I used an app to start investing, and it made me realize how little I know (2024)

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There are different levels of risk

Acorns offers different portfolios for different levels of risk tolerance. Risk tolerance — which simply means how much risk you can afford to take in your investments — generally depends on three factors: how much money you have, how much time you have, and how you feel about it. Generally, the more money, time, and emotional fortitude you have, the more risk you are able to take.

Acorns offers portfolios pegged to different levels of risk: conservative, moderately conservative, moderate, moderately aggressive, and aggressive. They serve different purposes, the app explains, ranging from helping preserve capital to providing capital appreciation.

I was offered the "conservative" portfolio based on the information I provided, which included where I worked, how much I got paid, how long I planned to invest before needing the money (I put five to 10 years), and my net worth (calculated by the value of the things I own — my checking account balance, savings, investments, car, home) minus any debt I owed.

I was probably recommended the "conservative" portfolio because of my low income. I can't afford to lose money, regardless of how much or how little it will be. Still, 20-somethings with steady incomes are well-positioned to take much more risk in their investments than 50-somethings nearing retirement because they have years for their portfolio to even out.

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'Investing' doesn't always mean 'buying stocks'

With Acorns, the money invested doesn't go to stocks, which represent ownership of a small piece of a larger company. Instead, the investments are in exchange-traded funds. An ETF is a "marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund," according to Investopedia.

Basically, ETFs trade on the stock exchange but have higher daily liquidity and lower fees than a mutual fund share would. They are also more attractive to individual investors because of their low risk and fast cash.

Each of the app's portfolios includes ETFs, which represent six areas of investment: stocks (large cap, small cap, emerging market, and real estate) and bonds (government and corporate). They are selected based on their size, liquidity, and associated expenses and come from some of the world's largest asset managers, like Vanguard, BlackRock, and Pimco.

Luckily, I really didn't have to know much about ETFs, since the portfolios do all the work.

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Checking your investments every day doesn't do you any favors

Since I downloaded the app a month ago I have checked it eight times, and apparently that's too often.

According to Kira Brecht from , the trick to investing is to let your money work on its own over a long period of time. Especially when you're investing cents at a time, as I am, it takes a long time to accrue. It's best to review your statements quarterly at most, according to Brecht.

I can vouch for this tactic. Checking my investments every day made me think it wasn't going anywhere and led to my next learning moment ...

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Don't touch the money

Because I was checking my accounts so often, I couldn't help being discouraged by the stagnant numbers, and I thought I had chosen the wrong portfolio.

The lack of action even tempted me to move the investments around to get seemingly faster results. I even thought about changing my portfolio every week to see whether there were differences.

After a week I decided to change my portfolio to "moderately conservative," a level up from "conservative." I was tempted to move to a riskier portfolio after — yet again — not seeing results. But, I was able to refrain.

The tendency to be hands-on with long-term investments is problematic because, many times, the most successful retail investors are those who leave their money alone. According to Dan Egan, Betterment's director of behavioral finance and investing, the less customers adjust their allocations, the more likely they are to hit their goals.

I was comfortable with shrugging off the app's recommendation because I was investing so little (remember, I started with $20) that I didn't expect to see significant changes, no matter which portfolio I used.

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A month is barely any time at all

This past month made me realize that investing takes a lot of time to see results. In my opinion, Acorns is a good app to get started because it's hands-off and you don't really need to think about your money every day — but it was still nerve-wracking to see my money fluctuate below the $20 I started with.

But by the end of the month, my account went up to $26.41, an increase of $1.05 from my original $20, plus the $5.41 I invested in "round-ups."

This might be because I did not use the credit card linked to the apps for round-ups very often that month, so there weren't as many infusions of cash to go toward my investment funds.

This might not be a lot of money, but it definitely opened the door to investing for me. I plan on sticking to investing with Acorns for at least the next three months while taking on higher risk, to see whether there will be any great differences. The app, which I'm finding is fairly easy to use and lets me learn about investing, is also giving me more confidence in investing bigger and broader in the future.