Acorns: Investing Your Spare Change

Acorns: put your spare change to work in the stock market!

Note: I don’t get paid for making these recommendations, these are actually just stuff I’ve found that I think is cool and want to share with you!

Those of you who have been with my blog for a little while might remember when I talked about Digit, a cool little application that squirrels away your extra money, a few dollars and cents at a time, into a savings account. In that same vein, I recently discovered an application called Acorns. In the same spirit as Digit, Acorns (currently a mobile app, with a web application on its way very soon) pulls small amounts of money from your accounts over time. However, instead of depositing it in a plain-old savings account, Acorns invests it.

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My Experience with Personal Capital

I'm kind of a sucker for pretty user interfaces...
I’m kind of a sucker for pretty user interfaces…

Personal Capital is another of the great personal money management websites out there. It pulls information from all connected bank, investment, and credit card accounts to give you an easy-to-digest summary of all your financial activity. I just started using it two weeks ago, deciding whether to switch to it from Mint, and wanted to write a little about my experience with the tool. Being able to visualize the distribution of your money in colorful graphs–whether that’s income, spending, or investments–is a fantastic experience that will help make managing your money easier and more intuitive. With a great companion mobile app, Personal Capital could be a great option for you… but not for everyone!

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How an IRA Can Help You

You may remember from my 401k post that there are several good reasons to invest in an IRA (Individual Retirement Account). These include:

  1. Maximum Flexibility: Invest in anything, with any investment manager/bank
  2. Avoid Taxes: Gains in an IRA are not taxed like they would be in a regular taxable account, so you’ll pay the government less.
  3. Penalty-Free Contribution Withdrawals: You can withdraw the money you put in at any time without penalty (though you can’t withdraw the investment gains that have grown on that money). This is good thing, just in case you ever need that money (though please remember that the stock market is NOT the place for your emergency savings).

Let me walk you through some of the basics of your IRA.

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How to Handle Your 401k

It’s best to start early when it comes to retirement savings!

Most professional jobs these days provide 401k accounts to the employee. However, employees–especially us young’uns that haven’t seen this stuff before–are often confused about what to do with this account. There are a lot of considerations, like how much to put in there, where to invest your money, what your company match means, how vesting works for that match, and whether you should take the Roth or Traditional option. I’ll guide you through all of these decisions to help you get the most out of this awesome account!

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RSUs: Restricted Stock Units

Pretty soon, you’ll feel comfortable with all this stock market stuff!

I spent most of my life before now knowing nothing about the stock market or investing. However, when I graduated, I had investment thrust upon me because of RSUs: Restricted Stock Units. RSUs are a form of alternative compensation which is often included in job offers, particularly in the tech sector. They serve several purposes:

  1. Acting as a delayed bonus which you can cash out after a set period of time (known as a “vesting period”). This helps companies retain employees since if you leave before the end of the vesting period you lose out on your bonus.
  2. Forcing employees to invest in the company’s stock so they will have more motivation to do their jobs well, because if the company is doing better your stock is worth more.
  3. Serving as an alternative to increased salary when trying to piece together an acceptable offer for a new engineer (see my post on salary negotiations to learn how you can use this to your advantage).

It can sometimes be pretty confusing to figure out how RSUs work, and what RSUs should be worth to you. I’ll guide you through those thought processes in this post.

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Employee Stock Purchase Plans (ESPP) — Guaranteed returns!

Don’t worship your company so much that you are blinded to the risks of putting all your eggs in one basket!

A whole lot of companies in the tech space offer Employee Stock Purchase Plans (ESPP). These are programs which incentivize employees to buy the stock of their employer company, often at a steep discount. As an engineer just starting out, you may see this and think: Awesome! I love my company and believe in what they’re doing, this is a chance for me to invest in their success. But have you thought about what happens if their stock takes a dive? You not only lose the value of your stock, you also might lose your job! Or maybe you HAVE thought about that, to the extent you’re afraid to participate at all! This is also bad, as some well-structured ESPP programs can yield a guaranteed return well above that of the stock market at large.

I’m going to do some explaining and simple calculations using an example ESPP which is very, very similar to the ones I’ve seen at companies where I’ve worked or interned in the past. This will show you that:

  1. You should almost definitely participate
  2. You should almost definitely sell as soon as the stock is in your hands

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