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Acorns has a clear mission: To simplify investing.
The investment app accomplishes this in two ways, first, by allowing you to invest small amounts of money and secondly, by doing the legwork so you don’t have to become an expert on financial products.
For experienced investors, Acorns may be too simple, though it can still be fun. For beginners, Acorns may be just what you need to start life as an investor.
Let’s take a closer look and answer some key questions.
In This Article:
Acorns at a Glance
- Minimum deposit: $0
- Base fee: $1 a month under $1,000,000
- Mobile access: iOS, Android
- Best for: Beginning investors
How Does Acorns Work?
In a nutshell, here’s how Acorns works:
Saving Spare Change
You start an Acorns account and connect your credit card or debit card. Each time you make a purchase, Acorns rounds up the transaction to the nearest dollar.
If you spent $3.75 on an espresso you’d actually pay $4, and Acorns would save the additional 25 cents.
Investing Those Savings
At first, Acorns would simply save your change, but when your balance reached $5, you could start investing the money. Acorns uses a computer algorithm to invest your money in Exchange-Traded Funds (ETFs).
You get to decide how aggressively you want Acorns to invest your money from five different tiers of investing portfolios.
If your invested spare change has accumulated value and you’d like to spend some of the money, you can transfer funds from Acorns Invest into your bank account.
It may take up to a week to complete the transfer.
This process works well for people who want to make investing a way of life but don’t have time to manage a portfolio or learn investing lingo.
Is Acorns A Good Investment?
- If you probably wouldn’t invest without the kind of service Acorns provides, Acorns will be a good way for you to invest.
- If you want a broad variety of investment options — and a lower fee rate — you will probably like Wealthfront or Betterment better than Acorns.
Does Acorns Actually Make You Money?
Acorns invests your money in a variety of Exchange-Traded Funds (ETFs) which tend to be safer than individual stocks.
Why are ETFs safer? Because each tradeable share of an ETF is comprised of many different securities rather than just one.
You get to decide how aggressively or how conservatively Acorns should invest your money by choosing one of their five tiers.
The Aggressive tier has the most potential for earnings but it also has the most potential for uncertainty.
The Conservative tier won’t lead to rapid growth in your portfolio, but it’s also the most stable option.
Either way, you can expect your money in Acorns to grow, but you should also know your invested money isn’t guaranteed to grow. It’s always possible to lose invested money.
Acorns 5 Investment Tiers:
- Conservative: Acorns will place most of your money in government and corporate bonds which do not gain value quickly but are least likely to lose value.
- Moderately Conservative: Along with bonds, a sizeable chunk of your money will go into large company stock-fueled ETFs which are stable.
- Moderate: Bonds and large company stocks will comprise about two-thirds of your portfolio; the remaining third includes new company stocks, real estate stocks, small company stocks, and international stocks.
- Moderately Aggressive: Bonds comprise only 20 percent of your portfolio. The rest includes mostly large and small company stocks with real estate and emerging market stocks mixed in.
- Aggressive: This level invests none of your money in bonds. About 10 percent of your investments will go toward emerging market stocks and 20 percent toward international stocks. The rest will be invested in more established stocks and real estate.
Is Acorns Federally Insured?
Unless you have money in an Acorns checking or savings account, the money in your Acorns account is not protected by the Federal Deposit Insurance Corp. (FDIC).
But, Acorns is a member of the Securities Investor Protection Corp. (SIPC) which protects your money in case Acorns failed for some reason.
The SIPC does not protect you from losing money because a security you’d invested in lost value; it simply protects the balance in your Acorns Invest account.
How Much Does Acorns Cost?
If you’re aged 23 or younger, you can use Acorns Invest at no charge for up to four years.
When you’re 24 or older, Acorns has a simple price structure:
- Acorns Invest = $1 a Month: For Acorns’ simplest investing plan which we’ve been discussing so far, you’d pay $1 a month until your account reached $1 million. At that point, Acorns would start charging 0.25 percent of your portfolio annually.
- Acorns Invest + Later = $2 a Month: This plan adds in retirement accounts which have tax advantages either now or after you’re retired.
- Acorns Invest + Later + Spend = $3 a month: This plan integrates Acorns into your broader financial life by providing banking products that work directly with your Acorns account.
Bonus Features of Acorns
We’ve talked about Acorns’ core service — investing your spare change and integrating investing into your everyday life.
Just like any emerging company, Acorns is always adding to its list of services and features.
Newer Options Include:
- Bigger Round-Ups: rather than rounding to the next dollar, you can set your account to round your purchases to the next $10. An $8 fast food meal would result in a $10 charge and $2 saved. You can also set your account to round to the next even number or the next multiple of 3.
- Found Money: Acorns’ Found Money program works with leading retailers including Apple, Macy’s, Blue Apron to match part of your rounded-up deposits.
- Scheduled Deposits: Along with money generated from rounding up transactions, you can schedule regular deposits from your checking account into your Acorns Invest account.
- Acorns Potential: This service lets you experiment with hypothetical scenarios which can help you make better investment decisions.
Acorns vs Stash
Acorns isn’t the only option for micro-investing apps. Another one of our best investment apps offering a similar service at a comparable price point is Stash. Here are some of the key differences between the two:
Free Access for College Students
College students get free access to Acorns Invest but would pay the $1 a month fee for Stash.
Fee Structure Threshold
Stash switches your account to a percentage-based fee when you reach $5,000. At that point, you’d begin paying 0.25 percent a year in fees rather than a flat $12 a year ($1 a month).
On a balance of $5,000, 0.25 percent would equal $12.50. On a balance of $10,000, you’d pay $25 a year, and so on.
With Acorns, you’d keep paying $12 a year until your account reached $1 million which can lead to significant savings the larger your account grows.
Minimum Balance Required
There’s not much difference here. You can open an Acorns account with no minimum balance, but you can’t invest until your account balance reaches $5.
With Stash, you’d need to deposit $5 in order to open an account.
Stash Has More Options
Stash offers a wider variety of investment opportunities, including individual stocks.
But Stash doesn’t actually manage your investments. The service simply advises you and offers connections to investment opportunities.
Stash does lets you start up to two custodial accounts ($9 a month) for your children.
Pros & Cons of Acorns
- Ease of use
- Innovative new features
- Free for college students
- Limited investments available
- Flat fee skews high on low balances
Is Acorns Worth It?
A dollar a month sounds reasonable. If you’re just starting to learn about investing and you enjoy Acorns’ spare-change approach, paying this fee will probably be worthwhile for you.
However, the value you get in exchange for this fee will depend directly on how much you invest.
If you connect Acorns to a credit card you seldom use and invest only $10 a month, this $1 fee will most likely cost more than you earn on your investment. You’d be losing money.
The more you invest with Acorns, the less this $1 should impact your earnings.
And when compared to a robo-advisor like Wealthfront which sets its fee on small percentage of your portfolio each year, $1 a month can be expensive.
But, once again, if you like Acorns’ ease of use and its ability to integrate investing into your everyday life, you’ll most likely find Acorns to be a good deal.