If you want to start investing but aren’t sure how to get started, robo-advisors like Acorns and Betterment are a great option. Robo-advisors take most of the work out of investing by deciding where to invest your money based on your goals.
However, Betterment and Acorns take different approaches, from their fees to features. Acorns uses Round-Ups and Found Money to create a super low barrier to investing. In comparison, Betterment offers tax-loss harvesting and socially responsible investment portfolios.
Deciding which one is right for you comes down to what you’re looking for in a robo-advisor, and today I’m going to break these two down to help you decide.
Founded in 2008, Betterment is the first widely available robo-advisor, and it’s grown to live up to its OG status. Betterment has retirement planning tools, goal-based savings, a variety of retirement account options, and a diverse list of asset classes to add to your portfolio.
Acorns launched in 2012, and it’s the first spare-change investment app. This approach has eliminated one of the major barriers to investing -- the cost. While you’re not going to retire off of spare change alone, it proves to reluctant investors that you can spare some money to save for your future.
Betterment vs. Acorns: Fees
Neither one of these robo-advisors requires that you have a certain amount to get started, but they differ greatly in how they charge customers for their services.
Betterment charges a percentage of assets under management (AUM). Customers with balances under $100,000 will use Betterment Digital, which charges an annual fee of 0.25% of your invested balance. Once you hit $100,000, you can upgrade to Betterment Premium and pay 0.40% annually. There’s a 0.10% discount for balances of $2 million or more.
Betterment Digital has all of the features I’m going to cover in this comparison: tax loss harvesting, socially responsible investment options, automatic rebalancing, dividend reinvestment, multiple account types, and more. Premium adds in-depth investing advice with a human advisor on investments held with Betterment and those held in outside accounts.
Acorns takes a different approach with flat fees charged based on the kind of investment accounts you want, and there are three tiers:
- Acorns Lite – $1/month: Includes a personal investment account, access to features like Round-Ups and Found Money, and access to their library of articles by financial experts.
- Acorns Personal – $3/month: Includes a personal investment account, tax-advantaged retirement account, and access to Spend, Acorn’s checking account option. Spend 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.
How they compare:
Acorns pricing is super simple, and that’s one of the things that’s so appealing about it to new investors, but it’s actually pretty expensive if you’ve got a low account balance. Say you have $100 invested through Acorns, $1/month is a monthly management fee of 12%.
Acorns pricing starts to shrink as your balance grows — at $10,000 it’s down to 0.12%. That’s cheaper Betterment, but it may take a while for you to get there.
Betterment vs. Acorns: Account types
Betterment vs. Acorns: Features
Acorns and Betterment are both robo-advisors that use information about your current financial situation, goals, and timelines to determine your risk tolerance, and then recommend a portfolio to invest in for you automatically.
They both have multiple account types: individual brokerage accounts, custodial accounts for children, and IRAs (Roth, traditional, rollover, and SEP IRA). But after these similarities, there are a number of different features that may make one of these robo-advisors stand out to you.
Both robo-advisors also do automatic rebalancing to keep your portfolio within the right asset allocation to reach your goals.
Features unique to Betterment
When you sign up for Betterment, you answer a series of questions about your financial goals. And if you don’t have any specific ones, these questions will help you set some. These goals can be for things like having three to six months’ worth of expenses set aside in an emergency fund or set a retirement savings timeline.
Every goal you want to save for is set up as a separate investment account that comes with its own recommended target and asset allocation, and you can adjust and personalize these over time. You’re also in control of how each goal is funded through one-time deposits or auto-deposits.
Betterment’s retirement planning tool lets you link up non-Betterment accounts, like your work 401k, to get a full picture of your savings. This gives you a comprehensive view of what retirement will look like, and even considers your desired retirement spending levels. You’ll see if you’re saving enough and whether or not you’re saving in the right ways.
Financial planning packages
Betterment gives you the option to speak with a certified financial planner in one of five different financial planning packages. They start at $299 for a 45 minute “getting started” call with a Betterment certified financial advisor that helps you set up your accounts and get full use of Betterment’s services.
The other packages are $399 for a 60-minute call and focus on retirement planning, marriage planning, college planning, and a financial check-up.
Checking and savings
Betterment Checking is an online checking account with $0 fees (no minimum balance fees, maintenance fees, ATM fees, or overdraft fees). It comes with a Visa debit card, which can be used to earn you cash back at thousands of retailers nationwide.
All Betterment users can also access Cash Reserve, which is a high-yield cash savings account. It’s a no-fee account that pays 0.40% APY. Cash Reserve lets you set individual savings goals in the account, and you can keep track of your progress towards each of them in the app.
Two-Way Sweep is a feature that analyzes what’s in your linked checking account (even if you’re not using Betterment’s checking account) and finds an excess and sweeps it into a Betterment Cash Reserve account. It works the other way too-- sweeping money from savings to checking if your checking balance is running low.
You can set a target balance and alerts for the Two-Way Sweep, and you can turn it off. The idea is to get extra cash in savings and earning some interest.
Socially responsible portfolios
Socially responsible investing (SRI) has become more mainstream. It’s the practice of investing in companies that seek to provide some kind of social or environmental gains, not just financial ones.
Betterment introduced their first SRI portfolio in 2017, and they now have three which align with environmental, social, and governance (ESG) standards set by MSCI. Here’s a list of Betterment’s SRI portfolios:
- Broad Impact Portfolio: Focuses on ETFs that consider all three ESG pillars: environmental, social, and governance.
- Climate Impact: Heavier focus on environmentally conscious funds that support alternative energy, pollution prevention and control, sustainable water, and more.
- Social Impact: Includes to stock ETFs that focus on diversity and inclusion
All Betterment accounts qualify for tax-loss harvesting to help you lower your tax bill, but you do have to enable it when you set up your account. Betterment also lets you donate shares to charities, and if you do that with appreciating assets, you can avoid some capital gains taxes. Betterment will even help you figure out which assets are best to donate.
Features unique to Acorns
Round-Ups are Acorns’ most well-known feature. They work when you link a credit or debit card to Acorns after signing up, and then Acorns rounds up transactions from your linked card. Once your round-up amount hits $5, Acorns withdraws money from your bank account and invests it in your portfolio.
For example, if you spend $40.37 on dinner out, Acorns rounds that up to $41, and invests the $0.63 difference. You can turn on Multipliers to boost your Round-Ups by 2x, 3x, or 10x.
You can turn on and off Round-Ups and Multipliers in the Acorns app, and you can link more than one credit or debit card. Acorns keeps track of your Round-Ups progress, so you can see how close you are to the $5 withdrawal minimum.
The Found Money feature gives you money for signing up or shopping with one of Acorns’ 350+ different partner companies. The amount you earn varies from company to company, and it can be a flat fee or percentage of your total purchase.
Here are some current Found Money offers:
- $35 for new Blue Apron customers
- $10 for new customers who sign up for the Disney+, Hulu, ESPN bundle
- $5 when you get a home, auto, or renters insurance quote from Liberty Mutual
Acorns has a partnership with ZipRecruiter to list nearby job openings. Most of the jobs are focused on freelance, work-from-home jobs, or no-experience needed. There are also listings for jobs that invest for you, including side gigs for places like Uber or Postmates, which will invest $5-$30 for you after you sign up and complete your first delivery.
Acorns referral program
If you invite your friends or family to start using Acorns, you will receive a $5 bonus for each person that signs up through your unique referral code. Your friend also gets $5 to start investing.
Betterment vs. Acorns: Investment methodology
Acorns and Betterment are both robo-advisors, so you’re trusting these brokerages to recommend the best investments for your portfolio. They both recommend portfolios in the same way: using information about your current financial situation, goals, and timelines to determine your risk tolerance. Then, they recommend a portfolio to invest in for you automatically.
Both use Modern Portfolio Theory to develop their portfolios, but Acorns and Betterment differ in what kinds of assets make up their portfolios.
Acorns will include up to 16 different ETFs in your portfolio, including:
- iShares iBoxx $ Investment Grade Corporate Bond ETF - LQD
- iShares 1-3 Year Treasury Bond ETF - SHY
- iShares Core S&P Mid-Cap ETF - IJH
- iShares Core S&P Small-Cap ETF - IJR
- iShares Core MSCI Total International Stock - IXUS
- iShares Ultra Short-Term Bond ETF - ICSH
- iShares Core U.S. Aggregate Bond - AGG
- Vanguard Small-Cap Index Fund ETF Shares - VB
- Vanguard REIT Index Fund ETF Shares - VNQ
- Vanguard 500 Index Fund ETF Shares - VOO
- Vanguard Emerging Markets Stock Index Fund ETF Shares - VWO
- Vanguard FTSE Developed Market Index Fund ETF Hares - VEA
- JPMorgan Ultra-Short Income ETF - JPST
- Goldman Sachs Access Treasury 0-1 Year ETF - GBIL
- SPDR Bloomberg Barclays 1-3 Month T-Bill ETF - BIL
Those ETFs give you exposure to bonds, U.S. stocks, foriegn companies, and real estate.
M$M tip: Stash is a good Acorns alternative if you want a little more control over how you invest your money. Stash has automated portfolio management, but you can also self-direct your investments.
Betterment has twice the ETFs that fall into the following asset classes. The first ticker symbol for each class is the primary ETF, and secondary ETFs enable tax-loss harvesting.
- U.S. Total Stock Market: VTI, SCHB, ITOT
- U.S. Value Stocks - Large Cap: VTV, SCHV, IVE
- U.S. Value Stocks - Mid Cap: VOE, IWS, IJJ
- U.S. Value Stocks - Small Cap: VBR, IWN, SLYV
- International Developed Markets: VEA, SCHF, IEFA
- International Emerging Market Stock: VWO, IEMG, SPEM
- U.S. High-Quality Bonds: AGG, BND
- U.S. Municipal Bonds: MUB, TFI
- U.S. Inflation-Protected Bonds: VTIP
- U.S. High-Yield Corporate Bonds: HYLB, JNK, HYG
- U.S. Short-Term Treasury Bonds: SHV
- U.S. Short-Term Investment-Grade Bond: JPST
- International Developed Market Bonds: BNDX
- International Emerging Market Bonds: EMB, VWOB, PCY
Both Acorns and Betterment include automatic rebalancing, which fixes any drift in your portfolio that happens over time. Drift is completely normal, and rebalancing keeps your asset allocation in check so you can stay on track for your goals.
One of the perks of using a robo-advisor is that they rebalance for you. Self-directed investors using brokerages like Robinhood or Webull will have to rebalance on their own.
Betterment vs. Acorns: Is Acorns or Betterment better?
These two robo-advisors are both great for hands-off investors. They give you the set-it-and-forget style of investing that allows you to focus on other facets of your financial life.
But if I had to pick a winner, Betterment stands out — it has more features and flexibility for investors. You have access to more asset classes and ETFs. Being able to invest in an SRI portfolio will be a big draw to many investors, and so is the option to speak with a certified financial planner when you need it.
Yes, Betterment will get more expensive over time, but the extra features you get with Betterment more than make up the difference.