Acorns is a Robo-advisor; built on the age-old concept of saving spare change. Indeed, its name is derived from the saying that giant oaks begin as humble acorns.
This robot-advisor rounds up all your credit or debit card transactions to the closest dollar and invests the change in an exchange-traded fund portfolio (ETFs).
Everything is done online and automatically, so you can just set it and forget it.
Acorns aim at young and inexperienced investors. College students, in particular, can profit from it.
|Guide||Is Acorns Worth It?|
|Regulated||SEC, FINRA, SIPC|
|Trading Platforms||Web and mobile|
|Management Fee||$1 – $5/month|
|Features||No trading fees and multiple account options|
If you just find it tough to save, Acorns’ roundups may be of assistance. This service automates everything, so there’s no need to worry about forgetting to transfer funds.
It’s also a cost-effective choice if you don’t have much money to invest.
How Does Acorns Work?
You can sign up for an account through Acorns’ website or mobile app. These platforms have received numerous industry awards for their appealing designs.
To begin, you will need to provide some personal information, link your bank account, set up your financial goals, and indicate your risk preferences.
It will place you in one of five prebuilt portfolios based on your personal information: conservative, moderately conservative, moderate, moderately aggressive, or aggressive.
In general, the greater your risk tolerance and the longer your time horizon, the greater your investment in higher-risk assets with higher growth potential.
Accounts are financed by “roundups,” as Acorns refers to them. You may begin generating roundups by attaching your credit and debit cards to your Acorns account.
When you use an Acorns-linked card to make a purchase, the firm will round up to the next dollar, remove the difference from your bank account, and invest it in your portfolio.
Why Is Acorns Good For?
It’s Robo-advisor capabilities are particularly appealing to those who get lured to the platform’s “roundup” savings claim-to-fame: Purchases made in connected accounts round up to the closest dollar, and the difference gets deposited into an investment account.
For example, if you spend $4.50 on a coffee using a connected credit card, an extra $0.50 would be charged to your card and deposited into your investing account.
If you’ve had success with this pro-savings gimmick, you might be interested in saving for retirement with it as well.
Nonetheless, other Robo-advisors provide more extensive services at a lesser cost.
Only those who believe that they can be persuaded to save more money with Acorns should apply.
Here are the Acorns features
- The roundup system is the standout feature of Acorns
- You can withdraw money whenever you want or use it for trading stocks
- Your debit and credit get connected to your Acorns account for trading
How Your Money Is Managed In Acorns?
Like most other Robo-advisers, Acorns provides its customers with a diverse portfolio of low-cost ETFs tailored to their risk tolerance and goals depending on how they respond to a few questions.
It will question you about your age, net worth, income, and when you expect to require the cash. It select your portfolio from a pool of approximately 25 exchange-traded funds (ETFs).
Forbes Advisor created a profile for a youthful, upper-middle-class worker with a lengthy investment horizon.
Acorns responded with an “Aggressive Portfolio” that had the following allocations:
- 55 percent to major domestic corporations via Vanguard S&P 500 (VOO)
- They allocates 30 percent to overseas stocks via the iShares Core MSCI International Stock Index (IXUS)
- The iShares Core S&P 500 Mid-Cap ETF allocates 10% of its assets to mid-cap equities (IJH)
- 5% to small-cap equities via the iShares Core S&P 500 Small-Cap ETF (IJR)
Unlike other competitors, such as Wealthfront, our Acorns portfolio comprised only four low-cost ETFs, all with negligible expense ratios—the operating fees charged by the funds in which you invest.
This streamlined method simplifies your investments while without compromising rewards.
On the other hand, a portfolio comprised exclusively of equities maybe a little too risky, even for a risk-tolerant younger worker.
You can switch to a different portfolio but be cautious: your tailored portfolio is based on the questionnaire.
So going against the grain may result in having too little risk rather than too much risk.
Acorns, for example, utilizes the iShares ESG Aware MSCI USA (ESGU), which has a 0.15 percent expense ratio, which is five times more than the Vanguard S& P 500 ETF (VOO) that it uses in its non-SRI fund.
Consider this: if you start your account with $1,000 and contribute an extra $300 monthly for 30 years with a 7% return, you’ll pay roughly $10,500 in fees with ESGU versus more than $2,100 with VOO.
Acorns, like many Robo-advisers, employs a well-known financial philosophy known as contemporary portfolio theory (MPT).
Modern portfolio theory is based on the premise that investing in a diversified portfolio spanning several asset classes may reduce risk and maximize profits.
Harry Markowitz, the creator of modern portfolio theory, assisted Acorns in developing its portfolios.
Acorns invest in ETFs representing six separate asset classes: corporate bonds, government bonds, domestic extensive business stocks, foreign large-company stocks, small company stocks, and medium company stocks.
Your risk tolerance and investment objectives determine the amount you invest in each through asset allocation.
It has fewer ETF choices than some other Robo-advisors. Competitors such as Wealthfront and Betterment offer more extensive descriptions of their investment methods.
On the other hand, Acorns operates more on the idea of “let us worry about the technological concerns.”
While others may prefer greater openness, this strategy simplifies things for Acorns’ core demographic of young individuals who are new to investing.
Our experience with Acorns
The bottom line of using Acorns is that if you want to make most of your spare change and you would like to get an occasional retailer kickback, then no other place is better than Acorns.
The standout feature of Acorns would be the roundup system help in saving and investing money easily.
What differentiates Acorns from others?
Following are the facts that differentiate Acorns from others
- It comes with traditional bank account features
- You can do direct deposit, and connect your debit and credit card to your Acorns account.
- Your fee-free money withdrawal from over 55,000 All points ATMs worldwide
Let’s compare Acorns with other similar services:
Acorns vs. Robinhood
You don’t have to have any minimum amount for your brokerage account at Acorns.
But at Robinhood, you must have $5 to start investing, but there is no minimum amount to open your account here as well.
You get charged a 3% management fee for an investment account at Robinhood. There is no annual fee at Acorns.
Read Robinhood Review
Acorns vs. Stash
You get charged 3% per month for automated investments at Stash.
There is no such fee at Acorns because it doesn’t have such a feature of investing your money.
There is a $1 and $9 account management fee at Stash that you will get charged.
Acorns vs. Wealthfront
You need to have a minimum of $500 in your Wealthfront account to start your investments.
There is no such rule when it comes to Acorns. You can start trading at Acorns with a minimum of $5.
You get charged $1 per month for Acorns lite and 0.25% AUM at Wealthfront.
Acorns are intended for a specific customer: someone who has difficulty saving money or is unfamiliar with investing.
As a result, young people are the specific target market, and college students with little or no income will profit most.
The company’s roundup technique is unlikely to make you a lot of money, but it’s a nice place to start, and a little amount saved throughout your college years may add up over the following few decades.
You also don’t have to worry about money transfers because everything is automatic.
On the other hand, the firm does not provide numerous investment instruments, such as frequent portfolio rebalancing and tax-loss harvesting.
It also has a limited number of account kinds. These account options may be sufficient for beginning investors.
Still, they also imply that you will ultimately need to open an account with another firm if your requirements or ambitions change.
Can I make my Acorns Checking my primary checking account?
Yes, Acorns Checking may be your primary checking account for Acorns! Please visit the Acorns website to link Acorns Checking as your primary checking account!
Can I make wire Transfers in or Out of Acorns Checking Account?
At this moment, unfortunately, the Acorns Checking account does not support or offer wire transfers into or out of an Acorns Checking account. If a client goes to another financial institution and tries to send a wire transfer into their Acorns Checking account, it will fail since we do not have that capability, and it will get refused before we ever get it.