You might have heard of the Modern Portfolio Theory developed by Harry Markowitz which optimized returns based on a given level of risk. This theory supports the concept that introducing uncorrelated asset classes into a portfolio improves the risk return profile.
I recently came across an mobile application from the US called Acorns which helps investors, mainly targeted to household who has yet to start any investing, to make regular small investments into a basket of portfolio by using spare change from your everyday purchases by rounding up each amount to the next dollar automatically. For instance, if you spend $4.50 on Subway and uses the apps to record the transaction, it will read as $5 and pushes the rest of the $0.50 into your Acorns account. This amount will then get accumulated at the end of the month and are used to purchase a basket of indexes of stocks or bonds depending on your preference.
The other benefit of the apps is it helps to automate portfolio management by rebalancing your portfolio automatically towards its target allocation. This means that the apps help you to monitor and keep your emotions away from the decision you would have made should you be actively involved.
There are obviously going to be a lot of setbacks using this apps. The fees and commissions for doing so is one thing. But you can see the greatest benefit it provides and that is "forced investing" for beginners without feeling the need to come out with an extra money. After all, I believe these people do not track where their spare change goes to anyway.
For seasoned investors, Acorns might not be the most suitable for everyone, but it may suit younger investors who has lesser money to invest and are always finding an excuse not to start investing. The apps charges a small monthly fee but should be minor over the long run. They are currently only available in the US, though they might venture elsewhere sometime soon.
For seasoned investors, Acorns might not be the most suitable for everyone, but it may suit younger investors who has lesser money to invest and are always finding an excuse not to start investing. The apps charges a small monthly fee but should be minor over the long run. They are currently only available in the US, though they might venture elsewhere sometime soon.
I personally feel the concept is certainly interesting and refreshing and it'll be nice to see how this would change the face of investing if they were available in Singapore.
What do you think of this apps? Do you think it will work over here in Singapore?
