Acorns Review

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Acorns is a robo-advisor whose service is based on the old idea of saving your spare change. Indeed, its name comes from the proverb, paraphrased here, that mighty oaks start as small acorns. This robo-advisor rounds up all of your credit or debit card purchases to the nearest dollar, and then invests that change into a portfolio of exchange-traded funds (ETFs). Everything is done online and is automated, so you can just set it and forget it.

Acorns is geared towards young and new investors. College students can particularly benefit from it too. If you just find it difficult to save, you may find Acorns' round-ups helpful. This service automates everything so there’s no fear of forgetting to transfer money. It's also an affordable option if you don’t have much to put toward investing.

Acorns' services are completely digital, which is fine for someone who doesn’t want or need to meet with a real person to talk about their investments. If you are a serious investor who wants to invest in more than the handful of ETFs Acorns offers, you should look elsewhere. Other robo-advisors also offer more account types, such as 529 college savings plans.

If you're looking for more in-depth services than a robo-advisor can offer, consider working with a personal financial advisor. These advisors can help you manage your investments, build a financial plan, save for retirement and more. To find a local financial advisor, use SmartAsset's free matching tool.

Pricing: How Much Does Acorns Cost?

Unlike most robo-advisors who charge a fee based on your account balance, Acorns charges a flat monthly management fee. Since its target customer is someone new to investing, its cheapest plan, Acorns Lite, costs $1 per month. This plan is a basic taxable investing account. It's fairly basic, but it includes Acorns' round-up feature and bonus investment opportunities through Acorns' Found Money partners.

If you also want a Roth or traditional IRA and a checking account, you'll need to upgrade to Acorns Personal, which costs $3 per month. In addition to the aforementioned basic investing account, you will receive an Acorns Later personal retirement account that comes with tax benefits and automatic contributions. To cover your spending needs, you'll also get an Acorns Spend checking account that boasts no monthly fees, access to 55,000 fee-free ATMs and a debit card.

The highest account tier is Acorns Family, and it costs $5 per month. At this tier, you'll receive all of the above, as well as an Acorns Early account, which is an investment account for your kids. You can use this account to save for their college, and there's no limit to the amount of children you can use it for.

How Acorns Works

You can open an account by going to either Acorns' website or mobile app. These platforms have won multiple industry awards for their attractive designs. You will need to enter some personal information to get the process started, in addition to linking your bank account, setting up your financial goals and indicating your risk preferences.

Based on your personal information, Acorns will put you in one of five prebuilt portfolios: conservative, moderately conservative, moderate, moderately aggressive or aggressive. Generally speaking, the higher your risk tolerance and longer your time horizon, the more you will be invested in higher-risk assets with higher growth potential. 

Accounts are funded through what Acorns calls "round-ups." You can start making round-ups by linking your credit and debit cards to your Acorns account. Then, when you make a purchase with an Acorns-linked card, the company will round the purchase up to the nearest dollar, withdraw that difference from your bank account and invest it into your portfolio.

For example, let's say you spend $5.60 on coffee with your card. Acorns will round that purchase up to $6 and invest the difference of $0.40 into your portfolio. Although this is only a minor amount, the idea is that the change will really add up over time.

You can link an unlimited number of credit and debit cards to your account. Acorns also offers a branded checking account and debit card through a partnership with Lincoln Savings Bank. This account is only available through Acorns Personal and Family. and it is set up to work seamlessly with your Acorns account. Through this, you can check your round-ups and investments in real time.

Acorns will invest round-ups automatically, but you can also choose to manually invest. This requires you to go through a list of your purchases and decide which you want to round-up and invest. In addition to funding the account through your round-ups, you can also manually transfer lump sums into your Acorns account from a bank account.

Key Features of Acorns

Acorns’ most distinguishing feature is its round-ups. And while a round-up doesn’t necessarily add a lot on a per transaction basis, all of that change adds up over time.

Found Money is a rewards program that adds bonus cash to your portfolio when you spend money with one of Acorns’ partners. There are currently two kinds of Found Money transactions. For “Tap and Get” offers you have to go through the Acorns app and then make a purchase through your mobile phone. For “Simply Spend” offers you just need to use your Acorns-linked card to make purchases with partner brands.

Unlike a cash back credit card that offers cash back on all purchases, Found Money offers only exist for companies that partner with Acorns. There are currently more than 250 partners, including Walmart, Expedia, Apple, Nike and Sephora.

Acorns also provides educational content through its website and app. This content explains important investment terms and concepts using simple language. You can also find useful financial advice to help you make the most of your savings and investments.

Acorns Investing Strategy

Like many robo-advisors, Acorns uses a prominent investment philosophy called modern portfolio theory (MPT). The whole idea of modern portfolio theory is that investing in a diversified portfolio, across multiple asset classes, can both lower risk and maximize returns. The father of modern portfolio theory, Harry Markowitz, helped Acorns build its portfolios.

Acorns uses ETFs from six distinct asset classes: corporate bonds, government bonds, domestic large company stocks, international large company stocks, small company stocks and medium company stocks. How much you're invested in each through your asset allocation  depends on your risk tolerance level and investing goals.

Acorns offers fewer ETF options than some other robo-advisors. Competitors like Wealthfront and Betterment also provide more detailed explanations of their investing strategies. In turn, Acorns operates more on the principle of “let us worry about the technical details.” While some might want more transparency, this approach makes things easier for Acorns’ target market of young people who are new to investing.

What’s the Catch?

The biggest catch with an Acorns account is the cost. Unlike other robo-advisors, Acorns charges a flat management fee. Spending just $1 each month sounds great, but it can actually work out to a high percentage of your assets if you don’t have a lot of money in your account.

Imagine you have $500 in your account. A $1 fee would equal 0.20% of your assets under management (AUM). At 0.20% each month, that comes out to an annual fee of 2.40% if you maintain a $500 balance in your account. That’s a very high rate compared to other robo-advisors, which typically charge an annual rate of 0.50% or less. So if you opt for one of Acorns’ more expensive plans and don't keep a high balance, your costs could be high.

On the flip side, the flat monthly fee also translates to a relatively low rate if you have more in your account. With Acorns Lite ($1/month), an account balance of $5,000 would bring your annual fee down to about 0.24%, which is similar to the management fee from other popular robo-advisors. You would need about $13,000 with an Acorns Personal account to get down to a fee of 0.25%. Once your account is that large, the monthly fees from Acorns become a much better deal.

With that said, you should be aware that the ETFs that Acorns invests your money in will charge their own fees. Acorns says it bakes these fees into the prices of the ETF shares.

Fees aside, it’s worth noting that other advisors also offer more robust investing services, which can be useful as the value of your investments increases. For example, other robo-advisors help reduce your tax burden with tax-loss harvesting. This is a feature that sells investments that have lost value, and then buys very similar investments, allowing you to claim a capital loss deduction on your taxes while staying invested in the market. The end result is that you decrease the amount you owe in taxes at the end of the year. While many Acorns customers don’t earn enough income for tax-loss harvesting to make a significant difference, the taxes could still add up.

You also won’t get any face-to-face professional advice from Acorns' staff. Some people prefer being able to ask questions to an advisor directly, particularly if their financial situation is more complex. No matter your personal situation, talking with a financial advisor who's a real person can help you to create a more comprehensive financial plan.

How Does Acorns Compare to Other Robo-Advisors?

Acorns is designed for young investors with little to no regular income. Like other robos, Acorns offers multiple types of accounts that can help you to start investing, whether through a taxable or retirement account. It doesn’t offer as many features or account types as some other services, so it isn’t necessarily the best option for users of every life stage.

Stash is one company that operates in a similar market. It’s tailored to people who are new to investing and it includes a lot of informational materials about saving money and investing. Stash is nearly identical to Acorns in price, but it isn’t actually a robo-advisor. It doesn’t manage accounts directly and only helps to guide users through the investing process.

A serious investor will also find that Acorns doesn’t offer all the tools and features that many of its competitors do. For example, Wealthfront and Betterment both offer tax-loss harvesting. Wealthfront also offers direct indexing, a similar strategy for taking advantage of capital losses to lower your tax bill. This feature is only available for accounts with at least $100,000, but it is very useful if you have that much to invest.

Acorns does, however, have a clear advantage on account minimums. Most robo-advisors require at least $500 to get started, while Acorns has no minimum. This makes it an affordable option if money is tight. As for management fees, Acorns can be pricier for smaller accounts, though larger account holders will find rates much more competitive.

Acorns is completely web-based, so investors who feel more comfortable talking with human financial advisors might prefer another company. Betterment has a plan that allows you to talk with a financial expert over the phone, though it requires a minimum balance of $100,000.

Robo-Advisor	Management Fees	Minimum Balance	Best For
	Acorns Lite: $1/month Acorns Personal: $3/month Acorns Family: $5/month	$0 for all accounts (but minimum deposit is $5)	New investors with little money Hands-off investors
	0.25% annual advisory fee	$500 for all accounts	Investors with smaller sums to invest Those who don’t need a human advisor
	"Digital" account: 0.25% annual fee "Premium" account: 0.40% annual fee	"Digital" account: $0 "Premium" account: $100,000	First-time investors with low savings balances Goal-based investors

Bottom Line: Should You Use Acorns?

Acorns is designed for a specific customer: a person who has a difficult time saving money or doesn’t know a lot about investing. As such, young people are the clear target market, and college students with little or no income will particularly benefit. 

The company’s round-up system probably won’t earn you a ton of money, but it’s certainly a good place to start, and a little bit saved during your college years can really grow over the next few decades. And because it automates everything, you don’t have to worry about transferring money. On the flip side, the company doesn’t offer many investing tools, like regular portfolio rebalancing and tax-loss harvesting. It also offers only a few account types. These account options may be enough to cover novice investors, but it also means that you will eventually need to get an account with another company if your needs or goals change.

Tips for Finding an Advisor

• Acorns doesn't provide many features for investors who have more complex financial situations. If you have multiple types of investments or want to build a financial plan, you may want to talk to a financial advisor. SmartAsset's free tool can match you with up to three advisors in your area. Get started now.
• The rise of robo-advisors has coincided with a bull market. But what do the algorithm-driven advisors do when there's a major downturn? The general wisdom is not to panic when things head south, but an automated system of rebalancing may sell when prices are low.