From a tiny acorn, a mighty tree can grow. That’s what Acorn encourages users to believe with its straightforward investing app. Through linking your credit, debit, and bank accounts, Acorn takes your everyday spending and rounds up to the next dollar on purchases. The difference is then deposited into your Acorns investing account.
Spend $3.64 at Starbucks? Acorns rounds it up to $4.00 and puts the remaining $0.36 into your investment account. The same goes for anywhere else you make purchases.
There’s a lot to love about Acorns, especially if you’re a younger investor who wants to plan for the future but may not have a ton of extra income to save.
What’s the benefit of Acorns? And is a good place to store your hard-earned cash? Find out everything you need to know in this ultimate Acorns review.
What Is Acorns And How Does It Work?
Acorns is the modern version of saving your spare coins in a jar on the fridge. Founded in 2012, this micro-investing and robo-investing services company has grown to over 4.5 million users and $1.2 billion managed assets. That’s not bad for a company that focuses on your extra change.
Pay attention to these key terms: micro-investing and robo-investing. Micro-investing is the process of depositing, saving, and investing small amounts of money into investment accounts. Usually, platforms that provide obstacles for investing like training fees and account minimums.
Robo-investing is the process of using automated algorithms and advanced software to manage your portfolio. If you’ve ever wanted a robot to walk your dog or cook your dinner, think of robo-investing as the investing equivalent to this.
Micro-investing and robo-investing are the two defining characteristics of using Acorns. If you wanted to pick out select stocks like Apple, Microsoft, or your best friend’s company, then this isn’t it. Instead, you choose from one of five portfolio styles that vary in terms of risk and reward between conservative and aggressive.
Likewise, while Acorns will happily look after millions of your dollars, you can get started using it for as little as $5
When you first set up your Acorns account, the app will have you take a survey to determine what kind of investor you are. Once you do that, Acorns will recommend one of their five portfolio options:
- Moderately Conservative
- Moderately Aggressive
On the conservative end, the app invests more into bonds and less into stocks, while the aggressive side does the opposite. Everything in between is a variance of those extremes. While the survey does give you a recommendation, you can change your portfolio at any time.
You can link your debit card, credit card, or checking account to Acorns to start investing your money.
How To Get Started With Acorns
You don’t have to know anything about stocks, portfolios, or bonds to use Acorns. You can get started using it in just a few minutes.
Download the app or sign up through the Acorns website. You will have to put in a good deal of personal information, including your address, birthdate, and Social Security Number. Do note Acorns, like many other investment apps, are for US residents online. You’ll also need to link at least one bank account to get the service up and running.
After this, Acorns will then ask you some questions about your employment status, net worth, and risk tolerance.
Be honest because this will directly determine the type of portfolio that Acorns chooses for you though you are free to change styles at any time.
Once you do this, you’ll be taken to your account dashboard where you can start your first deposit, set up Roundups, and customize more of your settings and preferences.
Acorns is meant to be low-maintenance and low effort. While it has branched out into a few other offerings, including Acorns Later (for retirement) and Acorns Early (accounts for your children), its main offering revolves around a few main terms and features.
The heart of Acorns. Acorns automatically rounds up for each purchase for linked credit and debit cards to invest automatically. The round-ups feature invests your spare change for you. You can link as many debit and credit cards as you would like to the app, and Acorns will round up to the nearest dollar for every purchase you make. The round-up amount is what they use to invest in your account.
2. Recurring Investment
The automatic recurring investments allow you to choose how much money you want to put towards your account each day, week, or month. You can customize it how you want, but the minimum you have to invest each month is $5 to use the recurring payments feature. The idea is to make investing an automatic activity for you.
3. Found Money
The Found Money feature allows you to take advantage of the partnerships that Acorns has with various retailers. The Acorns application has multiple offers and will invest a certain amount of money for every offer you participate in. This updates all the time and includes big names like Apple, Chevron, Airbnb, and many other major companies. They will even invest money into your account if you do more to earn extra money, such as signing up to be an UberEats driver!
The catch, however, is you must purchase by going through the Acorns “Shop Now” portal.
4. Acorns Spend
The Acorns Spend feature allows you to get a checking account with Acorns and an Acorns debit card that you can use to spend the money in your investment account. I wouldn’t recommend spending all of your investment money, though. However, if you do decide to use Acorns Spend and get the Acorns debit card, you get to use it with no minimum balance fees, no ATM fees, and no overdraft fees.
5. Acorns Grow
Acorns Education blog for smart financial and investment decisions that is accessible via the app or online.
6. Acorns Later
We all know investing for retirement is important. The Acorns Later feature allows you to invest in a retirement account (IRA). You have three options with Acorns Later:
- Roth IRA
- Traditional IRA
- SEP IRA (for self-employed individuals).
As far as fees go, it only costs $1 a month to use the basic application for your first $1 million. After that, you would pay 0.25% annually. For information on the plus version, you get access to Acorns and Acorns Later and pay $2 a month. For the premium version, you get Acorns, Acorns Later, and Acorns Spend for $3 a month.
Read on to understand the advantages and disadvantages of the Acorns application.
Different Acorns Investment Approaches
Acorns is a robo-investor. This means you’ll never directly pick the stocks, bonds, and other financial products in your portfolio.
Instead, you’re given a choice between five different investment styles from conservative to aggressive.
The more aggressive you choose, the more of your savings get invested into stocks and less in bonds, which are generally more conservative. That’s because stocks are higher risk (and reward) while bonds are safer long-term bets.
Acorns automatically suggest a portfolio type based on your age, income, and assets. You are free to change the style at any time. Acorns will rebalance the portfolio within 5 days.
However, remember there is a reason why you’ve decided to invest with a robo-investor. Do you really want to bet against advanced algorithms? While you may want to change your style periodically, doing so often may actually cause you to lose money.
The Pros Of Using Acorns
There are a lot of advantages to using the Acorns app. For one, the application makes investing extremely easy. All you have to do is invest the money, and they do the hard work for you. It doesn’t require much analysis of stocks since they automatically invest your money in a pre-determined portfolio.
The application is also very cheap to use. While it may not be free, all you have to pay is $1 a month to use basic Acorns. If you decide to use Acorns Later, you will spend $2 a month, and if you chose to use Acorns Spend, you will pay $3 a month. This isn’t much considering what the application does for you. Plus, there are no deposit or account minimums to maintain, no commission fees, and no withdrawal penalties. You can also invite friends to use the app and you both get rewarded $5 each.
Furthermore, the application is straightforward in terms of navigation. This is made possible by the clean and user-friendly design.
The best part about this application is that it allows you, the investor, to start small and gradually, consistently build your investment account over time. The round-ups feature enables you to invest money without even having to think about it. Additionally, the application’s automatic recurring investments makes the app unique. One of the most important strategies for growing your investment account is to keep investing money into it. The automatic recurring investments make this a smooth and passive way for you to do this.
Acorns also has a “potential” section of the app that gives you a projection of your future earnings given your current investment portfolio as well as the amount you are investing each month. This is a neat feature because it gives you an idea of what to expect of your investment earnings over the long-run. Lastly, the retirement options they offer are beneficial for investors who want to get a lot out of a single app.
The Cons Of Using Acorns
The main con of using Acorns investing is that it doesn’t allow you to trade. If you are someone looking to get into trading, this wouldn’t be the application for you. The Acorns app is best for long-term investors since it focuses on a long-term investing strategy.
Additionally, while the $1 fee isn’t much in the grand scheme of things, it is a lot if you aren’t investing enough each month. Even if you were to invest $12 a month, $1 would equate to an 8.33% fee each month. This is a lot compared to applications that only charge a 0.25% fee annually.
Lastly, you also can’t invest in individual securities. Since the application automatically allocates your money for you, it gives you less control over what stocks you invest in.
Who Should Use The Acorns App?
Once again, if you are looking to trade, this application isn’t for you. Instead, this application is excellent for the following types of people:
- New investors-it’s easy to start investing
- College students-College students are allowed to use the application for free for the four years they are in college.
- Investors who want to get a lot out of one application and that want to passively invest long-term.
Acorns has three pricing tiers starting from $1/month:
- Lite – $1/month: Acorns Invest (automated investing account)
- Spend – $3/month: Invest, Later, Spend
- Family – $5/month: Invest, Later, Spend, Early
However, there are no transaction or withdrawal fees for Acorn. So, if you decide you need to withdraw your money for whatever reason, you can get it back within a few days without paying a fee.
There are tons of different apps out there that offer a similar micro-investing approach to saving. That big question is how involved you want to be in the process.
Two of the most popular alternatives to Acorns are Robinhood and Stash.
What Is Robinhood?
Robinhood is a better fit for people who want to be more active in choosing their investments. With it, you get much more customization than Acorns while still keeping low fees and commission-free treads.
You can even get in on cryptocurrency trades with it. If you’re looking for a streamlined and straightforward way to get into trading stocks, then be sure to check it out.
What Is Stash?
Stash also puts much more control into your hands. With it, you select stocks and bonds directly. Stash also offers a debit account, fractional shares, suggested investing themes, and roundups. Stash’s account fees are a touch higher than Acorns, but Stash does offer more frequent promotions so it’s a bit of a toss-up in this area.
In terms of long-term micro-investing, Acorns is one of the best applications for the passive version of this. However, some apps don’t charge any fees. One of those applications is SoFi which also allows you to invest in individual stocks. As noted before, if you are someone who doesn’t plan to invest a lot of money each month, Acorns $1 fee could end up not being worth using the app.
Is The Acorns App Worth It?
Using Acorns isn’t necessarily a side-hustle strategy since you aren’t going to be cashing out on your wins often. However, it is still an excellent way to invest your money for the long-run and for retirement. Even if you decide to use other applications for trading or for more control over your investing, Acorns is still worth using because of how easy it is to use. It is a very passive way for you to invest, as long as you set up the round-ups and the recurring investments. Even if you like to day trade, it’s still good to have a long-term strategy as well.
Wrapping Up: Acorns
While there are many investing applications available, what makes Acorns stand out is how easy it is to passively invest through the use of their automatic recurring payments and round-ups. You can also set up a retirement account and get a lot out of just one app, including the cashback Found Money feature. While it isn’t the best for the active day trader or the investor wanting more control over their investments, it is, instead, an excellent way for new investors to set themselves up for the long-run. Now, go start investing!