Sunday, April 03, 2016

Why I Cancelled My Acorns Account

I very recently cancelled my +Acorns account. Despite the excellent app and overall product experience, it is not a fit for my needs. Two problems arise from my experience with Acorns. The first problem was the randomness, which could be fixed by not rounding up. The second problem is that they use modern portfolio theory (which money geeks call MPT). A third issue is not related to Acorns itself, but my own move towards simplification.


The idea of taking spare change and investing it has an allure of simplicity. Surely, you would not miss a few cents here and there, right? Sure, until it adds up to real money. I think my highest 30 day contributions reached around $70. That's real money out of my monthly budget, not just change. While the occasional draft of $5+ from my checking account does not interfere with my spending, I realized that the $70 could be going towards my other accounts or goals. I didn't realize that spare change is real money.

Downside Protection

With regards to modern portfolio theory, I at one point thought it to be the best way to invest. As my financial journey leads me to better understanding of money, I have come to realize some of the shortcomings of MPT involve downside protection, which is nonexistent. There is no amount of asset reallocation that is going to help you when the overall market gets its ass handed back to it. A loss is a loss.

I cancelled my +Betterment account last year because they also rely on MPT. I do like the idea of robo advisors; but, find that they rely too much on MPT alone. I did find and sign up with robo advisor +Hedgeable to manage my money. As the name implies, Hedgeable hedges against losses by actively managing risk.

What this means in real terms is that if there is increased market risk, Hedgeable is not shy about cashing out and waiting for things to improve. They would take a loss like everybody else, although it would be a small loss.

Acorns does not offer downside protection. At best, the algorithms will rebalance your portfolio. There are benefits to rebalancing; but, they do not include making up for large losses.


The third reason I mentioned was a personal move towards simplification, which has nothing to do with Acorns. I think they product is very well done and serves people who might not otherwise save money. However, for those who have some modicum of self-discipline and awareness about their finances, Acorns may not offer sufficient value. At the very least, Acorns is one more account to keep track of, one more app on your phone, one more demand of your time. For me, this is one too many at this point of my life.

Part of simplification also includes knowing precisely how much and when my deposits into my savings will occur. This way, there is no tiny nagging voice in my head telling me to be on the lookout for an automatic transaction.

I Am Still Favorable Towards Acorns

Despite my leaving Acorns, I still have positive regard for them. As mentioned earlier, Acorns provides an easy way for people to start putting money away for the future, which they may not have done on their own. Furthermore, if somebody with little financial sophistication is going to put money into the market, it is better to use modern portfolio theory than to buy individual equities.

In short, if somebody I know and care about asks about getting started in investing, Acorns might be one of my first suggestions so that they at least have a sense of getting started. Then, as their level of understanding increases, I might point them towards other products.

Friday, April 01, 2016 Tax Preparation Lovefest

I am crushing on my +Simple account now that I am gathering my expenses for tax purposes. While Simple is not so useful this year, due to limited use in 2015, it is going to be awesome next year. Simple currently only offers personal accounts, although their Help section mentions that they are considering business accounts in future, which would be even better.

The one feature that will make my tax preparation less demanding next year is the ability to tag my expenses. By adding a #business tag to the appropriate income and expenses, I instantly create a filter for my searches. Next year, for example, I would simply search "2016 #business" to get a report listing all my business expenses and income. Then, it is as simple as exporting the list. Done.

Another excellent tax feature is the ability to upload invoices to the individual transactions. This is great in that I would have access to the actual invoice should I ever need to verify that the expense is business-related.

Finally, the ability to add memos to my transactions is extremely useful, not only for tax purposes. Sticking to taxes for now, a memo would allow me to document why an otherwise personal transaction is business-related. For example, I frequent Walmart to purchase groceries and other items. On occasion, I need to purchase a wireless router or a tool to finish a tech job. In a sea of Walmart transactions, it would be difficult to distinguish a business expense from an everyday expense. That is, it would be difficult unless I tag, attach the receipt to, and annotate the transaction.

The reason all of this is easier with Simple is because this can be done as you go. As soon as you purchase and have the receipt in your hand, you can tag, photograph the receipt, and add a memo. The entry is automatically made for you when you swipe your card. You no longer have to go home, sync your accounting software, hunt for receipts, and then match them to transactions. Part of what makes keeping records is the drudgery of batch work. However, if bookkeeping is as simple as posting a tweet or other social update, it simplifies tax season.

If Simple ever does come around to creating business accounts, you bet I'll sign up in a heartbeat. Imagine that your accounting software was also your bank. One login. No syncing. No manual entries. Instant updates with every transaction.

I'm actually excited about doing taxes next year because of Simple.