare Change With An App

For smaller investors seeking a way to build wealth and grow their savings accounts, spare change apps are enticing. Over decades, the stock market is one of the best ways for individuals to grow their wealth, especially for retirement and future goals.

During the last century, investing in the stock market resulted in approximately 9% annual return while savings account returns were in the low single digits.

Yet nearly half the population is missing out on this wealth building opportunity.

Gallup found that 55% of Americans owned stock in April 2019. This number has dipped a bit since 1998, when the financial reporting company reported that 60% of Americans owned stock.

That leaves a large swath of the population not investing.

Because of the large number of ordinary Americans shut out of the financial markets either by choice, high investment minimums, or lack of knowledge, many spare change investing apps have emerged.

Spare change apps, like Acorns, Betterment and M1 Finance allow small investors to invest in the stock market. No need for thousands of dollars to get started. Just download an app, answer a few questions, link a bank account and you can invest spare change into the stock market.

Investment Apps like Acorns, Betterment, M1 Finance, Stash, Twine, Axos Invest, Wealthfront and others make investing spare change easy. Possibly too easy.

With the S&P 500 index growing nearly 30% in 2019, it might seem like investing in the stock market is a sure fire way to riches. Yet investment apps like Acorns have their pros and cons.

For newer investors, considering whether to use an investment app to get started in the stock market, here are the spare change app pros and cons.

What is a spare change app?

The Acorns spare change investing app uses a system called “round ups” to transfer the difference between your purchase amount and the next round dollar amount into the stock market. So, if you buy a coffee for $2.40, then $.60 will be transferred into your investing account.

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Disclosure:I have accounts with Betterment, M1 Finance and Axos Invest

Disclaimer: I am a former portfolio manager, former university finance instructor, and successful investor committed to ...

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