Acorns Review 2019
A college student acknowledging the needs and the obstacles in front of his peers, interested in investing, alongside with a progressive-minded father and here is the perfect recipe for a successful FinTech startup.
Launched in 2014, Acorns is an investment app focused on instilling an investing mindset in millennials by finding the perfect application for their spare change. For its short history, the Acorns app has managed to earn the trust of some of the most renowned investors in the world, attract two Nobel Prize winners on its board, serve the needs of more than 4 million people and invest over $1 billion.
The investment app encourages users to take advantage of their spare change when making purchases by using it to construct an Acorns portfolio.
The user can inform Acorns about his goals and preferences so that the collected funds are invested accordingly.
For example – if the user is paying for his $2.50 coffee with a card, he can instruct the app to round the sum to $3.00. The 50 cents difference is then transferred to the user’s investment account. You even get the flexibility to round up only certain transactions or even multiply the amount of the saved sums by 3, 5 or 10.
In the following Acorns review, we will dive deeper into the benefits of the investment app and find out the answer to the common question – Is the Acorns investment app worth it and is it one of the best investment apps available right now?
The best thing about the Acorns app is that everyone (within the USA and Australia) can open an account for free. The investment app does not require any account minimums.
Yet, in order for one’s automated investing plan to get triggered, he would need to collect at least $5 in his account. Another good thing is the fact that Acorns does not charge any trading, transfer or account closing fees.
The only fee that users are charged with is the account management fee. Depending on the type of the plan that the investor has subscribed for, the Acorns monthly fees are as follow:
College students can take advantage of Acorns Core free of charge for 4 years since the day of account confirmation. Although Acorns is for novice investors, individuals who have more than $1 million in their accounts, can get in touch with the company representatives for a tailored management fee.
In some cases, the Acorns fees are related to as unreasonably high. In cases where investors are hardly making any monthly card payments, the amount of the fee, even for the basic plan ($1), may actually seem pretty high.
For example, if you have $500 in your account and you are charged $1 each month, this means that for a single year, you will be charged with 2.4% of your assets under management.
When compared to other investment solutions, this fee is unreasonably high. And it can get even higher if you opt to choose one of the more expensive plans. In such cases, it would have been better for the company to charge a fixed percentage.
It really depends on how often you use your app and what amount you generate in your account. If a certain user is constantly using his card to make purchases, thus transferring a bigger amount of his spare change to the investment account, then the Acorns fees are reasonable.
The investment app relies on the principles of the modern portfolio theory (MPT) which is no coincidence, as the father of the theory, Noble Prize winner Harry Markowitz is an advisor. The MPT suggests that one should invest in a diversified portfolio and combine multiple asset classes to reduce the risk and maximize the expected returns.
When using Acorns, investors basically choose passive investing which means that they are not required to take any follow-up actions, apart from the initial account setup and goal setting.
The investment app, built as a robo-advisor, invests across different types of ETFs, such as large company stocks (domestic and international), bonds (corporate and government), small company stocks, real estate and emerging markets.
Although this may sound like plenty of investment options, the truth is that other robo-advisors offer way more ETFs. That is why the case of Betterment vs. Acorns or Wealthfront vs. Acorns is often solved in favour of the competitor robo-advisors.
Acorns is often criticized due to the limited asset classes and personalized solutions. While this may not be necessary for beginner investors, it is often considered as a big disadvantage by the more experienced ones.
Before starting to invest, make sure to check the ETFs prospectus so that you can get familiar with the investible options and be able to easily find the most suitable solution, according to your needs. The Acorns app provides five prebuilt portfolios for you to choose from:
- Conservative – 12% Large Stocks; 2% Small Company Stocks; 2% Real Estate Stocks; 40% Government Bonds; 40% Corporate Bonds; 4% International Large Stocks
- Moderately Conservative - 24% Large Stocks; 4% Small Company Stocks; 4% Real Estate Stocks; 30% Government Bonds; 30% Corporate Bonds; 8% International Large Stocks
- Moderate - 29% Large Stocks; 10% Small Company Stocks; 3% Emerging Markets Stocks; 6% Real Estate Stocks; 20% Government Bonds; 20% Corporate Bonds; 12% International Large Stocks
- Moderately Aggressive - 38% Large Stocks; 14% Small Company Stocks; 4% Emerging Markets Stocks; 8% Real Estate Stocks; 10% Government Bonds; 10% Corporate Bonds; 16% International Large Stocks
- Aggressive - 40% Large Stocks; 20% Small Company Stocks; 10% Emerging Markets Stocks; 10% Real Estate Stocks; 20% International Large Stocks
One of the downsides of the platform is the fact that it does not provide plenty of information about its investment strategies.
This is understandable, as its main target is inexperienced investors and millennials, but, on the other hand, it may worry the more experienced ones as they cannot get the whole picture of their investments.
Trading Platforms and Tools
The lack of advanced trading tools and features is no surprise as the main target of the investment app are users who are willing to leave everything to professionals.
Yet, if we should compare Acorns to other robo-advising solutions like Wealthfront and Betterment, it surely falls behind. For example, Acorns does not offer investors tax-loss harvesting, while its competitors do.
Apart from that, the investment app does not rely on frequent portfolio rebalancing. On the contrary – most robo-advisors rebalance your portfolio on a daily, weekly or monthly basis in order to make sure that your investments remain on track.
Depending on the type of account plan that you choose, you will get access to different tools and features. For example, the cheapest option (Acorns Core, $1 per month) is a taxable investment account that provides you with the chance to take advantage of Found Money® - a cash-back solution.
When you purchase or pay for a service from one of the 200+ Acorns’ partners, including Nike, Airbnb, Lyft, Groupon, Walmart, etc. you will get automatic cash-back investments in your account. Found Money® even has a free Chrome extension.
All you have to do is have an Acorns’ account and a linked debit or credit card.
For investors who want tax-advantaged retirement accounts, Acorns offers the Acorns Later plan. In addition to the mentioned features, those who choose the $3-per-month plan will get access to Acorns Spend – a special Acorns debit card that provides digital direct deposits, check sending, free bank-to-bank transfers and many other features.
Education and Research
Acorns’ website explains key investing terms, related to their services. The main source of educational content and general investing information is the Grow Magazine that each user gets access to when signing up for Acorns’ services.
The magazine is an online personal finance site intended to educate millennials about credit card debt, loans and similar financial information. Apart from that, Acorns’ users can take advantage of its financial literacy course on Udemy for free.
Yet when it comes to education and research, it feels like Acorn can do more for its users. Considering that the majority of the users are beginner investors, having a good educational center is a necessity.
Although investors may prefer to leave the whole process in the hands of professionals, it would have done no harm if there was a more advanced information for those, who are willing to dive deeper into investing and financial markets.
Acorns’ customer service is handled mostly by email correspondence through the form on their website. Currently, on the top of the page, there is a message stating that answers should be expected within 1 or 2 days due to high demand.
In cases where users have urgent requests or some issues, like most of the listed on the respective pages on the App Store and Google Play, this timeframe may surely affect the user experience in a negative way.
The platform suggests before contacting the support team, to take a look at their support page. There are some explanatory videos, as well as articles related to the service and the different features.
Alternatives To Acorns
Acorns Review Summary
Acorns is designed with the main idea to satisfy the needs of a very specific group of individuals – those who struggle to save money or have no idea about investing, but want to put their spare funds at work.
This makes it a perfect choice for younger, inexperienced investors, as well as college students without a handful of money at their disposal.
Yet, the lack of educational resources makes it seem like the investment app has a long way to go until it is capable of satisfying its target audience’ needs to the full extent.
The nature of the whole idea somehow limits it in terms of efficiency. It may not earn you tons of money, but at the same time is a great way to start investing with little-to-no efforts from your side.
If you wonder whether Acorns is worth trying – the simple answer is: Yes. If you have basic investment goals, are a college student that does not have access to a 401(k) but wants to save for the future, or simply an investor who doesn't have the time or patience to manage their investments, Acorns will do the job for you.
But if at some point, you want to take advantage of more sophisticated trading tools or be more flexible when designing your short- or long-term strategy, you will most probably need to make an account with another investment app as well.
Great way to invest your spare change
4 years free for college students
Limited investment options
Cash-back feature Found Money®
Lack of more in-depth educational resources
No account minimum
No tax benefits