Usually these Sorta Random Sunday posts don’t have anything to do with investing. But I just thought I’d mention one way I invest that I think is really cool. Basically, the one-liner is you can invest your change.
This post does include an affiliate link. A bit after I started telling people about this service, I realized they offer $5 invested for each referral after no cost to the person referred.
I started to invest my change at the end of my training after starting my financial education. Someone told me about the Acorns app. I looked into it and started using it. I still use it and like it a lot.
How does Acorns invest your change
Here’s how it works:
- You sign up for Acorns here
- It links your bank account
- Each purchase you make gets rounded up to the nearest dollar
- The extra change from the round-up gets invested in low cost, broadly diversified index funds
- You choose how aggressive you want to be via a stock/bond allocation
- You can also contribute regular weekly amounts
Let me break it down in one line
This is essentially a taxable account that lets you invest your change the right way (low cost, broadly diversified index funds).
Why I use it
If you recall from my written financial plan, investing in a taxable account is pretty low down. It’s so far down that I actually haven’t reached that part of my plan yet.
So, why do I invest in a taxable account using my change?
Well, that’s really just it. It’s my change.
The way I do it is that I invest 2x my change for each transaction as well as $20 weekly.
It’s money that I don’t even notice is gone from my account.
But, due to this “phantom investing,” I have thousands of dollars in this investment account making compound interest. And, in the worst case scenario, I can just withdraw that money and use it as I please while paying capital gains taxes. Hopefully it will be long-term capital gains taxes if you hold for >1 year.
Why did I choose this service?
There are other micro investment brokerages that you can invest it. Services like Robinhood and the like.
I do not recommend using those services.
They use gamification to try and give users a dopamine hit every time that invest in risky strategies like cryptocurrency and day trading. There have been horror stories as a result.
Acorns is simple and only allows you to invest the right way. It’s straightforward and honest, not gamified.
That’s why I chose to use it.
The bottom line
In my mind, this is another simple habit and simple way to automate your wealth building.
What do you think? Do you invest your change? What simple habits have you built to grow your wealth? Let me know in the comments below!