For those who don’t know much about investing, think it takes too much work, or feel like they don’t have enough money to start investing, micro-investing has become a really popular option these days.
As you may have already guessed, all micro-investing is basically hipster-speak for “investing with small amounts of money”. While larger brokerages are making investing more accessible by lowering or eliminating account minimums, there are still a lot of people who are hesitant, opting for companies like Acorns instead.
To help you understand what Acorns is and to see if it might work for you, I wanted to give you a full M$M Acorns review.
I’ve actually been wanting to write this Acorns review for a while now, and just today, as I sat down to write, someone in my M$M Facebook Group asked if anyone was using Acorns and wanted honest feedback to decide whether or not it was a good option.
Clearly, this is a relevant issue and I’m happy to finally get to it!
What is Acorns?
If you’re not familiar with the company, Acorns is a web-based investment platform available on your phone or computer that merges the old-school approach of saving your spare change with the robo-advisory model. This type of approach is often called spare change investing, and if you’ve ever blindly thrown money into a piggy bank, you understand how that spare change adds up over time… assuming you aren’t breaking into it every couple of weeks.
On the most basic level, Acorns rounds up any transactions you make with a linked account to the next dollar and invests that into your portfolio.
I’m going to go in-depth on all of these things in my Acorns review, but here’s an overview of how it works:
- Set up an account, linking a debit or credit card
- Acorns helps you choose an investment portfolio
- Invest with round-ups and, if you choose, scheduled deposits
- Watch your investments grow
This premise sounds pretty cool, and in a lot of ways it is, but I want to make this very clear in my Acorns review…
… investing with spare change alone won’t be enough for retirement.
I’d say more than anything, Acorns reduces the mental and financial roadblocks associated with investing.
M$M tip: If you want to stay on track for retirement and see all of your investments in one place, Personal Capital is my favorite FREE tool. To learn how Personal Capital can help you, read my Personal Capital Review – Free Money Tracking and Retirement Calculator.
How does Acorns work?
Alright, now for the nitty-gritty details in this Acorns review, including signing up, investing, and then growing your money with Acorns.
Signing up with Acorns
Creating an account with Acorns is relatively painless, and I’d say it can be done in just a few minutes, but you’ll have to be comfortable handing out a decent amount of your personal information. In reality, it’s the same information that you’d need to share with any type of investing app.
You’ll start by going to Acorns, entering your email address, and creating a password.
This is really what Acorns is about, and this is the spare change model that it’s built on. Once you’ve created an account with Acorns, you’ll link your debit or credit card, which is where the app will pull transactions from to round up to the next dollar amount. You can choose the types of transactions that Acorns draw from or simply let it automatically round up all of your transactions from the card that you choose to link.
Here’s how the round-ups work:
Say you spend $40.11 at the grocery store. Acorns rounds that up to $41, putting $0.89 aside to invest. Once you hit $5 in round-ups (the app shows you how close you are to $5), the money is withdrawn from your linked account and put it into your Acorns account.
You can also choose Acorns Multiplier to boost your totals, multiplying these round-ups by 2, 3, or 10 times.
Acorns Found Money
To boost the amount you invest, Acorns has partnered with more than 200 different companies to give you cash back on purchases you make with your linked account. Some of the Found Money companies include Apple, Hulu, Nike, and Airbnb.
Acorns Scheduled Deposits
To really increase your investment portfolio, you can opt in to additional deposits made on a monthly basis. These can be as little as $5 a month.
Investing with Acorns
Now that we’ve covered how to sign up and where the investment money is coming from, the next big topic to cover in this Acorns review is the actual investing aspect.
Acorns offers two different types of investment accounts:
- Acorns Core: Using your round-ups and any additional deposits you make, Acorns invests your money into micro-shares of ETFs (Exchange Traded Funds).
- Acorns Later: With this option, you invest your money into a specially-designed IRA (Individual Retirement Account).
When you sign up with Acorns, you will be asked a series of questions – employment information, net worth, yearly income, and the reason for investing – and the app will assess your needs and match you with an appropriate portfolio. You can stick with what Acorns recommends or make needed changes.
The Acorns portfolios are made up of 0.10% expense ratio ETFs and are broken down as follows:
- Conservative: 18% stocks, 80% bonds, 2% real estate
- Moderately conservative: 36% stocks, 60% bonds, 4% real estate
- Moderate: 54% stocks, 40% bonds, 6% real estate
- Moderately aggressive: 72% stocks, 20% bonds, 8% real estate
- Aggressive: 90% stocks, 0% bonds, 10% real estate
I like to nerd out on this stuff, so I’m going to breakdown your investments even more in my Acorns review. Here are the specific ETFs that the app will invest your money in (plus ticker symbol):
- Large Company Stocks: Vanguard S&P 500 (VOO)
- Small Company Stocks: Vanguard Small-Cap (VB)
- Developed Markets: Vanguard FTSE Developed Markets ETF (VEA)
- Emerging Markets: Vanguard Emerging Markets Stock (VWO)
- Real Estate: Vanguard REIT (VNQ)
- Corporate Bonds: iShares iBoxx$ Investment Grade Corporate Bond (LQD)
- Government Bonds: iShares 1-3 Year Treasury Bond (SHY)
What are the fees for investing with Acorns?
Signing up for Acorns is free, but it takes $5 to start investing. That means you’ll need to reach $5 in round-ups or make a deposit of $5 to actually begin investing.
Acorns Core costs $1 per month.
Acorns Later, plus the Core account, is $2 per month
Acorns Spend is a an optional checking account attached to your investment account. It costs $3 per month and includes Acorns Core and Later.
If you are a college student with an email address ending in .edu, Acorns Core is free.
Now the real Acorns review: Pros and Cons
I try not to take hard stances on M$M, but I do want to give you my honest opinion on where Acorns shines and falls short. This is meant to help you decide if investing in Acorns is going to be worth your time and money.
The pros of using Acorns:
- There isn’t an intimidating initial investment amount – you start with just $5. Acorns has reduced, if not eliminated, one of the most daunting barriers to new investors.
- You can start an IRA with spare change. Using spare change investing to fund your retirement isn’t going to be a reality, but it can be a good start.
- You do have control over the type of portfolio you’re investing in, which may help you get comfortable with a more hands-on approach to investing.
- The app is user-friendly and includes graphs and charts to visualize what’s going on with your money. This is always an important feature for me, and I like that Acorns has such a clean design.
- There is some useful, educational content in their platform that takes you through the basics of investing.
- There is no cost to withdraw money from your account. However, since withdrawing money involves selling your shares, it can take 3-6 business days for payment to be processed.
- Acorns gets you comfortable with market volatility. By viewing the daily/weekly/monthly hits and gains to your account, you grow more accustomed to how the stock market operates. This will make investing with a traditional brokerage a little less stressful because those accounts will work in the same way.
- They’ve got the millennial-friendly thing down pat by using technology to automate your investments in an easy-to-use app.
The cons of using Acorns:
- The fees are high for accounts with a small balance. Your monthly fee is your cost of investing. Only have $10 invested in their Core account? Then you are technically paying a 10% management fee. You can find much lower rates with more traditional brokerages. Read Best Online Stock Brokers in 2019 for more information.
- Flat fees, like what you’ll see with Acorns’ monthly fee, are pretty rare with robo-advisors, who typically charge a percentage of assets under management.
- Acorns doesn’t give you any tax benefits like loss harvesting. They do, however, give you a 1099 at tax time.
- With only seven asset classes, you have limited investing options.
- If you rely on Acorns, or other spare change investing apps, for retirement, you won’t have enough invested. I’ve said that already in this Acorns review, but it’s important enough to repeat.
Acorns review – My final verdict
Alright, I’ll admit that there are some real perks to investing with Acorns, namely removing the barriers from traditional investing. That’s something I like. And we all know how important investing is for retirement, but it’s going to take SO MUCH MORE THAN SPARE CHANGE… yep, said it again.
Besides the management fees and possibly not investing enough, it might not hurt to start investing with Acorns, so if you want to give it a try, go for it. But, use it in the interim while you’re getting more comfortable with other options.