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Man investing onlineAcorns and Robinhood are online investment tools both geared toward younger, newer investors, but they are still quite distinct. Acorns is a robo-advisor tool that helps people invest by automatically skimming the spare change off their digital purchases. This overage is then invested according to the platform’s algorithms and recommendations, and the result is a set-it-and-forget-it portfolio. Robinhood is a streamlined platform designed to make investing as easy and comprehensible as possible. With a design that is often compared to Twitch gameplay or the quick reactions of Tinder, Robinhood makes engagement with a portfolio simple and fun.

Acorns vs. Robinhood: Fees

When it comes to online investment platforms, users should generally look out for four types of fees:

  • Trading Fees – This can (relatively rarely) come in the form of a flat fee, or more often the broker will charge you what’s known as the “spread.” This is the difference, if any, between the buying and the selling price of an asset.
  • Trading Commissions – This is when a broker will charge you a percentage of the trade based on the volume or value of each trade.
  • Inactivity Fees – Any fees that the platform charges you for not trading, such as keeping money in your brokerage account for example.
  • Non-Trading/Other Fees – Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account, taking money out of it or moving securities among platforms.

This is an area in which Robinhood has an unquestioned advantage. Robinhood has almost no fees of any kind. This includes no commission, trading fees or inactivity fees. It’s free to put your money in and take it out and to move assets around within your account. The only fees you will pay are if you choose to trade on the margin, meaning with borrowed money. In this case you will pay an interest rate of 5% or more, and to use this service you must sign up for Robinhood Gold at a rate of $5 per month.

However, fees have been an issue for Robinhood. In December 2020 the Securities and Exchange Commission said one of “Robinhood’s selling points to customers [between 2015 and late 2018] was that trading was ‘commission free,’ but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices.” Robinhood agreed, without admitting or denying the SEC findings, to a cease-and-desist order and to pay a $65 million civil penalty.

Acorns, on the other hand, charges a monthly fee to use its service. For $1 per month you can sign up for Acorns Lite, which offers the platform’s basic investment services. At $3 per month you will receive Acorns Personal, which gives you a checking account and tax-advantaged retirement accounts. Finally, at $5 per month you can enroll in Acorns Family, which adds investment accounts for dependents. (For any account that has more than $1 million in it, these fees increase to $100 per month.)

While a niche part of its service, Acorns also charges a very high fee to transfer securities out of its platform at $50 per asset.

Acorns vs. Robinhood: Services and Features

Acorns makes a relatively novel pitch. Its service works as an automatic investor and advisor for users. You link Acorns with your financial accounts, such as your debit and credit cards. Every time you make a purchase the platform then rounds that spending up to the nearest dollar and invests the overage in your Acorns account. For example if you buy a cup of coffee for $2.80, your credit card would show a $3 purchase and Acorns would deposit the extra $0.20 in your portfolio.

You can also invest manually, depositing money directly into your account.

Acorns invests your money into one of five pre-built portfolios based on your risk tolerance and desire for growth, ranging from conservative to aggressive. These portfolios are built out of a weighted mix of ETFs, or exchange traded funds. These ETFs are selected based on how well they fit the portfolio’s risk and growth management strategy and automatically balanced by the platform.

The idea behind Acorns is simple: small contributions can grow into significant results over time. To achieve this goal, however, Acorns offers an extremely feature-limited platform. Investors can’t select individual investments or even asset classes. Your money is locked into the automatically managed portfolio that you select, and that in turn invests exclusively in ETFs. This makes Acorns less of an investment tool than a financial management device. Users hoping to manage their portfolio or make active investment decisions will be left frustrated, while those hoping for help managing with savings and investment may find much to offer.

Robinhood is a trading platform focused on its app (although it does offer a web presence as well). It is feature-limited and built around ease of use.

Through Robinhood users can trade a handful of the most popular assets on the market today: Stocks, options, ETFs and American Depositary Receipts (ADR). A section of Robinhood known as Robinhood crypto has recently expanded this offering to include cryptocurrency as well.

Robinhood offers relatively few tools for managing your investments. Each asset is presented with a small set of data such as pricing history, trade volume and other related statistics and purchasing information. Assets are grouped by market sector (e.g. technology stocks) and you can quickly look up similarly situated products to invest in. Users can invest easily, making purchases from money they have uploaded to their Robinhood account or selling assets and distributing the money back there.

This ease of use is both Robinhood’s greatest strength and its weakness. The investment platform offers relatively little in the way of sophisticated tools or technical analysis. Pricing information only goes five years back, and more complicated tools such as bar charts are unavailable. This makes the platform easy to understand, avoiding some of the more overwhelming mechanics that can drive away new investors. Yet it also makes the platform highly limited, with few options for investors who have grown past their initial purchases.

Acorns vs. Robinhood: Online and Mobile Experience

Young man investing onlineBoth of these platforms are built around the concept of customer experience. Acorns builds a largely hands-off experience designed so that customers actually have to use it as little as possible. The app automatically rounds up your purchases and puts the overage into one of its handful of managed accounts. The whole process is designed to happen in the background of the user’s life. And this works to a very large extent.

In the app itself, Acorns is generally well designed for what it does. Accessing and managing your money is fairly easy and hassle-free, although as noted above there are fairly few options for management offered by the system. In truth if you are actively using your Acorns account often enough for the mobile experience to matter, this is likely not the product for you.

Robinhood’s platform is also well designed for its intended purpose. Unlike Acorns it is built around the concept of active investing, and the platform’s interface is designed with that in mind. It’s easy to pull up assets, and making trades is highly intuitive on the platform’s minimalist screens. This makes Robinhood highly accessible to new investors who may otherwise get lost in a sea of complex trading data.

Both services, however, suffer from a critical flaw in customer service. Acorns and Robinhood offer nothing more than an e-mail option for support. While this may be an appropriate model for a website or app developer, perhaps reflecting the mindset at work behind these products, users who have their money invested through these services may find it frustrating that they can’t simply get someone on the phone in case of a problem.

Acorns vs. Robinhood: Who Should Use It

Acorns finds itself at an odd intersection of financial management and investment service. In fact it’s best not to approach it as an investment product, because in that regard this platform is lacking. Offering nothing more than a handful of automatically managed accounts, Acorns has little to interest potential investors.

However, as a financial management tool, Acorns is potentially quite useful. Its system of rounding up your purchases to create a small, but steady, stream of investment capital is clever. It’s a good way to help new investors get into the market, particularly those who struggle to find the money. For young investors, ideally those at or around college age, this might be an excellent way to begin growing an early portfolio.

Just keep in mind that the platform’s monthly fees (most users will likely spend either $1 or $3 per month) can actually eat up a larger share of your portfolio than it seems, given that you’ll be investing a few dimes at a time.

Robinhood, on the other hand, is a poor choice for virtually any investor.

The central selling point of Robinhood is that it makes investing easy. In fact, through an interface often designed to mimic app-based gameplay, Robinhood is out to make investing downright fun.

This is not a bad goal in and of itself. However, in doing so this platform creates a trading environment in which users are provided with very little information, yet prompted to take an ever-growing series of risks. Robinhood limits the amount of data users can get. Instead, at the bottom of each asset’s screen, the app prompts users with recommended products that they might also want to buy. It targets new, relatively uninformed investors yet makes options, a relatively high-risk product, one of its most prominent asset classes.

Robinhood seems poorly designed platform no matter what kind of investor you are. Experienced investors will find its streamlined interface wanting, and will quickly bump up against the limits of its information and trading tools. Novice investors may find themselves pushed into risky behavior they may not fully understand. While Robinhood promises to make trading faster and easier for novices, this is the exact category of investor who should be slowing down and thinking their trades through.

The Bottom Line

Woman investing onlineBoth Acorns and Robinhood seem designed for younger, digitally native users. Robinhood is less costly to use. Acorns is basically an automatic investor and advisor so it may be more appealing to a less-active investors; Robinhood is an easy-to-use but feature-limited trading platform so it may be more appealing to an active investor. Both only offer users an email option for support.

Tips for Investing

  • Consider talking to a financial advisor about which online platform is most suitable for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s matching tool can help you find a financial advisor in your area, within minutes, to figure out the right approach you should take when it comes to your portfolio. If you’re ready, get started now.
  • One of the most convenient digital resources for investors is a free, easy-to-use investment calculator.

Photo credit: ©iStock.com/ipopba, ©iStock.com/blackCAT, ©iStock.com/RgStudio

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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