Tax nightmare

Here is something to make @Terry's and @Paul@PFI's toes curl!

Acorns is a mobile app that rounds up your recent spending transactions and invests the rounded up portion. This can be linked to a credit and/or debit card which you might use several times a day. In addition to these individual purchase transactions, there are monthly fee transactions and also automatic rebalancing.

Someone using this app for a year may have upwards of 1,000 transactions on a low value portfolio.

Imagine the amount of effort to calculate the capital gain if someone sold their Acorns at the end of the year? or worse, if they only sold half? The fee for the service of calculating the capital gain could be more than the value of the portfolio.

Seems ridiculous to me.

acorns tax nightmare – "This is why you're broke!"

 

Great article

 

Might not be as bad as I thought. Reading further it appears there is no 'buy' until balance reaches $5. Still, most people reach $2,000 to $2,500 invested in the first 12 months, which is still 400 to 500 individuals "buy" transactions. A lot to sort out a tax time after selling down.

Micro-investment app Acorns launches in Australia

 

I don't want to be rude- but I didn't read the linked article. Will this have a neg effect on those of us using acorns just as a forced small change savings account?

 

If you don't sell, you won't have a tax problem.

If you sell your acorns, at tax time, someone has to sit down and work out your capital gain. This could range from simple to very complex. The fee could be small or it could be bigger than the value of the acorns you sell.

Look on the bright side, tax accounting fees are tax deductible.

 

@Perthguy I did some further research into this. It looks like Acorns provides you with a Tax Statement that has all the variables provided, including your Capital Gains Tax liabilities.

The power of Technology
Yes, this is included as part of their 0.275% Admin fee.

 

I think the idea of acorns is to get someone saving and investing and developing the frame of mind to do so. It isn't a retirement or long term solution.

For people that don't invest and know nothing $2,000 seems like a big deal. Certainly better than the example in the article where the compare someone that invests $1/day with acorns vs an investor putting in $550/month.

Vanguard charges 0.9% p.a. for their diversified retail products (higher than Acorns), which are superior IMO, however they require a $5k minimum; most people will never save $5k to get started, most people live paycheck to paycheck. Those people certainly aren't going to read a book on investing and then follow through on it, especially with what the media keeps pumping out.

 

When I die, I'll be dead between paycheques too

 

True but the VAS ETF is much lower fees and you don't need $5k to invest.

 

True.

There is quite a few articles hating on acorns after a brief Google. They should not a long term solution, they have a place to get people moving in a positive direction who have little knowledge or motivation. Acorns have their place and given they take customers with $5 I think the fees are reasonable