Acorns is an automated investing app designed to make it easier to save money and invest it. We know investing can seem scary — especially when you’re brand new to it. But Acorns rounds up everyday purchases to the nearest dollar and invests the spare change in a diversified portfolio. That allows newer or more hands-off investors to grow their money in a way that works for them. This Acorns review will explore its features, fees, investment strategy and how it compares to other platforms.
Our verdict: It’s best for beginners who want a simple, automated investing solution, but fees can add up for users with small balances.
What Is Acorns and How Does It Work?
One of the biggest draws of the app is that it does some of the work for you. As you make purchases with a debit or credit card that you have linked to the app, it will round up the change then invest it automatically. You can also set up recurring investments, helping you stay consistent with your portfolio. Acorns is ideal for beginners looking for a hands-off investing approach or those who need a little help with saving.
Types of Acorns accounts available include:
- Acorns Invest: Automated investing account with diversified portfolios.
- Acorns Later: Retirement accounts (IRAs) for long-term investing.
- Acorns Early: Custodial investment accounts for kids.
- Acorns Checking: A cash management account with a debit card and built-in investing.
Acorns Features & Account Options
The app has several features that would appeal to a wide range of investors. There are also multiple accounts to choose from. Here are some of those features and accounts at a glance:
- Round-Ups: Automatically invests spare change from purchases.
- Recurring Contributions: Allows users to set up automatic deposits.
- Found Money: Cashback rewards from partner brands that go directly into investments.
- Smart Portfolios: Professionally managed portfolios that are diversified across asset classes.
- Acorns Later: Provides access to IRAs (Roth, Traditional, SEP).
- Acorns Early: Enables parents to set up custodial investment accounts for children.
- Acorns Checking: A debit card with no overdraft fees, direct deposit and seamless integration with investing.
Acorns Fees and Pricing Breakdown
Unlike some other investing apps, Acorns is not free to use. The fees can add up if you’re looking to keep a small balance. Here’s what investing with the app would cost.
Acorns Pricing Tiers
- Personal (Acorns Bronze, $3/month): Includes Acorns Invest, Later and Checking. You can get more features with Acorns Silver at $6 a month and Acorns Gold for $12 a month.
- Family ($5/month): Adds Acorns Early for custodial investment accounts.
How Fees Impact Small Balances
- Acorns charges a flat monthly fee, which can be expensive for small investors.
- Example: A user with $500 invested pays $36/year ($3/month), an effective 7.2% annual fee.
Pros and Cons of Using Acorns
Acorns takes some of the work and pressure off your investing journey, but there are some drawbacks to it.
Pros:
- Simple, hands-off investing for beginners.
- Spare change investing makes saving effortless.
- Provides access to diversified portfolios.
- Found Money cashback rewards boost investment savings.
Cons:
- Monthly fees can be high for small balances.
- No tax-loss harvesting, unlike some robo-advisors.
- Limited customization in investment options.
Acorns Performance and Investment Strategy
Acorns invests in low-cost Exchange-Traded Funds (ETFs) that cover multiple asset classes. It uses Modern Portfolio Theory (MPT) to balance risk and reward. MPT is basically the idea that diversifying your portfolio can boost your returns without a ton of risk. So it’s a way for investors who aren’t ready to get risky to still reap the maximum benefits possible.
Expected Returns
- Conservative portfolios: Lower risk, lower growth.
- Aggressive portfolios: Higher potential returns with increased risk.
Risk Management
- Portfolios are automatically rebalanced.
- No manual stock picking is allowed.
How Acorns Compares to Other Investment Apps
It has plenty of desirable features, but how does it compare to other similar apps?
Acorns vs. Robinhood
- Robinhood: Allows users to pick individual stocks.
- Acorns: Fully automated, no stock picking.
Acorns vs. Stash
- Stash: Offers more customization for investments.
- Acorns: Simpler, automated investing experience.
Acorns vs. Betterment
- Betterment: Provides tax-loss harvesting and financial planning tools.
- Acorns: Does not offer tax-loss harvesting but focuses on simplicity.
Acorns vs. Competitors
| App | Fees | Investment Type | Best For |
|---|---|---|---|
| Acorns | $3-$5/month | ETFs | Beginners |
| Robinhood | Free | Stocks/ETFs | Active traders |
| Stash | $1+/month | ETFs/Stocks | Hands-on investors |
| Betterment | 0.25% of assets | ETFs | Passive investors |
Who Should Use Acorns?
Acorns could be right for you if you are a new investor looking for a simple way to get started and appreciate a set-it-and-forget-it investing approach. It’s also great for people who struggle to save money on their own.
However, not everyone is cool with relinquishing some control over their investments. If you want a little more control over your portfolio and lower fees, it might be good to look elsewhere.
Final Verdict: Is Acorns Worth It?
All-in-all, we give this app a solid 4 out of 5 stars. Acorns is definitely worth a shot for you if you’re on the hunt for an investing app that’s hassle free, automated and doesn’t require any active stock trading. That makes it excellent for beginners or people who just don’t have a lot of extra time to dedicate to managing their portfolios.
However, if you know you like to be a hands-on investor or you’re looking for lower fees for small accounts, there are better options out there.