Betterment vs. Acorns: Which is Better for Investing? A Detailed Analysis

Do you want to start investing but need help figuring out how to begin? Robo-advisors will save the day! To determine the best app for you, we’ll discuss 2 of the most popular platforms: Betterment vs. Acorns.

Betterment and Acorns are 2 robo-advisors among the industry’s best financial planning and investment platforms, helping you automate your savings and investments. 

They will make investing easy for you by directly managing your money, saving you time and effort when you do it on your own.

Both of them provide similar features and a few important differences. Knowing these details and the advantages and drawbacks of both apps will help you determine which is more suitable for your financial goals and investment preferences. 

What is Acorns?

Acorns Homepage

Acorns is an investment app that invests your cash through a relatively unique feature known as Round-Ups. This feature works by investing the spare change from your purchases. Say you purchased a donut for $1.50; Acorns will round up the cost to $2 and invest the $0.50. 

Aside from the Round-Ups feature, you can automatically send money to Acorns periodically or issue one-time payments to the platform.

The app is especially suitable for people who struggle with saving money. You won’t even notice that you’re investing, which is the part of the app that’s most convenient.

Acorns is an ideal app for hands-off investors with its automated investment feature that helps you invest money in a diversified portfolio of exchange-traded funds (ETFs) managed by world-class investment firms like Vanguard and BlackRock.

The platform is mainly designed for beginners, with an easy-to-use interface and helpful educational content.

How Does Acorns Work?

One prominent feature of investing with Acorns is the Round-Ups feature. You can issue one-time payments through your bank accounts or set up scheduled payments to the Acorns account. 

Acorns also offers various ETF portfolios and account types. 

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Portfolio Types

As you sign-up on the app and are ready to invest, the following ETF portfolios are offered based on your financial goals:

  • Aggressive: This portfolio option only offers investment in stocks ranging from large domestic companies, international stocks, small-cap and mid-cap stocks.
  • Moderately Aggressive: This type offers investment in large cap, international stocks, and some bonds.
  • Moderate: This portfolio offers investment in various stocks ranging from large to small cap and bonds.
  • Moderately Conservative: This offers investment in a mixture of stocks and bonds.
  • Conservative: This option offers investment in bonds only.
  • Acorns Sustainable Portfolio: Allows investment in stocks and bonds of companies that takes care of environmental and social well-being.

Products and Services 

Acorns has a broad range of account types. 

The following account types below are the products and services available when you open an Acorns account:

  • Acorns Invest. For as low as $5 recurring contributions at a time, Acorns will invest your money into ETFs.
  • Acorns Later. An individual retirement account (IRA), Acorns Later lets you “automatically invest for retirement and get potential tax benefits.” Acorns will set up your IRA portfolio based on your preferences and long-term goals.
  • Acorns Checking. Investment meets online banking. A money-saving checking account with minimal fees, no overdraft, and even ATM fee reimbursements, Acorns Checking also lets you automatically invest a portion of your paycheck or spare change from your purchases into your investment accounts. 
  • Acorns Early. An investment account for minors, Acorns Early is a UTMA/UGMA custodial account (Uniform Transfer to Minors/Uniform Gift to Minors) that you can use for educational expenses and other ways that directly benefit the child. 
  • Acorns Earn. Through Acorn’s online marketplace, members can get cashback when shopping from the listed major retailers, such as eBay, Apple, Uber Eats, and Walmart. This cashback will then be put into your investment account.

Management Fees

Acorns charges a flat fee depending on the subscription type. 

Personal accounts cost $3 in monthly fees. Except for Acorns Early, you can access Acorn’s saving, investing, and bonus investment products.

For Family subscriptions, the management fee is $5 per month. You will enjoy Acorns’ services and products available to Personal accounts, plus Acorns Early. 

Minimum Investment

You can open an Acorns account with no initial investment required. But to start investing, you require a minimum balance of $5. 

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What is Betterment?

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Betterment is one of the leading robo-advisors in the US, whose purpose is to make the best financial and investing decisions for your money. 

Investing your money with Betterment means you can access automated investing, personalized portfolio building, various portfolio options, and Certified Financial Planner guidance (available to premium account holders). 

Betterment is also known for its automatic tax-loss harvesting feature, which rebalances your portfolio holdings to limit capital gain taxes.

Betterment is an attractive platform for hands-off investors who’d like to benefit from professionally built and personalized portfolios.

How Does Betterment Work?

Betterment utilizes computerized algorithms to provide automated portfolio management. The platform serves high-end and low-end investors and allows them to invest toward a specific goal. 

You can choose your investment goal from any of the following 6 categories:

  • Retirement (savings)
  • Retirement (income)
  • Safety net 
  • Major purchase
  • General Investing
  • Cash goals

The platform caters to your daily spending and saving needs by offering an FDIC-insured checking account and a cash reserve account (this has an APY of 2.00%). 

Betterment also offers different types of investment options and portfolios. 

Portfolio Types

Betterment suggests the types of portfolios based on your goals and risk tolerance. However, you’re free to choose the type of portfolio you want to invest in, regardless of whatever the app suggests.

Here are various types of Betterment portfolios:

  • Core Portfolio: Invests money in various stocks and bond ETFs worldwide. It is more focused on long-term investment.
  • Innovative Technology: This portfolio offers stock and bond investment in potentially high-growth and high-risk companies like clean energy, semiconductors, blockchain, virtual reality, nanotechnology, and more.
  • Socially Responsible: This option allows you to invest in ethical, environmentally, and socially responsible companies. The category further branches into Broad Impact, Climate Impact, and Social Impact.
  • Goldman Sachs Smart Beta: This portfolio type targets investment in companies that have the potential to outperform. The investments are low-cost but have a higher risk.
  • BlackRock Target Income: This portfolio only offers investment in bonds, which secures your investment from the stock market volatility. 

Account Types

Betterment has various account types, and you can choose the one that best suits your goals. 

These are some of the many types of accounts offered by Betterment:

  • Traditional, Roth, and SEP IRA
  • Trust account
  • Cash Reserve 
  • Checking account
  • Individual taxable account
  • Joint taxable account

Betterment Cash Reserve is a no-fee cash account with a variable APY of 2.00%. The Betterment Checking account is a mobile-first checking account with an instant sign-up.

Management Fees

Betterment charges a fee of 0.25% to Betterment Digital Account holders, who can start an account with $10 and are provided with automated portfolio management. 

For Premium account holders, the fee is still at 0.25% for an account balance of $20,000 or more; however, when your balance falls below $20,000, a portion of the $4 monthly fee for that day will be charged to your account. 

Premium account holders can also access a Certified Financial Planner (CFP) for an additional 0.15%. 

Minimum Investment

Betterment allows you to open an account at $0. Once you’ve deposited the cash in your account, it starts investing it according to your goal and account type. 

You can set up automatic investing with Betterment around your paydays. You can schedule your investments at monthly, bi-weekly, or weekly intervals.

Betterment vs. Acorns

Now that we have a basic overview of what each investment app entails let’s see how they compare and what their pros and cons are.

Let’s start with the positive aspects of both apps.

Betterment Pros Acorns Pros
Management fees are low.Offers cashback at a large number of retailers.
Offers a wide variety of portfolios so you can choose what best aligns with your goals.Automatically invests the spare change.
Tax management features like tax-loss harvesting.A low-cost investment portfolio with limited risks. 
Human financial advisers are available.

Now let’s take a look at each platform’s downsides.

Betterment ConsAcorns Cons
High-risk attached to the Emergency Fund portfolio.Fees are relatively higher for people with low balances.
Direct indexing is not available.Fees apply for accessing the checking account.
No custodial accounts.No human advisor is available.

Betterment vs. Acorns – Which One Should You Choose?

Now that we have a comparison of the 2 popular robo-advisors, it’s time to choose which one is the better. Let’s take an in-depth view and find out which is best for you.

Betterment charges lower fees than Acorns if your balance is lower than $14,400, which makes it more suitable for low-net-worth investors.

Unlike Acorns, Betterment offers features like tax-loss harvesting at no extra cost, and the feature is available to all investors across the platform. These features help optimize investors’ returns by selling shares that have experienced a loss.

Betterment offers a wider range of portfolios and investment options than Acorns, and the Betterment Cash Reserve account pays 2.00% interest on your cash deposits.

On the other hand, Acorns lets you invest in Bitcoin-linked Exchange Traded Funds (ETFs), which allows you to invest in cryptocurrency, further diversifying your portfolio. For a 1% annual fee, Betterment offers diversified crypto portfolio options in cryptocurrencies like Bitcoin and Ethereum.

Acorns also offer cashback on 350+ retailers nationwide, a feature missing in Betterment. 

So, which is a better platform – Betterment or Acorns?

Betterment offers more variety, security, and lower management fees with access to a financial advisor.

On the other hand, Acorn’s user-friendly interface, a no-account-minimum policy, minimal fees, and helpful automatic savings features also provide investors with a convenient and practical option.

In choosing which robo-advisor is best for you, the bottom line is your investment style and goals. Use the comparative points mentioned in this article to find the platform that suits your needs.

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Frequently Asked Questions (FAQs) – Betterment vs. Acorns

Is Acorns Better Than Betterment?

Some may say that Betterment is better than Acorns, particularly when it comes to lower management fees for low account balances, broader portfolio types, and a feature to optimize investors’ returns known as tax-loss harvesting. 

Others would bat for Acorn for its low initial cashout, easy-to-navigate interface, and helpful online content to educate new investors. 

However, it depends on what you are looking for in a robo-advisor, your personal situation, risk tolerance, and preferences as an investor.

What Are the Cons of Using Betterment?

  • Betterment only offers investment through ETFs. It does not offer direct indexing. 
  • Custodial accounts are also not available with Betterment.
  • The minimum balance for a Premium account is relatively high ($100,000).

Is It Worth Keeping Money in Acorns?

If you need a nudge to save money, Acorns is the app for you. It also offers cashback at many retailers nationwide, so that’s a plus. 

Its Round-Ups feature also makes it an excellent choice for saving and investing money.

Is Betterment Worth the Fee?

It is. As stated in this comparative review, Betterment is an optimal robo-advisor platform that offers many perks compared to its competitors. 

With the U.S. national average on interest rates for savings accounts at 0.18%, Betterment’s Cash Reserve account with an interest rate of 3.20% is a compelling reason to choose this robo-advisor. 

Socially conscious investors may also be attracted to Betterment’s socially responsible portfolios. 

Conclusion – Betterment vs. Acorns

This article’s comparative analysis of Betterment vs. Acorns may have given you a better grasp of their differing approaches to investment based on their features and policies. Both apps offer great options for building your investment portfolio and generating passive income.

Choosing the right robo-advisor largely depends on your initial investment and financial goals. Most importantly, the app you choose should match your investment style and preferences at the end of the day. 

Choosing either or both platforms is already a win-win scenario since you have already embarked on your journey to financial empowerment by deciding to save and invest your money.

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