Acorns Review 2020 – Invest Spare Change Automatically!

Acorns is a mobile app that combines automatic saving with investment management. It links to your credit cards and debit cards so that each time you buy something the “loose change” is rounded up to the nearest dollar and invested on your behalf.

The investment account is managed by a computer algorithm similar to a robo-advisor. And the whole process from start to finish requires no effort on the part of users (after signing up!).

It is free for college students for up to 4 years, and costs just $1 per month for standard accounts or $2 per month for retirement accounts – unless you have a balance of $5,000 or more in which case an annual 0.25% management fee applies.

Acorns App

Is Acorns Right For You?

College Students

As long as you have a .edu email address, Acorns is 100% free to use for up to 4 years.

It is an ideal way to squirrel away a few nuts without having to think about where to invest or how to invest, especially at a time when money may already be tight.

Fee-Savvy Investors

It’s hard to argue that $1 per month is particularly expensive when you factor in all the Acorns app can do: save and invest automatically on your behalf.

Nevertheless, if you have just $20 invested and $12 disappears over the course of the year to management fees, it’s obviously a bad deal!

But once you have a few thousand dollars invested the fees become very reasonable, and especially so when you have $5,000 or more at which time the flat monthly fee transitions to an annual percentage fee on assets.

Hands-Off Investors

Investors who want to take control over their money and how it is invested would do better a brokerage firm like thinkorswim or tastyworks, which hands responsibility for investment selection to clients.

But for hands-off investors who prefer to avoid the hassle of picking stocks or ETFs, Acorns is a match.

Every time you buy something, whether at a grocery store or gas station, the spare change is swept into an investment account and allocated to a diverse portfolio of low cost exchange-traded funds.

Acorns Features

➤ Free Guide: 5 Ways To Automate Your Retirement

Acorns Fees

Acorns pricing is rock bottom. For taxable accounts, a buck monthly is hard to beat. And for retirement accounts, called Acorns Later, two bucks a month is charged up to the first $5,000.

Account balances of $5,000 and above are subject to a 0.25% fee, which is very much line with the management fees applied by Betterment, Ellevest, and other top robo-advisors.

And Acorns earns high marks for providing its service free to college students who have a .edu email address.

Acorns Vs Stash: Fees

With respect to fees, Acorns is more attractive than its competitor Stash, which also charges $1 monthly but doesn’t automate and manage investments.

If you compare Acorns vs Robinhood, which charges no commissions then Acorns loses out on price. But Robinhood won’t automate saving money and requires clients to pick stocks so it’s more of an apples-to-oranges comparison.

Open an Acorns Account

Acorns Investment Strategy

Acorns investment strategy is rooted in Nobel-prize winning academic research, called Modern Portfolio Theory.

Dr. Harry Markowitz, the father of Modern Portfolio Theory, and Nobel prize winner is on the Acorns board.

What Is Modern Portfolio Theory?

The big idea behind Modern Portfolio Theory is to diversify an investment portfolio across asset classes in order to maximize returns for a given level of risk.

Although everyone would love to “beat the market”, few have the skill, luck or timing needed to do so consistently. Investing in a diverse group of exchange-traded funds is widely accepted as a smart way to invest for non-professional investors.

Low-cost iShares and Vanguard exchange-traded funds up to seven asset classes are available, including:

• Corporate bonds
• Government bonds
• Real estate
• Large-cap stocks
• Small-cap stocks
• Emerging markets
• International Large-cap stocks

How Acorns Works

Acorns links to your bank account and sweeps ‘rounded-up’ cash amounts from transactions into an investment account, which is invested in a diversified portfolio aligned with your risk tolerance and financial goals.

Sophisticated investors can invest a lump-sum amount as well as set up recurring deposits on a regular schedule.

Step-by-Step

First begin by connecting your bank checking account to what’s called your Round-up account.

Next, you’ll be prompted to set up an investment account that has one of the following financial goals:

• General
• Long-term investment
• Short-term investment
• Children
• Major purchase

Your investment account will be invested according to the most appropriate risk level for your objectives. It will fall into the following categories:

• Aggressive
• Moderately aggressive
• Moderate
• Moderately conservative
• Conservative

Once you’re setup is complete, you can start using Acorns.

Acorns Example

Let’s say you pay for a coffee that costs $3.24, the rounded-up amount, $0.76, is added to what’s called your Round-Up balance.

Once your Round-Up balance has at least $5 in it, the money will be swept from your bank account into your Acorns investment account.

You can customize which transactions you want selected for your Round-Up account or choose the automatic setting which counts all eligible transactions.

It’s also possible to set up recurring deposits on a regular schedule each day, week or month.

And if you prefer, you can invest a lump sum amount of $20,000 or $30,000 too.

Acorns Pros and Cons

Acorns Fees & Investment Minimums

Acorns has low expense ratios, low management fees on amounts over $5,000 and hidden fees are not a concern when transferring or closing an account.

Acorns Account Types

A drawback of Acorns is that only taxable accounts are supported at this time. No IRA or 401(k) retirement accounts are supported.

Acorns Tax Strategy

While free rebalancing is supported, tax-loss harvesting is not a feature Acorns provides. Investors who care about automated tax-loss harvesting should consider other alternatives, such as Wealthfront.

Is Acorns Safe?

Data transfers are encrypted to ensure your money is protected using the highest security protocols.

Acorns Review Summary

Acorns makes it easy to save and invest automatically. Spare change from ordinary transactions can add up to produce a handsome nest-egg.

The low management fees, especially on large account balances, low investment minimums, top notch education in-app, and free account balancing combine to make Acorns one of the best investment apps period.

If you struggle to save, Acorns offers a way to build an investment portfolio effortlessly and almost invisibly.

Get Excited By Acorns!