A Review Of Acorns – A Micro-Investing App: Pros, Cons & Fees

Acorns is one of the most popular robo-advisors for beginning investors. It transforms spare change into automatic micro-investments in low-cost ETF portfolios. But is it right for you?

In this in-depth Acorns review, we’ll cover exactly what the platform does, its key features, investment strategy, fees, and more. The goal is to help you decide if Acorns is the best investing app for your needs.

Key Takeaways

• Micro-investing spare change: Acorns rounds up your credit/debit purchases to the nearest dollar and puts the difference into ETFs
• 5 portfolio types: Choose from conservative to aggressive investing based on your risk tolerance
• Cash back rewards: 300+ brands give investment cash back when you shop with them
• Easy account setup: Intuitive mobile app rated 4.7 stars makes investing simple for beginners
• Fees can be high: $3-$9 monthly fee and no tax-loss harvesting mean it’s not the cheapest option

What is Acorns and How Does it Work?

Acorns makes the most of your spare change. It rounds up everyday debit and credit purchases to the nearest dollar and micro-invests the difference into ETFs.

This “round-ups” feature is at the core of how Acorns works. The app links to your payment accounts and works behind the scenes to turn your pennies into regular stock market investments.

Automatic round-ups happen on each eligible purchase. Alternatively, go through purchases manually selecting ones to roundup. Either way, once you accumulate at least $5 in round-ups, the funds transfer to your Acorns investment account and get put into your customized portfolio.

Aside from round-up micro-investing, you can also set up automatic recurring transfers from your bank to your Acorns account, or make one-time investments whenever you want. The choice is yours, but the platform tries to make investing spare change as easy as possible.

Acorns constructs each portfolio from very low-cost ETFs. These exchange traded funds provide exposure to thousands of stocks, index funds, and other securities to keep investments diversified. Rebalancing keeps portfolios on target automatically over time.

The company aims to make hands-off, automated investing in the stock market accessible even with very small amounts of money. Almost anyone can take advantage of compound growth on a recurring basis.

Key Features and Offerings

One thing that makes Acorns unique compared to other robo-advisors is its rewards programs and shopping perks. When you make purchases at over 300 partner brands in the Acorns ecosystem, you earn bonus investment rewards.

The Found Money program is one major way account holders can take advantage of extra investment cash back. When shopping online and in-stores, you’ll accumulate bonus funds that Acorns automatically transfers into your portfolio. No loyalty cards or additional steps required!

Some big name Acorns partners for earning investment rewards include:

• Airbnb
• Macy’s
• Blue Apron
• Warby Parker
• Booking.com
• Walmart
• DoorDash

On top of that, new users are also eligible for generous welcome bonuses. Signing up requires an email address and linking your bank/payment accounts. But after setting up your profile, you immediately qualify for the latest sign-up investment bonus.

Referring friends to create accounts also results in a $5 investment bonus each. As you can see, Acorns goes above and beyond to incentivize investing on its user-friendly platform.

Investment Strategy and Performance

New investors get asked a few simple questions when signing up for Acorns regarding time horizon, income, goals, and risk attitudes. Based on the answers, it recommends one of five available portfolios aligned to your investing objectives.

But the choice always remains flexible if you decide you want to take on more or less risk with a different core investment portfolio:

• Conservative – 100% fixed income bonds
• Moderately Conservative – 40% stocks, 60% bonds
• Moderate – 60% stocks, 40% bonds
• Moderately Aggressive – 80% stocks, 20% bonds
• Aggressive – 100% stocks

Ranging from heavy fixed-income allocations to all-equity portfolios, these options cater to investors with any risk tolerance. Those new to investing generally stick with a more balanced portfolio between stocks and bonds.

Acorns also rolled out sustainable investment options for the socially conscious. You can easily switch your portfolio allocation to trade traditional ETFs for ones meeting ESG (environmental, social, governance) criteria for corporate responsibility.

Prefer getting exposure to more speculative assets? Up to 5% of your investments may also go toward Bitcoin via the recently added Bitcoin ETF offering. Just keep in mind cryptocurrencies tend to have higher volatility compared to stocks and bonds.

As you can see, Acorns aims to create very customizable yet still automated long-term investment portfolios. Performance ultimately depends on the asset allocation you choose, but annual returns between 5-8% are reasonable estimates.

Pricing, Account Minimums, and Fees

Rather than charging a percentage management fee based on assets under management, Acorns pricing consists of three flat monthly subscription fee tiers:

• Acorns Personal – $3/month
• Acorns Family – $5/month
• Acorns Premium – $9/month

Higher tiers include extra features like retirement account access, bonus rewards, and investment accounts for kids. But core investment capabilities come with even the lowest $3 level.

No minimum account balance is required to open or maintain an Acorns account. However, you need at least $5 to begin investing so funds can be allocated appropriately.

This pricing structure and low cash minimums make the platform ideal for investing small dollar amounts frequently. Yet the monthly costs also mean fees can eat into returns for newer investors not depositing or investing much each month.

As an example, a $3 monthly fee on a $100 balance works out to 36% annually! Most robo-advisors charge between 0.15 to 0.35% of assets. So while helpful for building beginner money management abilities, beware the steeper fees.

Who is Acorns Best For?

The simplicity and automation makes Acorns a perfect starter investing app for total beginners. Individuals who want to form better money habits and participate in the stock market stands to benefit tremendously from its intuitive platform.

Building a diversified portfolio takes no expertise or time invested evaluating complex financial metrics. Acorns handles the entire hands-off investing process seamlessly in the mobile background.

However, more advanced traders and investors may desire much more customization over asset selections in their portfolio. The five core portfolios limit tweaking ability for owners wanting more complex strategies beyond basic stocks-bonds allocation.

Additionally, the flat monthly pricing can still be rather limiting for buy-and-hold investors able to only contribute smaller, inconsistent amounts each month into their accounts. Ultimately $3-$9 per month seems reasonable but eats substantially into meager investment returns.

So Acorns works best for dipping your toes into investing rather than diving all the way in. Folks that fall into a couple common groups tend to get the most mileage from its unique platform:

• College students & young earners building savings/investing habits
• Parents/grandparents investing and gifting for their children’s future
• Mainstream consumers looking to passively grow wealth

However, advanced traders already maximizing 401k and IRA may prefer alternative brokers allowing greater portfolio personalization and lower long-run costs.

Pros and Cons of Using Acorns

Acorns as an investment platform tries to make growing wealth through the stock market as easy and automatic as possible. Outsourcing portfolio management to algorithmic investing models keeps cost low while returning solid long term gains.

Convenient spare change automation combined with cash back shopping rewards give Acorns investing accounts an advantage for passive investors compared to robo-advisor rivals. However, limitations around the number of portfolios and lack of tax optimization should also be considered.

Below is a break down of the pros and cons based on Acorns’* features and capabilities:

Main Benefits

• Turns spare change into automatic hands-free investments
• 300+ brand partners provide shopping/purchase rewards
• Choose from 5 easy-to-understand portfolio risk options
• Intuitive mobile app rated 4.7 stars on app store
• Fractional share purchases promote diversity even investing dollars

Potential Drawbacks

• Flat $3+ account fee monthly can reduce net returns substantially
• No access to dedicated human financial advisors
• Fewer portfolio customizations than competitors
• Does not offer automated tax-loss harvesting

As you consider your personal situation, think about why you got interested in Acorns originally. Maintaining proper expectations around account costs and investment customization helps decide if its simplicity matches your financial objectives.

Verdict: Is Acorns the Right Investing App for You?

Acorns streamlines investing even very small amounts of spare change for novice market participants. Hands-off ETF portfolios automatically grow wealth in the background while you go on living life.

But does the convenience and automation justify the monthly fees?

For brand new investors, Acorns can potentially serve as a great stepping stone into smart money management. Learning about compound returns while forming regular saving and investing habits can set you up for a solid investing future.

However, make sure to crunch the numbers on how many months (or years) it would take before those flat monthly account costs become inconsequential to your returns. savvy asset allocations.

Learning the basics takes discipline and consistency. If you’re looking to begin that investing journey, Acorns allows you start small and think big. Sign up today and get a bonus $5 or more into your new account!

Frequently Asked Questions

Below I answer some of the most common questions about Acorns from interested beginner investors:

Is Acorns really free?

Technically no, accounts cost between $3-$9 per month depending on which tier you select. So it is not entirely free to invest with Acorns. However, there is no minimum account balance and fraction share purchases provide immense flexibility even investing very small sums.

What happens if I only invest spare change?

You absolutely can choose to only invest rounded up spare change from purchases if that works best for your current financial situation! While more dollars invested results in higher total returns, even pocket change adds up substantially over months and years thanks to compound growth.

Can I lose money with Acorns?

Yes, it is possible to lose your investment principal with Acorns since the spare change gets invested into ETFs containing stocks and bonds. All securities come with some risk, so market corrections can cause temporary portfolio declines. But over long periods of time, diversified funds gain value.

Is Acorns better than Robinhood?

Robinhood offers free stock, ETF, and crypto trading rather than pre-made portfolios. So advanced investors may prefer Robinhood for greater control and customization. However, Acorns automates hands-off investing specially for beginners not ready to pick individual investments. Both platforms cater to different audiences.

What is the catch with Acorns?

The monthly account fees can eat into investment returns substantially for newer investors with smaller balances. Yet convenience and automation is the trade-off. As balances grow over months and years, the flat $3-$9 costs become negligible compared to average annual portfolio returns.

And there’s my exhaustive walk-through on everything Acorns! Let me know if have any other questions in the comments down below!