Acorns Review 2022: Acorns provides a straightforward inexpensive, low-cost option for passive investing which is ideal for investors who are just starting out. The app’s design and user-friendly interface are specifically designed for beginners, the flat-fee model is higher than percentage-based fees for people who are just beginning to learn (competitor Ellevest has the same issue).
This is all I can say. Acorns could be best used by those who are in dire need of a push to save some money and not those with weak balances searching for the least expensive alternative.
Acorns Review 2022
Who should choose Acorns?
The automated advisor Acorns features work best for those who are drawn by the platform’s “round-up” saving claim to fame purchases made through connected accounts get rounded by the closest dollar and the remainder is then saved into an investment accounts.
If you have spent $4.50 on a latte with the linked credit card for instance, an extra $0.50 will be charged to your account and then transferred to your savings account. If you’ve enjoyed the benefits of this gimmick for saving money it’s possible that you’ll want to invest in retirement savings using Acorns also.
Yet, other robo-advisors can provide superior services at less cost. Only those who think they’ll get enticed to spend more money with Acorns must to apply.
How Acorns Work
Acorns provides its customers with five primary savings and investment products: Invest, Later, Spend, Found Money and Early.
- Acorns invest. This is a tax-deductible investment account which puts your funds in exchange traded fund ( ETFs) that are selected for you according to your risk tolerance and financial objectives. You can fund your account by round-ups, regular deposits or even on-demand deposit. Setting up recurring contributions–Acorns lets users contribute as little as $5 at a time–is your best bet, taking advantage of dollar-cost averaging to build your portfolio.
- Acorns Later. This is a tax-advantaged personal retirement plan ( IRA). As with Acorns Invest, your portfolio is comprised of ETFs. We discovered it difficult to understand the Invest/Later name a bit confusing, as it’s not as though the Acorns Invest funds are meant to be used for trading on the day or in a hurry. Every investment is designed intended for long-term use regardless of what the objective.
- Acorns Spend. A checking account which comes with an ATM card. It is free of numerous fees, including minimum balance charges. Additionally, it reimburses ATM charges. Another option, known as Smart Deposit, allows you to automatically transfer money from direct deposits in your Spend account to other accounts, including Invest.
- The Acorns Funded Money. An online marketplace that gives a small portion of the purchase price back at hundreds of retailers such as Walmart. It is the amount of cash that you earn through Found Money is placed in your Acorns Invest account.
- Acorns Early. Available to those paying the most expensive Acorns price, this account is a UTMA/UGMA-based account, which allows parents to create the accounts of their kids, without having to deal with paperwork.
How Acorns manages your money
Similar to other robo-advisors Acorns provides its customers with an array of low-cost ETFs that can be adapted to their personal risk tolerance and objectives in relation to how they respond to a few questions.
You’ll be asked about your years of age, net worth as well as the time you’ll need access to the funds. Acorns chooses your portfolio from a list of more than 25 ETFs. Forbes Advisor signed up with the profile of an upper-middle-class, young professional with a long-term investment timeframe. Acorns returned by introducing their “Aggressive Portfolio” that diversified:
- 55% of the funds go to domestic large firms through Vanguard S&P 500 (VOO)
- 30% of international stocks through the iShares Core MSCI International Stock (IXUS)
- 10 percent or more the mid-cap stock market through IShares Core S&P 500 Mid-Cap (IJH)
- 5 up to smaller-cap stock through the iShares Core S&P 500 Small-Cap (IJR)
Contrary to other rivals like Wealthfront unlike other competitors like Wealthfront, our Acorns portfolio comprised only four ETFs that cost little or nothing, and each with a tiny cost ratios–the operating costs paid by the funds that you put into. This method of investing helps your investments become easier to comprehend, without sacrificing the returns.
However an investment portfolio comprised entirely of stocks even for a younger person, might be too risky. It is possible to switch to a different portfolio but be cautious: Your custom-designed portfolio is based on the questionnaire, and when you go against the grain, you may be putting yourself in a position of less risk than excessive.
If you’re interested, consider opting to go with Acorns their newly launched socially responsible investment ( SRI) portfolio. This is the standard procedure for robo-advisors, particularly as younger investors have expressed an interest in these funds. Wall Street loves these funds because they charge higher fees. However, most of the companies you’ll end up investing in do not pass an ordinary SRI test.
For example, Acorns uses the iShares ESG Aware MSCI USA (ESGU) which comes with an 0.15 expense ratio of 1 that is five times higher than that of the Vanguard S&P 500 ETF (VOO) which Acorns employs in the fund that is not a SRI.
For a better idea of how much, take a look at this: If you start an account for $1,000 and then contribute an additional $300 per month for 30 years, with 7 percent return that’s nearly $10,000 in fees when using ESGU in comparison to $2100 when you use VOO.
You might be fine with cutting off these funds for the sake of responsibly investing for the social good. However, you need to consider what it really is. The top investments for ESGU are Apple, Alphabet (Google) and Facebook each of which have been involved in unethical social norms (from allegations of unsafe working conditions to taking information to encouraging children’s porn). Perhaps you’d be better off going to the more affordable ETF and donating the profits to an organization of your choice.
Fees and Costs of Acorns
Acorns claims to be a low-cost option, however it really depends on the method you use to measure its charges. Two Acorns membership levels that both charge monthly flat charges:
- Personal: $3 per month. You get access to Invest, Found Money, Later and even spend.
- Family: $5 per month. In addition to all the benefits of the Personal level, Family grants access to Early, Acorns’ UTMA/UGMA investment accounts. They are basically an investment account for children.
Although the fees may seem easy to manage, they’re really costly on an annual percentage basis, as is the case with various other financial apps and robo-advisors calculate their charges. People who are young and just beginning out — the kinds of investors Acorns intends to draw–will pay higher fees than other robos.
Imagine opening a brand new investment account for just $100. If you chose Betterment which has an annual fee of 0.25 percent for its base Betterment Digital offering, your annual expense will be $0.25. If you had your own Acorns personal account with a Personal Account, then the cost for one year for the $100 investment is 36 dollars.
Naturally, the charges decrease in percentage of your account as you make more investments, however, it could take a long time.
For expenses for investing expenses, they range between 0.03 percent (VOO) up to 0.25 percent (two ESG funds). What you pay for when you invest in Early, Invest or later.
A quick note about Acorns Spend The checking account is supposedly free however, it’s not ideal that you must pay $36 per year to gain access since certain robots, such as Betterment offer access without these restrictions. However, you can consider the checking account an extra to be able to access the $3 level and in that case, the cost is less important to you.
The best method to invest is to not delay and invest now. Acorns strives to make it as simple as it can be. With no minimum balance and no minimum balance, you can begin recurring contributions quickly. You can also add up the purchases you make in linked accounts to earn cash in the market even if it’s not your intention to consider yourself an investor.
A simple interface allows you to set your savings quite easy and you’ll never be burdened by an overwhelming range of ETFs. If you opt for an existing account, minus ESG money, then you’ll be paying only a small amount of charges. If you’re in need of an extra push to get started, Acorns’ robo service is a great option that makes sense.
Acorns and their disadvantages
There are a few important disadvantages of Acorns. The most prominent is the tiered-fee system which is too costly for new investors with small balances. A monthly payment of $36 with just a few hundred dollars invested is not a good deal. While many Robo-advisors require minimum account requirements in the range of $1,000 or $500. Betterment offers a zero-minimum fee alternative that is lower in cost.
It’s a challenge to come up with $3 for access to the checking account isn’t an easy decision to make, especially since there’s no way to speak with a real-world financial consultant.
Some parents might prefer having access to a U.S. UTMA or U.S. account, however anyone who is who is saving for college might prefer the option of 529-type accounts. Additionally, there are no tax-loss harvesting feature which could help you when you’ve made more money in your account and you need to cover the tax consequences of selling your winners.