Micro-investing app Acorns is making it easier to start investing for yourself, retirement, and even for your kids. This Acorns review looks at the features and pricing and breaks down whether Acorns is worth it for you.
Since 2014, the Acorns app has been appealing to first-time investors because of its micro-investment approach. Instead of feeling like the only way to invest is with large monthly deposits, Acorns lets you invest your spare change – literally.
Acorns has added features over the past couple of years to appeal to new investors even more, and my Acorns review explores whether or not this micro-investment app is worth it.
How much does investing with Acorns cost?
Acorns offer subscription-based pricing on two different account levels, starting at $1 per month, and up to $5 per month.
- Acorns Personal – $3/month: Includes a personal investment account, tax-advantaged retirement account, and access to a checking account option. Acorns Checking is a no-fee checking account with access to over 55,000 fee-free ATMs.
- Acorns Family – $5/month: In addition to personal, retirement, and checking accounts, this plan comes with custodial investment accounts for children.
Subscription fees are for accounts under $1 million, and when you hit the million-dollar mark, pricing changes to 0.01%
How does Acorns work?
Acorns is a micro-investment app. It makes it possible for you to invest small amounts of money to purchase micro or fractional shares of an ETF or stock instead of full shares.
Acorns’ Round-Up feature is built on this idea of micro-investing spare change. The app rounds transactions up to the next dollar amount and invests the difference. For example, if you spend $4.63 on a latter, Acorns will round that charge up to $5 and invest the $0.37 difference in your investment account.
One of the largest barriers to investing is that many people don’t believe they have enough money to start investing. Acorns eliminates that barrier by helping you invest your spare change through micro-investments. Acorns invests your funds immediately instead of waiting until there’s enough in your account to purchase a full share.
Acorns is also a robo-advisor, which means it uses computer algorithms to determine exactly how to invest your money. You answer a series of questions when you sign up for Acorns that determines your risk tolerance, and Acorns recommends a prebuilt portfolio that can help you reach your goals.
Robo-advisors eliminate costs because there’s little to no contact with a human financial advisor.
For its robo-advising, Acorns uses Modern Portfolio Theory (MPT), which was developed by Harry Markowitz, a winner of the Nobel Prize in Economics. It’s a way to minimize risk while maximizing returns.
To wrap that all up, Acorns is a micro-investing app that acts as a robo-advisor. It’s an inherently affordable way to start investing, which leverages modern portfolio theory to determine your portfolio’s asset allocation.
For each type of Acorns account, you decide how it’s funded. You can use recurring deposits on your IRA, Round-Ups on your custodial accounts, etc. Settings can be changed at any time.
Acorns investing features
Round-Ups is the feature that Acorns is best known for, and you can start using it after you sign up and link a credit or debit card. Once you start spending with that card, Acorns will round transactions up to the next dollar amount. When you reach $5 in Round-Ups, the Acorns investing app withdraws money from your bank account and into your investment account.
If I spend $47.19 on gas, Acorns will round that up to $48 and invest the $0.81 difference.
But, if I want to super-charge your spare change, I can turn on Multipliers. You can apply 2x, 3x, or 10x Multipliers. Instead of $0.81 in the above example, I could be investing $1.62, $2.43, or $8.10.
For transactions that are whole dollar amounts, you can set a round-up amount between $0 and $1.
All of your Round-Ups settings can be adjusted and turned on and off in the Acorns investment app. You can set your Round-Ups settings for manual, which means you pick the round-up amount for each transaction.
Acorns lets you link more than one card for Round-Ups, and all of your cards can use the same funding source. You can keep track of how close you are to reaching the $5 withdrawal minimum on your dashboard.Related: Qapital Review 2020: Save Money Without Even Noticing
The Found Money Feature
Acorns Found Money feature gives you money for signing up or shopping with one of Acorns’ 350+ different partner companies. Found Money varies from company to company, but it can be a percentage of your purchase or a flat amount.
The company you shop or sign up with is giving you money to invest in your Acorns account.
Here are a few of the Found Money offers available when this Acorns review was written:
- $35 for new Blue Apron customers
- $10 for a Disney+ Gift Subscription
- MeUndies will invest 20% of the total order for new customers
- $0.25 invested by Kentucky Fried Chicken when you spend $20 or more on your linked card
There are specific instructions on how to claim each offer. The Kentucky Fried Chicken one is claimed when you use your linked card. The Disney+ Found Money offer is claimed by signing up through a link on the Acorns app.
Acorns has a Chrome browser extension that automatically applies offers when you’re shopping through the browser.
Found Money takes 60-120 days to be deposited into your account, and you can keep track of it in the app.
Acorns has partnered with ZipRecruiter for this new feature. You click on a button in the Acorns investing app that says “Find A Job,” and it pulls up a list of jobs in your area.
There are also offers for side gigs that invest for you. At the time of this Acorns review, one of the offers is for DoorDash. If you sign up as a new DoorDash driver through Acorns, DoorDash will invest $30 for you.
Recurring and one-time deposits
Round-Ups and Found Money are awesome, but if you want to start investing even more, Acorns investing gives you that option. You can make one-time and recurring deposits into your investment account with as little as $5.
One-time deposits will show up in 3-5 business days. Recurring deposits can be set on a daily, weekly, or monthly schedule from Monday through Friday. If you need to adjust or pause your deposits, you can go into the Acorns app and make changes.
Acorns referral program
Acorns users are rewarded for referring new users with a $5 bonus that’s invested in your account. Both you and the friend who uses your unique referral code receives $5 invested in their Acorns account.
It takes 2-5 business days for the funds to show up in your account.
Acorns Later is how you can start saving for retirement with Acorns. The platform offers three kinds of IRAs (Individual Retirement Account):
- Roth IRA: Best for individuals who make less now than they’ll make in retirement.
- Traditional IRA: Better for those earning more now.
- SEP IRA: Good for self-employed people who want to make tax-deductible contributions to a retirement account.
Your Later portfolio is selected based on your age now and the time it will take to reach retirement age (59.5 years old). Acorns automatically rebalances your Later portfolio as you get closer to retirement age. You can also rollover existing IRAs to Acorns Later, and there are tax implications if you withdraw funds before retirement.
The Acorns Checking account option is available for $3 a month, which also includes your personal investment and IRA accounts. Round-Ups will happen in real-time, and you 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 Checking features also include:
- No minimum balance
- No overdraft fees
- No fees or fee-reimbursement for ATMs
Acorns Checking accounts are FDIC-insured up to $250,000.
Early is included in the Acorns Family tier, and it includes custodial accounts so you can start investing for your kids. These are UTMA/UGMA accounts, not 529 plans, which means the money isn’t designated only for educational expenses. UTMA stands for Uniform Transfer to Minors Act, and UGMA stands for Universal Gifts for Minors Act.
Early is a custodial account that you, the parent or guardian, controls until the investment until the child reaches the “age of transfer.” That’s basically until they are legally considered an adult.
UTMA/UGMA accounts are considerably more flexible, but 529 plans offer more tax advantages for college savings. Consult a financial advisor or research which is the best option to save for your kids.
How does Acorns invest your money?
Acorns uses Modern Portfolio Theory as a strategy 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’re matched with one of five different portfolios:
- Conservative: 40% short term government bonds, 40% ultra short term corporate bonds, 20% 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 well-known companies like BlackRock and Vanguard. The expense ratios average 0.10%. Acorns automatically rebalances your portfolio to maintain your specific asset allocation.
Major life changes, like having a child or receiving a raise, can affect your recommended asset allocation, and Acorns sends out regular emails that remind you to update your investment portfolio as your financial situation changes.
If you want to change to a different portfolio than Acorns recommends, you can access it on your dashboard. Because switching portfolios might not be the smartest choice, you need to go through a couple of extra clicks.
Acorns investing account fees
On the surface, Acorns looks like an affordable way to start investing. However, the affordability depends entirely on your account balance.
Acorns investing uses a flat fee structure while most robo-advisors, like Betterment, charge a percentage of assets under management (AUM). For accounts with small balances, the flat fee costs more for accounts with small balances.
For example, if you have $100 in your Acorns account, paying $1/month for a personal account means you are paying a monthly management fee of 12%. The monthly management percentage shrinks as your balance grows, and here’s how that $1/monthly fee changes with your account balance:
- $500 = 2.4%
- $5,000 = 0.24% monthly
- $10,000 invested = 0.12% fee
Imagine how high that percentage would be if you were paying $5/month for the Family plan. $5 equals a 60% fee on $100 invested. Even once your balance hits $5,000, you’re paying a fee that’s 1.2% of assets under management.
When you compare Acorns flat fee pricing to Betterment – Betterment charges an annual fee of 0.25% AUM – Acorns becomes significantly more expensive.
The other part of this is that if you are only funding your Acorns investment account with micro-investments, it will take a considerable amount of time for the flat fees to make sense.
Other Acorns investing fees
Acorns doesn’t charge closing fees. However, if you want to move your investments to another brokerage, there is a $50 fee for each ETF you want to transfer. It’s not uncommon for a broker to charge a transfer fee, but Acorns is on the higher end.
Many brokerages charge a flat fee of anywhere from $50-$100 to transfer all of your securities. And Wealthfront, another popular robo-advisor platform, doesn’t have any transfer fees.
There’s always the option to sell your Acorns investments and transfer your cash to your bank account, and then invest with another brokerage. Acorns does not charge you to cash out your account and close it, but you’ll likely pay capital-gains taxes.
Acorns compared to Stash and Betterment
Because I’ve mentioned some alternatives in this Acorns review, let’s take a quick glance at Acorns compared to two other micro-investing platforms.
No minimum to open an account, $5 minimum to invest
No minimum to open an account, $5 minimum to invest
No minimum to open an account, $10 minimum to invest
Access to a human advisor
Who is Acorns investing best for?
Acorns is best for anyone who has been intimidated by a traditional brokerage in the past. I’ve talked a lot about how the monthly fee is more expensive than a percentage of assets under management, but it still feels affordable enough for people to start investing.
That’s why Acorns still isn’t a bad option – many people aren’t investing like they should be. If it takes a $1/month subscription fee and fun things like Round-Ups to start, then there’s still a lot of good.
Pros and cons of Acorns
Is Acorns legit?
Acorns is most definitely a legitimate brokerage. Acorns brokerages and custodial services are regulated by the Securities and Exchange Commission. It’s also a member of FINRA (Financial Industry Regulatory Association) and the SIPC (Securities Investor Protection Corporation). Those are the industry standards for brokerages in the financial sector.
Acorns can’t promise or guarantee any kind of returns, and they don’t. There is always a risk associated with investing your money.
My personal experience investing with Acorns
I opened an Acorns account a couple of years ago to try it out. I went with Acorns Lite at $1/month and turned on Round-Ups, then a couple of months in I started contributing $100/month to my personal investment account (Acorns Lite option is no longer available, so you may check out the Personal option).
After a year using Acorns, my total contribution was $1,256.43 with a gain/loss of $127.43. So if you’re wondering has anyone made money on Acorns, the answer is yes.
The return was nice, but it had more to do with the overall market than Acorns’ performance. That’s really important to remember.
My experience with Acorns was really positive – the Acorns app was easy to use, and the process was as mindless as advertised. Sometimes I actually forgot about it, only to check in and see my balance had grown.
Despite that good experience, I have sold my micro shares and shut down my Acorns account. There are a couple of reasons for that, but I have no hard feelings towards Acorns.
One, I started using Stash at the same time, and I like Stash just a little better. You can read more about it in my comparison Acorns vs. Stash, but mostly it’s because Stash lets me choose how I invest. I can pick which companies or funds I back, so I can put my money into companies that reflect my beliefs – a practice known as socially responsible investing.
Besides my personal Stash and Acorns account, I also have brokerage accounts with Schwab (where my IRA is held). It didn’t make sense for me to have accounts with three different brokerages. I choose to focus my energy on the two that are most important to me.
It probably sounds like a lot to keep track of all three accounts when I was still using Acorns, but thanks to Personal Capital, it wasn't. Personal Capital is a free service that lets you link your brokerage accounts, bank accounts, mortgage, etc. to track your net worth.
Again, Personal Capital is free. It has features that let you track your cash flow and save on advisory fees.
The final word – Is Acorns worth it?
If you haven’t started investing yet because of the perceived costs or difficulty, Acorns can break those barriers down. It might be the push you need to start investing on a regular, and eventually, larger scale.
At $1/month, Acorns has a solid micro-investing platform that builds good habits.
There are more affordable options for accounts with lower balances, like Betterment, but Acorns provides a unique service that can set you on the right path towards long-term wealth.