Micro-Investing Apps Help Millennials Toward Financial Future

(Photo: Pexels, Creative Commons)

(Photo: Pexels, Creative Commons)

US college students and recent graduates are usually living on a tight budget, and the prospect of investing in the stock market doesn’t look affordable for many. But Acorns and Stash, two maturing investment apps, are trying to change that.

The apps are attempting to attract millennials by allowing them to start small in terms of amounts invested, and by giving them inexpensive or free accounts to get their portfolios going. The users invest in fractional shares, meaning that the apps buy one share and break it into smaller parts.

Acorns is a micro-investing app launched in 2012. It allows users to invest their spare money – or ‘Acorns’ — in an automated manner. In just two years since launching, Acorns has managed to attract 850,000 customers, offering a diversified portfolio of low-cost exchange traded funds (ETFs). Nearly 75 percent of Acorns’ users are millennials between the ages of 18 and 34, attracted by the simple and intuitive mobile app and its automated investment process.

As Steven Hatzakis of the Finance Magnets writes, Acorns has recently announced a $30 million round of financing obtained from PayPal, the Rakuten Tech Fund and several existing investors such as e.ventures and Greycroft Partners. The capital injection will help the company grow its business and improve its investment features.

Joanna Lambert, vice president of global consumer product and engineering at PayPal, commented:

“Acorns and PayPal share a vision of democratizing financial services and offering innovative solutions to help people build financial health.”

Stash is another player in the same space, having launched in fall 2015.  According to its CEO David Ronick, the goal is to break down barriers to investment and to make it more attractive for millennials. The company recently commissioned a Harris Poll concluding that nearly 40 percent of millennials were convinced they needed at least $1,000 to get started investing. The company refers to it as proof that there is a market for a micro-investing products like Stash.

For just $5, anyone can sign up through iOS and Android. The company says over 55,000 people have opened accounts since its launch in October 2015. The startup managed to raise $3 million in a seed-funding round in February.

Stash says that millennials want to invest in “values” and in companies they “believe in,” writes Nathan McAlone of Business Insider. An example of that is the Stash’s iShares Global Clean Energy ETF, which aims to find out the investment results of an index composed of global equities in the clean energy field. Next to the belief-based offerings, Stash also offers intuitive ETF rebrands like “Moderate Mix” and “Blue Chips,” coming from well-known players like BlackRock and Vanguard.

Acorns and Stash claim that users are eager for financial content. Therefore, both companies provide investment advice to clients, and are designed to reward investors for learning more about the market, writes Michael Bodley of the USA Today. Jeff Cruttenden, co-founder of Acorns commented:

“Our customers are hungry for dedicated content, and that hunger didn’t  exist before they were an investor. When people have an investment, even if it’s just $50 or $100, they care more. They have a stake.”