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Acorns Review: A Comprehensive Guide to Investing with Acorns

Acorns Review: A Comprehensive Guide to Investing with Acorns

July 23, 2020

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Acorns Feature Types

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Investing can be a daunting task, especially for beginners who are just starting to explore their options. That's where Acorns comes in. Acorns is an investment app that allows users to invest your spare change automatically. With over 10 million all-time users and $15 billion in assets under management, Acorns has become one of the most popular investment apps in the market.


In this ultimate guide, we will deep dive into Acorns and explore everything you need to know about the platform. From its return rate and interest rate to how it compares to Robinhood, we will cover it all. We will also answer some common questions, such as whether Acorns is even worth using, whether it can be trusted, and what the pros and cons of the platform are.


Finally, we will walk you through the steps of setting up an account and getting yourself started with the Acorns app.


Acorns Pricing Plans

Acorns Pricing Plans


Pros and Cons of Acorns

Here are some of the pros and cons of investing with Acorns:


Pros:

  • Easy to use, especially for beginners

  • Automated investment process

  • Access to Acorns Earn for cashback rewards

  • Offers additional features like Acorns Later, Acorns Banking, and Acorns Early

  • Financial education resources through Grow Magazine

Cons:

  • Fees may be high for some users, particularly those with small account balances

  • Limited investment options compared to other platforms

  • Not the best choice for experienced investors or those with larger sums to invest

  • Large fees to move your money to another investing platform


How does Acorns Work?

Acorns cost $3/month (for the personal plan and $5/month for the family plan), either plan helps you invest money by rounding up to the nearest dollar on all your purchases. For example, if you were to spend $52. 65 at the grocery store, Acorns would round up and invest 35 cents for you. Every time you make a purchase and round up that money is invested into an exchange-traded fund (ETF) that you select. ETFs are really just a bunch of stocks in one big bundle.


This is the core feature that drove Acorns' early success and separated them from their competition in the space. Since that original feature was built Acorns has expanded its feature set for those that want to take their investing to another level.


Now, you can invest more than just the amount rounded up. You can set up recurring investments, and a variety of other features we will walk through in the next section.


Acorns Features

Invest: This is the main feature of Acorns. It allows you to invest your money into a diversified portfolio of exchange-traded funds (ETFs) based on your chosen investment strategy. I like to call this the "Round-up" feature.


Recurring Investments: This feature allows you to set up automatic investments on a daily, weekly, or monthly basis. For those that want to use Acorns as their primary investment vehicle, this feature is geared toward you!


Acorns Earn: This feature offers cash back when you shop with Acorns' partners, which is automatically invested into your account. You can check out the list of partners and read the fine print here.


Acorns Later: This is a retirement account that allows you to invest in a traditional or Roth IRA to save for retirement. If you get started investing a little later in life, or if you have been with Acorns for a while and want to take your investing to another level, Acorns has added this feature for you!


Acorns Banking: This feature includes a checking account, a debit card, and other financial management tools. It also allows you to earn cash back when you spend with Acorns' partners. It also allows you to "Get Paid Early" if you have direct deposit. Similar to Chime, if you have direct deposit set up, you can spend a part of that direct deposit before it posts to your account.


Grow Magazine aka Learn: This is Acorns' financial education and lifestyle publication. It includes articles and resources on personal finance, investing, and more. This is a great Rolodex/resource to learn about nearly any financial topic, very similar to SmartAsset.


Acorns Early: This is a custodial account for kids that allows parents or guardians to invest on their behalf. Check this feature out here, if you want to start savings for your kids' future.


Acorns Return Rate

First and foremost, the return rate of any retirement account depends entirely on the performance of the stock market and which positions you have taken within it. While Acorns may have a history of positive performance, that does not mean the same results will continue.


One of the most important things to consider when investing with Acorns is the return rate. Acorns give you the ability to invest in exchange-traded funds (ETFs) that are diversified across 7,000 stocks and bonds. The return rate of your investment will depend on the performance of these ETFs.


Typical Acorns Portfolio Distribution

While investment portfolio distributions can vary from investor to investor this is the typical breakdown you will see if you have an Acorns account:

  • Stocks: 40%

  • Bonds: 30%

  • Real Estate: 15%

  • Commodities: 10%

  • Cash: 5%


Typical Acorns Portfolio Distribution


What People Think of Acorns Overall

When it comes to investing, it's important to choose a platform that you can trust. Acorns has received mixed reviews from users, with some praising the platform for its ease of use and others criticizing it for its fees and investment options.


According to NerdWallet's Acorns review, the platform has a 4.6/5 rating (that's pretty good). Some users praise the platform for its easy-to-use interface and automatic savings features, while others criticize it for its fees and lack of investment options.


Overall, I'd say Acorns is a great and easy-to-use app for anyone looking to get their investment portfolio started and those who have a little trouble setting money aside to invest. The amount of money you invest with Acorns is relatively small, you are just rounding up purchases to the nearest dollar, so many won't really notice they are investing at all.


What People Think of the Acorns App

Acorns also offers a mobile app that allows you to manage your investments on the go. The app is available for both iOS and Android devices and has a 4.7/5 rating on the App Store and a 4.3/5 rating on Google Play. Overall, users seem to enjoy the app for its user-friendly interface and functionality.

The Acorns app offers a comprehensive experience for users, including:

  • A dashboard that shows your account balance, recent transactions, and the status of your investments

  • The ability to customize your investment portfolio by selecting your risk tolerance and investment goals

  • Access to Acorns Earn, where you can browse cashback offers from partner brands

  • Educational resources through the Grow Magazine

The app is regularly updated to improve performance and fix bugs, ensuring a seamless experience for users. While some users have reported technical issues, the majority of reviews are positive


Is Acorns Actually Worth Using?

Whether Acorns is worth using depends on your personal financial goals and investing preferences. Acorns is an excellent platform for beginners who want a hands-off approach to investing, with minimal effort required. It's especially useful for those who struggle with saving and investing money, as the app automates the process.


However, if you're an experienced investor or have a larger sum of money to invest, you may find that the fees associated with Acorns outweigh the benefits, especially when compared to other low-cost brokerage platforms.


Another key consideration when trying to decide if Acorns is right for you is the monthly fee. You may be thinking, $3 per month, that isn't too bad, but after diving in a bit deeper you begin to see why this could be cause for concern.


$3/month = $36 per year - If you have $100 invested with Acorns, then in the first year you just paid a 36% account fee. For comparison, Betterment/Wealthfront both charge 0.25% per year.


So, Acorns makes a lot more sense as you obtain a larger balance.


Can Acorns be Trusted?

Acorns is a legitimate investing platform that has been around since 2012. It's registered with the Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA). This means that it's subject to regulations and oversight by these organizations.


Moreover, Acorns uses bank-level security measures to protect user data, including 256-bit encryption, secure servers, and multi-factor authentication.


While no investment platform can guarantee returns or eliminate risk, Acorns is a trustworthy option for those looking to invest their spare change.



Is Robinhood or Acorns Better?

Choosing between Robinhood and Acorns depends on your personal investment preferences and goals. Robinhood is a commission-free trading platform that allows users to trade stocks, ETFs, options, and cryptocurrencies. It's geared more towards active traders and experienced investors.


On the other hand, Acorns is designed for passive investors and beginners who want an automated, hands-off approach to investing. Acorns' main feature is its round-up investments, making it ideal for those who struggle with saving and investing money.


Both platforms have their advantages and drawbacks, so it's essential to consider which one aligns better with your financial objectives and investment style.


Acorns vs The Competition


SigFig

Brief Summary: SigFig is a robo-advisor that offers investment management services. It provides a broad range of services, including portfolio tracking, investment advice, and automated investment management. SigFig stands out for its free portfolio tracker and its management of accounts held at partner brokerages.

  • Pros:

    • Free portfolio tracking tool

    • Automated investment management

    • Access to human advisors

  • Cons:

    • High minimum investment for managed portfolios ($2,000)

    • Limited account types

Comparison to Acorns: SigFig offers more sophisticated investment services and access to human advisors, while Acorns focuses on ease-of-use and beginner investors with features like round-ups. However, Acorns has a lower barrier to entry with a minimal initial deposit compared to SigFig.


Wealthfront

Brief Summary: Wealthfront is a robo-advisor known for its PassivePlus investment strategy, which includes features like tax-loss harvesting, risk parity, and smart beta. It's designed to maximize returns and minimize taxes.

  • Pros:

    • Daily tax-loss harvesting

    • High-interest cash account

    • Low management fees (0.25%)

  • Cons:

    • High minimum investment ($500)

    • No human advisors

Comparison to Acorns: Wealthfront is a more feature-rich robo-advisor with strategies aimed at maximizing returns. It could be more suitable for investors who have a bit more to invest initially and want to be more hands-off. On the other hand, Acorns is geared towards beginners or those who wish to invest small amounts of money regularly.


Betterment

Brief Summary: Betterment is one of the first robo-advisors in the market. It offers automated investment management and has additional features like goal-based investing and access to human advisors.

  • Pros:

    • Goal-based investing feature

    • Low minimum balance for digital plan (No minimum balance)

    • Access to human advisors

  • Cons:

    • Higher fees for access to human advisors

    • No direct indexing

Comparison to Acorns: Betterment has more comprehensive features than Acorns, including goal-based investing and the option to talk to human advisors. Acorns could be a better choice for individuals who want to start investing with a small amount of money or are interested in round-up features.


Best Option: The best option largely depends on the individual's needs. Acorns is an excellent choice for those starting and wanting to invest small sums of money, using round-ups and easy-to-understand portfolios. SigFig, Wealthfront, and Betterment might be more suitable for individuals with larger sums to invest, or who require more advanced features and services.


Step-by-step guide to set up an Acorns account

If you have made it this far, then you are probably interested in learning how to get your Acorns account started. Follow these steps and you'll have your account set up in under 5 minutes:






Download the Acorns app from the App Store or Google Play Store.





Open the app and tap "Get Started".





Enter your email address and create a password for your account.





Choose your investment goals, such as saving for retirement or a down payment on a home.


Enter your personal information, including your name, date of birth, and Social Security number.





Connect your bank account to Acorns to start investing. You can do this by linking your bank account or debit card.





Choose your investment portfolio. Acorns offers five portfolio options ranging from conservative to aggressive.


Set up recurring investments to automatically invest money into your Acorns account on a regular basis.


Verify your account by confirming your email address and linking your bank account.





Start investing! Acorns will automatically invest your money into a diversified portfolio of ETFs based on your chosen investment strategy.


That's it! Setting up an Acorns account is quick and easy, and you can start investing in just a few minutes. Remember to regularly review your investment portfolio and adjust your strategy as needed to ensure your investments align with your financial goals.



Summary

Acorns can be a great option for beginners who want to start investing with spare change. While the platform has its limitations and fees, it offers an easy way to build a diversified portfolio and earn cash back on select purchases. However, if you're an experienced investor or want more control over your investments, you may find other platforms to be a better fit.

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