Low cost, easy to use micro-investing apps like Acorns is making it extremely easy for new investors to enter the market. They are trying to prove that anyone can start investing and saving for the future.
But with so many micro-investing apps and Robo-advisors on the market, is Acorns worth your time?
Acorns review 2019
What is Acorns?
Acorns was founded in 2014 and now has over 5 million open accounts. It was built on the idea that you can “find” small amounts of money in your budget to put towards investing. This idea is called micro-investing or spare change investing.
Not only is Acorns a micro-investment tool, it’s also a Robo-advisor that automates the entire investment process. That means Acorns investing app:
- Builds a portfolio for you that is based on your goals, risk tolerance, and timeline
- Pulls money from your linked accounts and invests it for you
- Constantly rebalances your investments so your account maintains your specific asset allocation (automatic rebalancing)
How much does Acorns cost?
Acorns has three different levels of service, and they offer flat-fee pricing for each:
- Acorns Core $1/month, includes a taxable, personal investment account.
- Acorns Later $2/month, includes your personal investment account and an IRA.
- Acorns Spend $3/month, includes the personal investment account, IRA account (traditional, Roth, or SEP), and a checking account.
Students with a valid .edu email address can open an Acorns Core account for free.
These fees are for accounts under $1 million, and when you hit the million-dollar mark, pricing changes to $100/month.
How does Acorns work?
This is the part of this Acorns review where you really get to understand how the spare change model works and why Acorns might be a good way to jump-start your investing practices.
Acorns offers several different ways to fund your investment account:
- Round-Ups- When you make a purchase with a linked card, the Acorns investing app will round your transaction up to the next dollar amount. For example, if you spend $21.67 at the grocery store, Acorns will withdraw and invest $0.33 from your funding source.
- Multipliers- To increase the amount you’re investing with Round-Ups, you can multiply them by 2x, 3x, or 10x. So, that $0.33 could be $0.66, $0.99, or $3.30.
- Found Money- Acorns has partnered with over 350 different companies that will give you cash back for shopping with them, and that cash can be invested in your Acorns account. Found Money can be a set dollar amount, like when you open a new account with Hulu and they deposit $10 into your Acorns account. Or, it might be a percentage you earn back, like earning 2% back on purchases you make with your linked account at Walgreens.
- Recurring investments- You can set up scheduled investments on a weekly or monthly schedule. You pick the amount of money and when it’s invested.
- Referral program- When you refer a friend, Acorns will invest $5 for you.
You can use one, a couple, or all of these funding options. You can even link a second card to earn more Round-Ups and Found Money.
One concern about an app that justs pulls money from your account at any time without giving you a chance to see if you have the funds is that you might run into overdraft fees. Acorns says, “Using a SmartDeposit system, we try to detect if an investment from your funding source could put you at risk for a bank fee. If so, we try to pause or cancel that investment.”
But, Acorns also acknowledges that bank processing times are a little different so this system is not 100% effective.
If at any point you want to pause or turn off your Round-Ups or recurring investments, you simply go into your Account Settings, go to Funding Source, and click the “Pause Transfers” button. Then you can turn them back on whenever you’re ready.
Acorns’ investing strategy
Acorns, like many other Robo-advisors, uses Modern Portfolio Theory (MPT) to determine the best asset allocation for your needs. To select the right portfolio for you, you’ll have to answer a few questions after signing up that ask about your age, income, and financial goals.
Then you are matched with one of five different portfolios:
- Conservative- 40% short term government bonds, ultra short term corporate bonds, and ultra short term government bonds.
- Moderately Conservative- 24% large company stocks, 4% small company stocks, 4% real estate stocks, 30% government bonds, 30% corporate bonds, 8% international large company stocks.
- Moderate- 29% large company stocks, 10% small company stocks, 3% emerging market stocks, 6% real estate stocks, 20% government bonds, 20% corporate bonds, 12% international large company stocks.
- Moderately aggressive- 38% large company stocks, 14% small company stocks, 4% emerging market stocks, 8% real estate stocks, 10% government bonds, 10% corporate bonds, 16% international large company stocks
- Aggressive- 40% large company stocks, 20% small company stocks, 10% emerging market stocks, 10% real estate stocks, 20% international large company stocks.
Each portfolio is made up of low expense ratio ETFs from companies like BlackRock and Vanguard. The expense ratios average 0.10%.
Acorns sends an email out every few months reminding you to update your Investor Profile so that they can adjust it as needed to better suit your needs. Things like a big a raise or having a child can affect your recommended asset allocation.
Acorns investing app features
“Grow” learning center
Like most Robo-advisor apps, Acorns has investing and personal finance-related articles so that you can build your knowledge. They are divided into six sections: getting to know Acorns, investing, savings and budgeting, paying off debt, building credit, and earning more.
These are articles are pretty limited to introductory advice and information. Acorns does have some featured articles, but they’re fairly limited in scope. Here are a couple of examples:
- The Past Decade Has Been One of the Best Times to Invest in the Market – Ever
- Cardi-B: How to Practice Self-Care Even If You’re Broke
When you log into your Acorns’ account (both app and web), you are brought to the dashboard that tells you how much you have invested with Acorns and your All-Time Market Gain/Loss. This section is called “Present.”
You can navigate to “Past” and “Potential.” Past shows the amount you’ve contributed, withdrawn, earned in dividends, etc. Potential gives you a projection of what you’re account could grow into. You can adjust your contributions and age to see how this very hypothetical amount will change.
This is Acorns checking account that is available for $3 a month, which also includes your personal investment and IRA accounts. Round-Ups will happen in real-time, and you will still have access to Found Money and up to 10% invested when you use your card at local retailers who aren’t part of Acorns Found Money program.
Acorns Spend also features:
- No minimum balance
- No overdraft fees
- No fees or fee-reimbursement for ATMs
Acorns Spend will be available later in 2019.
Related post: Best Online Savings Accounts in 2019
Acorns investing review – where Acorns shines
The Acorns investing app is fully automated investing
Robo-advisors are ideal for anyone who wants a passive investing experience. Acorns picks the ETFs for your portfolio and invests your money for you. It’s incredibly mindless.
Teaches you that you can invest
Micro-investing apps like Acorns are doing something really interesting for new investors – teaching them that anyone can start investing and that it doesn’t take much money at all. This is awesome considering how many people are behind on retirement or other long-term savings.
When you use a spare change app like Acorns, you very quickly realize that there has been money all along that you can earmark for investing. And as you realize that your money is in fact growing, you’ll hopefully prioritize it more.
You’re investing in micro-shares
Micro-shares are fractional shares of stocks, bonds, ETFs, etc. This makes them inherently less expensive than a full share, and it also means there isn’t any cash drag in your account.
When you’re ready to start purchasing full shares, read more at How to Get Started in Stocks: A Beginner’s Guide to Investing in Stocks and Bonds.
What Acorns lacks
There are limited portfolio options
There are five different portfolio options available with Acorns, and they are limited to 3-7 funds each. This is less than what you’ll find with most other Robo-advisors, like Betterment and Wealthfront.
Limited account types
Acorns only offers two types of investment accounts – individual and traditional IRA. No 529 plans or trusts. And while you can rollover a 401(k), Acorns does not support 401(k) management like Blooom does.
Read more about 401(k) management at Blooom Review 2019: Affordable Robo-Advisor for Your 401(k).
Acorns fees hurt accounts with low balances
$1 a month probably doesn’t sound like an exorbitant amount of money, but if you only have $10 invested, to begin with, that means you’re paying 10% in management fees. Your account will have to hit $5,000 before Acorns costs as little as Robo-advisors Wealthfront and Betterment that charge 0.25% of assets under management.
Well, there is none. Acorns investing app does not use tax-loss harvesting to help offset taxes on any gains or income.
M$M pro-tip: Personal Capital is the free money tool that lets you track all of your investments in one place, even what’s in your Acorns account. It's free to use and offers robust investment and net worth tracking tools.
Acorns Review, the final word
Is Acorns a waste of your time?
There are definitely other Robo-advisors out there that give you more control, more options, and can cost less than Acorns. What Acorns has going for them is that by funding your account with Round-Ups, you hardly notice that you’re investing as you spend the way you normally do.
This is a game-changer for anyone who’s ever said something like “I don’t have the money to invest” or “I would forget I needed to do it.”
Between automation and purchasing micro-shares, those are no longer issues for new investors.
If Acorns is what teaches you that lesson, then awesome – it’s done its job.
However, if you want to get serious about investing for retirement, micro-investing apps probably aren’t going to be your best option. Without tax-loss harvesting, more portfolio options, and limited customer support, Acorns just doesn’t compete with Robo-advisors like Wealthfront and Betterment.