If you’re familiar with micro-savings, then you probably have heard of Acorns. It is one of the more widely used micro-investing apps. In this Acorns review, we’ll show you how Acorns can help you grow your investments.
With Acorns’ popular features and services available to new investors and pros alike, investing your money has never been easier. People love the idea of being convenient and, at the same time, efficient in growing their liquid net worth.
Investing has its pros and cons, but with platforms providing investment strategies, saving tips, tools, and features, you won’t even be thinking twice about investments anymore.
Gone are the days that people stay away from investments because they were so difficult. There are so many online platforms simplifying investing, so it doesn’t have to be complicated.
In this Acorns review, you will learn about Acorns app features, investing strategy, cost, and other important details you should know before you get started.
What Is Acorns?
Acorns is one of the leading investment platforms that provides simple, affordable passive investing solutions that are suitable for new investors. It’s a micro-investing app where you can start investing with any amount you want.
Acorns is the first platform that establishes the idea of rounding up your purchases to the nearest dollar. It works by making purchases using your credit or debit card linked to your Acorns account and rounding them to the nearest dollar.
Then this money gets moved into an investment portfolio that automatically invests your money into stock market index funds on your behalf.
Using this feature lets you save $30 extra monthly on average. On top of the contributions, you have made into the account. How great is that? The more you use Acorns for your investments, the more you can have additional contributions.
How Does Acorns Work?
Acorns works as a platform allowing their members to invest by regularly saving a small amount of money. This type of investing is called micro-investing. Acorns is a platform that you can link to your bank account, and every time you purchase something, a small amount gets transferred to your investment account.
The best part? You won’t even notice the transferred amount while you build up your investments on the side. How cool is that?
Besides investing small amounts for you, Acorns also provides standard banking services at a low price. Now that’s a win-win situation by all accounts.
The company divides its services into 3 categories:
- One that permits members to invest spare change in Exchange-Traded Funds (ETFs).
- The second one allows its users to create and fund an Individual Retirement Account (IRA) through Acorns.
- The last one offers members a debit card provided through Visa, Mastercard, and JCB.
How Does Acorns Add Money To Your Investments?
Purchasing from a checking account, credit, or debit card that is linked to your Acorns account, will activate the Acorns “Round-ups” feature and will sweep them into the nearest dollar and set aside your change.
For instance, if you buy a candy bar for $1.20 at a convenience store, Acorns will lay aside the 80 cents.
Acorns is the modern and digital version of your piggy bank, which sweeps the change from your linked account into your Acorns account. With that feature, you can automatically do investments daily, weekly, and even monthly. One-time deposits are also possible using this feature which saves you a lot of time and effort.
If you want to set the feature to multipliers, you can double or triple the change on your purchases and invest. Other than that, you can also tell Acorns to invest a quarter, 50 cents, 75 cents, or even a dollar when a purchase comes to an even dollar amount. Pretty flexible!
Where Do Acorns Invest My Money?
Acorns invest your change in ETFs. This tends to widen your investments beyond a large spectrum of companies and asset classes. The website affirms that every dollar you invest is automatically diversified into more than 7,000 stocks and bonds through fractional share purchases.
Acorn’s company has 5 different portfolio types:
- Moderately Conservative
- Moderately Aggressive
In addition, Acorns provides a recommendation depending on your age, goals, income, and time horizon.
With the different choices laid out for you, you can accept it or choose your own risk level when you set up your Acorns account. While you explore Acorns, you can see some well-known investment management companies such as Vanguard and BlackRock designed the portfolios.
If you want to invest your funds to diversify your investment portfolio, here are some suggestions.
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How Much Does Acorns Cost?
Acorn’s price varies depending on the category you choose. There are 2 account categories:
- Acorn’s Personal costs $3 per month.
- Acorns Family costs $5 per month.
Acorns fees start at $3 monthly for all accounts with a balance under $1 million.
In contrast to the traditional management, mutual funds, and DIY ETFs, this fee is low. While other portfolio advisory services like Amerivest charge 1.25% and require a minimum investment of $25,000.
Here are the 2 categories and their features you can use:
Acorns Personal ($3/month):
Acorns Personal is divided into 3 categories:
- Acorns Invest: This service has index fund investing ability through “Round-Ups” and account contributions.
- Acorns Later: This service offers automated tax-advantaged investment selections such as Individual Retirement Accounts (IRAs).
- Acorns Checking: This service serves as your bank account, which provides free withdrawals at over 55,000 ATMs nationwide. It has no account fees and provides an opportunity to earn up to 10% in bonus investments.
- Bonus Investments: You can earn investment rewards by shopping, currently at over 12,000 brands.
Acorns Family ($5/month):
All in Personal (Invest, Later, and Checking, Bonus), plus Acorns Early allows you to open an investment account for your kids or a custodial account for your child and start investing for them as a minor.
Now that you have a better idea about Acorns, let’s get to know the features they offer and their functions to help you with your investments.
The Round-Ups feature is the most popular among all Acorns features. When you purchase using your Acorns Visa debit card or other cards linked in your Acorns account, it rounds your transaction amount up to the nearest dollar.
For example, suppose you spend $5.45 on your favorite food, Acorns rounds the transaction up to $6. The amount rounded up using Acorns is 55 cents. This is pulled from your checking account and placed into your investing account, where it can start increasing and earning.
The more you use the Acorns cards, the more money you save!
For the most part, the service’s users invest over $30 worth of spare change and return a month with their round-up feature. Even if it’s a small amount to start with, it can grow over time and will make sure that you’re investing without even noticing it.
Acorns Round-Up Multiplier
Do you want to save money fast? If so, then you can enable Acorn’s Round-Up Multiplier. You can choose to multiply your round-ups by 2x, 3x, or 10x.
For instance, if you choose the 3x multiplier rather than saving the 55 cents from the purchase mentioned above, you will be saving $1.65 ($0.55 x 3).
Using the Round-Up Multiplier is the easiest way to set aside more money without thinking about it. You can also change the multiplied amount or disable it anytime you want.
Acorns Earn helps you earn money when you shop or look for a job. This feature has more ways to earn, save, and invest money. One way is by inviting friends or family, and each one of you will receive $5 to invest once you invite them.
Furthermore, the Acorns company has a Job Finder feature and partnered with ZipRecruiter to help its users in finding jobs easily.
Acorns Found Money
The Acorns Found Money feature allows you to make money by shopping for specific brands. There are over 350 leading brands you can choose from that will invest a percentage of your purchase or a set amount of money directly into your Acorns investing account when you shop with them.
Some of the brands you may find on Acorns are Apple, Expedia, Chevron, Kohl’s, and Nike. Acorns has a Chrome Extension that automatically earns you cashback as you shop online.
Acorns Early is for children, where you can open an investment account for them. It operates as a UTMA/UGMA account, where the money sits and grows and can be transferred to your kids when they reach a certain age.
UTMA and UGMA accounts are custodial accounts under the name of the minor. However, it is managed by a parent or a guardian until the child reaches the age of maturity as defined by your state.
With this feature, it is now possible for kids to start investing and saving for their future. You can set recurring investments daily, weekly, or monthly.
This feature is as easy and simple as the “set it and forget it” procedure that makes it eccentric. These accounts are aggressive and can earn large amounts. It costs $5 monthly, and you can even add multiple children for no additional costs.
Besides, there are tax benefits you will like, such as the tax credit, which can lower your tax fee. As a bonus, the company offers financial literacy content, so you and your kids learn valuable skills on how to manage money.
Acorns Gift Card
Finally, the Acorn’s Gift Card feature is where you can buy gifts for your family and friends. Once the recipient invests their money, it can double overtime.
You don’t have to have an Acorns account to purchase a gift card, but your recipient must sign up to be a customer to redeem the gift card if they don’t have one.
As of now, they only offer $25 gift cards, and you can buy as many as you want.
Pros And Cons of Acorns
Acorns is a good tool to help people to control their spending habits and invest money without even noticing it.
Here are the pros and cons you should know of before you use Acorns.
Pros Of Acorns:
- Start investing today – Many are held back when they want to start investing. Acorns has a low barrier to start investing and manages everything for you.
- Hand-off approach – When signing up with Acorns, they’re taking care of your investment portfolio. You can always adjust it if you want, but you don’t need to spend much time setting it up.
- Acorns helps create good financial habits – 8 out of 10 Americans are notably poor at saving money. By using Acorns, it is easier to keep the money because of the way they process it automatically. With Acorns, everyone can now save and invest comfortably.
- Educational features available – The Acorns website utilizes less technical language compared to many investment companies. It makes it accessible for beginners. Acorns also publishes Grow Magazine, an online personal finance site, and it emerges that content into the Acorns app.
- Uniques Perks – Aside from the features they provide, there are other perks you get to enjoy, such as getting a free children’s book for signing up for the Acorn’s Family tier.
Cons Of Acorns:
Aside from the fees, there are other details that are under Acorns shortcomings:
- Costly management fees – Many robo-advisors charge you depending on the percentage of your assets instead of a flat price, while Acorns provides an offer that can lead to deceivingly high fees, especially if you have a low balance.
- Notable missing features – Acorns provides customer support but does not offer human investment advisors, just like M1 Finance, Webull, and more. Aside from that, Acorns does not offer tax-loss harvesting, which most traditional brokers and many fintech companies do. Acorns also do not offer the Acorns 529 plan.
- Expensive transfers – Acorns charges $50 per ETF you want transferred to another broker. You can sell your holdings and cash out for free.
- A limited selection of portfolios – Acorns portfolios cover a maximum of 7 asset classes while the other robo-advisors provide a wide selection of asset classes.
[Related Read: M1 Finance Review: Is It Worth It?]
Acorns Investing Strategy
Similar to many robo-advisors, Acorns make use of a prominent investment ideal called the modern portfolio theory (MPT). The ideal of the modern portfolio is that investing in a diversified portfolio can both lower risk and maximize returns.
The person behind modern portfolio theory, Harry Markowitz, helped Acorns build its portfolios. This company uses ETFs from 6 distinct asset classes: corporate bonds, government bonds, domestic large-company stocks, international large company stocks, small company stocks, and medium company stocks.
The amounts you have invested in each category depend on your risk tolerance level and investing goals.
Acorns also provide fewer ETF options than the other robo-advisors. Competitors such as Wealthfront and Betterment also offer more specific explanations of their investment strategies.
Sequentially, Acorns works more on the principle of “let us take care about the technical details.” That type of approach makes things easier for people who are new to investing, as they will take care of everything for a fixed fee.
Which ETFs Are Available Through Acorns’ Robo-Advisors?
Acorns app provides a great number of index funds from iShares, JP Morgan, Goldman Sachs, and Vanguard, including:
- Developed Markets — iShares Core MSCI Total International Stock ETF (IXUS)
- Real Estate — Vanguard REIT ETF (VNQ)
- Large Company Stocks — Vanguard S&P 500 ETF (VOO)
- Medium Company Stocks — iShares Core S&P Mid-Cap ETF (IJH)
- Small Company Stocks — iShares Core S&P Small-Cap ETF (IJR)
- Corporate Bonds — JP Morgan Ultra Short Term Corporate Bond (JPST)
- Corporate Bonds — BlackRock Ultra Short-Term Bond ETF (ICSH)
- Government Bonds — iShares 1-3 Year Treasury Bond ETF (SHY)
- Government Bonds — Goldman Sachs Access Treasury 0-1 Year ETF (GBIL)
Who Should Use Acorns?
Would-be investors of Acorns are mostly still at school, fresh graduates, starting their careers, or those who have never invested before. Acorns can be a good turning point for you towards creating healthy habits with your finances.
Acorns is for you if:
You Are A Hands-Off Investor
Acorns is perfect for those investors who may not have that much time to monitor their investments. Acorns can do all the work for you.
You Are Striving To Save
What is good about Acorns is it has no minimum investment required. So, you can open an account with whatever amount you have.
You Are In College
As mentioned earlier, Acorns is best for those who have never invested before like college students. For college students, Acorns waives the monthly fee so you can start investing without paying any additional money. This is best for college students who are usually on a tight budget.
You Want To Earn Cashback Rewards
We all love cashback. With Acorns’ Found Money feature, you can earn cash back by shopping for specific brands that will go directly to your Acorns account when you shop with them.
If you fall under one of the groups above, Acorns is an excellent investing app for you!
You Want To Invest For Your Kids
If you want to invest in your kid’s future, Acorns Early is the best feature for that. Start investing early and let your money grow. This will surely help your children in the future since this feature is transferable when they reach a certain age.
If you fall under one of the groups above, Acorns is an excellent investing app for you!
Do Acorns Really Help You Save and Invest?
Yes, the more you use Acorns features and services, the more money you will save. Their round-up feature alone lets you earn more money, invest more, and grow your money faster.
Anyone who purchases using their Acorns card or linked card is going to save a lot more compared to someone who only uses it scarcely.
Another great example is that when someone has recurring payments sent to their investment account weekly are also going to save much more long-term than somebody who only adds money every few months.
The service is how you take it. If you have strategic settings, you can save many with Acorns. Keep in mind when utilizing the services of Acorn, it’s all about creating a set-it-and-forget system.
Is Acorns A Scam?
No, Acorns is not a scam.
Acorn’s mission is to protect its user’s financial best interest of the up and coming. While Acorns does not guarantee the activity of the stock market, there are things that they are certain about.
When you invest with Acorns, the money will be invested into an Acorns investment portfolio. The security in your investment accounts is SIPC-protected up to $500,000, and your checking account is FDIC-insured up to $250,000.
If you wish to withdraw your funds or close your Acorns account, you can do so any time you want. Withdrawals may take at least 3 to 6 business days.
Lastly, Acorns do not store any of your personal information, such as bank login information.
Is Acorns Legit?
Yes, Acorns is a legitimate regulated investment company. The Securities and Exchange Commission (SEC) regulates its broker and custody services. Also, Acorns is a member of the Financial Industry Regulatory Authority (FINRA), a self-regulation organization.
Furthermore, Acorns is also a member of the Securities Investor Protection Corporation (SIPC). Not only are Acorns legally obligated to submit information to federal regulators, but they must also uphold the rules of FINRA and SIPC.
Bear in mind that there are risks present with any type of investment. The stock market is volatile, and there is always the risk of losing money.
Conclusion – Acorns Review
If you like saving little amounts that fall under the micro-savings category, then Acorns is the best stepping stone for you to invest and reach your financial goals. This is the first step towards achieving your desired financial independence and freedom.
Investing with Acorns lets you earn, save, and invest in the best way possible without affecting your lifestyle. Your financial habits will be sturdy and better with Acorns’ products and services. It’s combining the best of both worlds in terms of being smart with your purchases and savings while having the opportunity to earn for your future.
If you have trouble starting your investment journey, do the micro-saving style and use Acorns to help you grow your funds. Nothing can stop you from using different methods to boost your savings rate, become independently wealthy, and without having trouble retiring early.
You don’t have to trouble yourself if you don’t save enough. Acorns will help you start your path to investment.
Marjolein is a financial consultant who has built over €4,000 monthly passive income and saves over 70% of her income. Read Radicals’ inspiring story, from stuck in the 9-to-5 to loving life. Feel free to send Radical a message at the bottom of this page