MoneyLife

Round Ups are an easy way to put your investing on autopilot

By Ellen Williams

Just think how much money you’d likely have if you’d collected all of the loose change over the years for all of the things you buy daily. All of the coffees, grocery store runs, gas tank fill-ups — whatever. You’d probably have a pretty good amount of money saved up. What if you could start taking all that loose change and invest it automatically? Well, you can. That’s the idea behind Round Ups. Round ups are an easy way to make investing an automatic habit. It lets you invest small amounts of money over time, without even thinking about it, which can help you build wealth. 

Let’s face it. Building a portfolio and building wealth tends to be a slow, long-term project that happens over years — not over days and weeks. Having the discipline to contribute to an investment portfolio regularly over time is one of your most important jobs as an investor, but it sure can be a challenge. That’s where Round Ups come in. 

Here’s how it works

Let’s say you use your debit card to pick up a morning coffee that costs $2.50. When you choose to do Round Ups, the transaction gets rounded up to $3 and the extra $.50 goes straight into a savings or investment account for you automatically. With Round Ups, this happens automatically every time you use you make a qualifying purchase.

Three reasons Round Ups work

The biggest hurdle to investing is usually our own behavior. The natural tendency to procrastinate and over-react to market movements and headlines can do significant harm to portfolios over time. There are three ways Round Ups can help investors stay disciplined and consistent over time:

  1. Automating contributions helps you stay invested, even in challenging times. The past two years, which experienced the COVID-19 pandemic market crash and recession, have been a great example of this. In hindsight, the market pullback was brief and the S&P 500 ended the year with a strong 18% total return. In 2021, the stock market provided investors with another 18% gain [as of 7/13/2021] despite significant uncertainty along the way. Those who stayed invested despite scary headlines and day-to-day swings avoided selling when prices were at their lowest. 

Chart: Total annual return of S&P 500 compared to the biggest decline that yearChart

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Note that, for the past 30 years, even when downard swings have been large, in most years the markets have ended in positive territory. Be aware that past performance is no guarantee of future results. Sources: Clearnomics, Standard & Poor’s [as of July 14, 2021].

  1. Round Ups puts the glorious power of compounding to work for you. When you can invest consistently over a long time, you allow the value of your investments to “compound” and potentially magnifying its growth. Albert Einstein famously called the power of compounding the “eighth wonder of the world.” At its core, compounding is simply the idea that your investments can grow exponentially over time. Not only does your initial investment generate returns, but your past gains plus any interest or dividends you’ve earned on those investments also generate returns. Over time, this can have a snowball effect in creating wealth, making it a powerful tool for savers and investors. Remember though, there is no guarantee that your investments will go up over time.
  1. Round ups are a great way to take advantage of dollar cost averaging. In its simplest terms, dollar-cost averaging is a strategy that enables you to invest frequently and consistently without having to consider the price of an investment. And it can be one of the biggest factors of investment success over time. This approach is completely opposite of what you typically hear other people talk about – buying investments, like stock, by timing the market. This is a bad approach because NO ONE can predict the markets, and because of human nature you’ll likely make some bad investment decisions (instead of buying low and selling high, you’ll likely end up doing the opposite). By dollar cost averaging you are removing the guesswork and investing consistently over time, sometimes when you buy prices will be higher but other times prices will be lower. 

Are Round Ups right for you?

Discover MoneyLion Round Ups — and power up your investing today.

Disclosures

Some of this material, as well as the insights and data within, have been provided to MoneyLion by Clearnomics, Inc.

RoarMoney Accounts with an active Round Ups feature will round-up each eligible transaction to the nearest dollar. Once it accrues to $1 or more, it will be transferred to your MoneyLion Investment Account, where the funds are invested into a portfolio of selected ETFs.

MoneyLion is a financial technology company, not a bank. RoarMoney℠ demand deposit account provided by, and MoneyLion Debit Mastercard® issued by, MetaBank®, National Association, Member FDIC. RoarMoney is a service mark of MoneyLion. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International. Funds are FDIC insured, subject to applicable limitations and restrictions, when we receive the funds deposited to your account.

Investment advisory services provided by ML Wealth LLC. Investment Accounts are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Investment Account, see Investment Account FAQs and FORM ADV. Accounts are subject to an administrative fee of $1 per month.
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, MoneyLion does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information. For more information about MoneyLion, please visit https://www.moneylion.com/terms-and-conditions/.

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