Acorns Review: Micro-Investing App for Beginners

Acorns logo

Acorns

9.7

Millennial Money rating

Expert Take

With its game changing spare change round up feature, Acorns has made it easier to automate your investments. As it turns out your spare change actually adds up quickly and so will your savings. But what's most exciting is how Acorns continues to evolve its services and mobile experience, adding new features to its best in class mobile app to help you make money in your sleep.

Pros

  • Easy to Use
  • Offers Fractional Shares
  • 24/7 Live Chat Customer Support
  • Automates Your Investing

Cons

  • Limited Investment Options
  • Flat Fee Skews High on Low Balances
  • No Tax-Loss Harvesting

Features

10.0

Fee

9.0

Mobile Experience

10.0

Investment Options

9.0

Customer Service

9.5

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Acorns has a clear mission: To simplify investing for millennials and other young adults.

The investment app accomplishes this mission in two ways: First, it lets you invest small amounts of money. Second, it does the legwork so you can be hands-off and don’t have to become an expert to open an investment account.

For experienced investors, Acorns may be too simple, though it can still be fun. For beginners, it offers just what you need to start your life as an investor.

Let’s take a closer look and answer some key questions.

Minimum Deposit $0 ($5 to start investing)
Fee $3 – $5 a month
Apps iOS and Android
Best For Beginning Investors

How Does Acorns Work?

In a nutshell, here’s how Acorns works:

1. Acorns Collects Your Spare Change

When you open an Acorns account you connect your credit card or debit card — ideally the card you use for everyday purchases. Each time you make a purchase using the card, it will round up the transaction to the nearest dollar.

If you used your connected debit card to buy a $3.75 espresso, you’d actually pay $4, and Acorns would save the additional 25 cents so you could invest it later.

2. Acorns Invests Your Savings

At first, Acorns will simply save your change, but when your investment account’s balance reaches $5, you could start investing the money. The app uses a computer algorithm to invest your money in Exchange-Traded Funds (ETFs) based on Modern Portfolio Theory.

This sounds complex, but it’s not. You get to decide how aggressively it invests your money from five different tiers of investing strategies. You can also choose to invest for retirement savings or in a taxable account.

3. You Can Withdraw Money

When your invested spare change has accumulated value and you’d like to spend some of the money, you can transfer funds from Acorns into your bank account. This transfer takes three to six business days to complete.

Or, if you want instant access to your money, you could open an Acorns Checking account which is part of the Acorns Personal package, which costs $3 a month.

Acorns Checking automatically rounds up your purchases when you use its heavy metal debit card.

This built-in checking account also lets you round up transactions in real-time instead of on a delay which means you can invest sooner.

Acorns Investment Tiers

Your spare change and other deposits you invest with Acorns can find their way into five different asset classes: real estate, government bonds, corporate bonds, large-company stocks, and stocks in small companies.

You can choose the way it spreads your money across the different asset classes by choosing one of five tiers:

  1. Conservative: Places most of your money in government bonds and corporate bonds which do not gain value quickly but are least likely to lose value.
  2. Moderately Conservative: Along with bonds, a sizable chunk of your money will go into large company stock-fueled ETFs which are stable.
  3. 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.
  4. 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.
  5. 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.

Rebalancing Your Portfolio

Acorns periodically rebalances your portfolio to ensure your preferred asset allocation stays on target. Over time, and if left unbalanced, parts of your investment portfolio will outweigh the other parts because funds perform differently.

If your stock-fueled ETFs perform better than expected because of a rally in the stock market, for example, your asset allocation could become too stock-heavy. The platform would sell off part of your stock-based portfolio and buy shares in bond funds.

Acorns normally rebalances portfolios quarterly, but your portfolio could get attention any time you withdraw or deposit funds.

Features

Acorns is always adding to its list of services and features.

Here are some standout services and features that come with an Acorns subscription:

  • 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 have Acorns round up to the next even number or the next multiple of 3.
  • Acorns Earn: This program works with leading retailers including Apple, Macy’s, Blue Apron, Barnes & Noble, Lyft, and Walmart. These retailers will match part of your rounded-up deposits as cash back when you shop with a credit card or debit card connected to your Acorns account.
  • Smart Deposits: Acorns lets you schedule deposits, but it also gives you the opportunity to allocate a portion of your paycheck to Acorns Early, Later, and Invest when you set up direct deposits.
  • Acorns Potential: This service lets you experiment with hypothetical scenarios that can help you make better investment decisions. It can be a lot of fun — and educational — to play out different scenarios.
  • Gift Cards: If you’d like to give the gift of investing, this is a great way to do it. Especially at graduation time.

Cost

Acorns no longer offers the core investment app at no charge for college students; everyone pays the same rate.

It has a simple price structure:

  • Acorns Personal: The $3 personal account includes the core investment app, Acorns Later (an IRA account), and Acorns Checking, which comes with a debit card, ATM reimbursements, and direct deposit allocations to your investments.
  • Acorns Personal Plus: For $5 per month, you get the features of the personal account, plus premium financial advice and tools, including Q&As with financial experts.

Is Acorns A Good Investment?

So, is signing up for Acorns a good idea? There’s no doubt this is a cool product. It’s safe and secure and easy to use. Your minimum investment is low, at $5. And there’s no account minimum to get started.

But this investment platform won’t be a perfect fit for everyone. If you’d like to decide quickly, here’s the quickest way to decide who should and shouldn’t open an account:

  • Start an Acorns Account If: You probably wouldn’t invest without the kind of service Acorns provides. Acorns will be a good low-cost way for you to start investing. Once you see how much fun it can be to invest, you’ll want to learn more.
  • Find a Different App If: You want a broad variety of investment options — and a lower fee rate on smaller balances. You might like Wealthfront or Betterment better than Acorns.

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 key comparisons between the two:

  • Fee Structure Threshold: Stash has two plan tiers, each offering an array of features. Their lowest tier is also $3 per month. Their highest-tier is for families is $9 a month.
  • 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 $1 in order to open an account.
  • Stash Has More Options: Stash offers a wider variety of portfolio options, including individual stocks. But Stash doesn’t actually manage your investments. The service simply advises you and offers connections to investment opportunities. So if you’re looking for fully automated investing, Acorns will be a better fit. Stash does let you start up to two custodial accounts ($9 a month) for your children.

Frequently Asked Questions

Is Acorns federally insured?

Money in Acorns Checking and Acorns Later (checking and IRA accounts) is FDIC insured up to $250,000 just like it would be in any other checking or savings account at an FDIC member bank.

Invested money is, of course, not protected by the FDIC. But Acorns is a member of the Securities Investor Protection Corp. (SIPC) which protects your non-invested money in case Acorns failed for some reason.

The SIPC does not protect you from losing money because an ETF you’d invested in lost value; it simply protects the non-invested balance in your investment account.

Does Acorns actually make you money?

Acorns puts your money in a variety of Exchange-Traded Funds (ETFs) which tend to be safer than individual stocks. Acorns ETFs are from Vanguard so you’re getting a quality product.

Why are ETFs safer? Because each tradeable share of an ETF is comprised of many different securities rather than just one. ETFs offer a fast track to a diversified portfolio.

You get to decide how aggressively or how conservatively Acorns invests your cash by choosing one of the app’s 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 net worth, but it’s also the most stable option.

Either way, you should expect your money in Acorns to grow over the long term, but you should also know your invested money isn’t guaranteed to grow. It’s always possible to lose invested money. Your tier should match your risk tolerance and financial goals.

Is Acorns Worth It?

If you’re just starting to learn about investing and you enjoy the Acorns app’s spare-change approach, paying a small fee will probably be worthwhile for you.

If you connect Acorns to a credit card you seldom use and invest only $10 a month, this $3 fee will most likely cost more than you earn on your investment. You’d be losing money with such a high fee.

But the more you invest, the less this $3 should impact your earnings — that’s the beauty of a flat rate fee.

Another HUGE selling point of Acorns is its impressive referral program. Each week they release a new referral bonus. If you have lots of friends, you could earn up to $1,000 extra each week just by getting them to join Acorns with your referral link.

Smaller balances skew Acorns’ flat fee upward. I couldn’t write an Acorns review without pointing that out.

But, still, three dollars a month for a service you like — there’s nothing wrong with that, right?

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.

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  • Comment Author image blank
    Hello Grant. I live in New Zealand and tried to join acorn but says it not available in new Zealand.