Investing

Acorns CEO advocates long-term investing over 'fast money' trades

Key Points
  • "We're just really doubling down and tripling down on that message" instead of riskier stock trading, which has seen a surge in popularity, said Acorns CEO Noah Kerner.
  • "We try to remind people that every downturn in history has ended in an upturn," he said in an appearance on "Squawk Alley."
  • "This recent upturn is a good example of that, and I hope that sets another tone for people to say, 'You know what, long-term investing is really the right way to think about things,'" he said.
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Acorns CEO on investing habits during the pandemic

The historic fall and rebound in the major market indexes this year illustrates just why investors should focus on long-term investing, Acorns CEO Noah Kerner said Wednesday on CNBC.

"We're just really doubling down and tripling down on that message" instead of riskier stock trading, which has seen a surge in popularity, said Kerner, who leads the micro-investing app Acorns.

Major stock indexes are all trading at or near record-high levels after tumbling double digits during the coronavirus-induced sell-off that ended the longest bull run on record at the beginning of the year.

The Dow Jones, S&P 500 and Nasdaq Composite averages all tanked more than 30% between February and March, and the averages are now enjoying more than 55% upsides from their lows within six months. The Nasdaq has returned 75% from its March lows as of Tuesday's mid-session.

The Dow is the only laggard of the three. While the blue-chip average finally crossed into positive territory on the year last month, it's the only one to remain below its February levels. It remains about 2% off its all-time closing high.

Kerner, who appeared on "Squawk Alley," said it's imperative that investors don't panic when managing their money and to stomach short-term pain and volatility for long-term gains.

"We try to remind people that every downturn in history has ended in an upturn," he said. "This recent upturn is a good example of that, and I hope that sets another tone for people to say, 'You know what, long-term investing is really the right way to think about things.'"

The comments come as stock brokerages see unprecedented interest in stock trading, which is betting on securities with hopes of turning a profit in the short term. Retail investors have flooded into trading apps such as Robinhood that led the wave into commission-free trading last year. Traditional brokerages such as Fidelity, Charles Schwab and TD Ameritrade have all jumped on the zero-commission wave and added new offerings such as fractional share investing.

Acorns — which CNBC's parent company, NBCUniversal, is an investor in — is a micro-investing app that lets users invest spare change and more into diversified exchange-traded funds. The app also offers financial literacy sources, seeking to encourage more saving.

Despite the coronavirus recession, most major brokers saw record revenues from trading in the second quarter as new, younger investors sought to take advantage of attractive equities in a volatile market environment. 

While more Americans stayed home in efforts to slow the spread of Covid-19, a majority have been doing more to save, according to a CNBC/Acorns survey conducted with SurveyMonkey. About 60% of respondents identified themselves as "savers," up from about 54% a year ago. About 46% said they have been saving more since the onset of the outbreak, while 45% said they have stuck to their same routine. Another 7% said they have been spending more in the same period.

As more millennials try their luck on the market, individual trading has about doubled since 2010, Kerner said.

"For me, that's concerning because that indicates people [are] looking for fast money, and as we know the house always wins, so I'm encouraged to see people doubling down on saving and investing and committing to it," he said.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.