With the rise of robo-advisors, it seems that the days of calling up your stock broker to place trades are long gone.
With today’s technology, you can take an in-depth online questionnaire and have an investment plan laid out for you in minutes. This is, at least, the goal of mondern day robo-advisors like Acorns and Betterment. Both have the average investor in mind and offer a variety of products with reasonable fees.
In this article, we will be comparing the services and offerings of Acorns vs Betterment.
Betterment Review 2021: Is This The Best Robo Advisor?
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Acorns Investing Review 2021: Is It Worth It?
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Have you ever thought that you really need to start saving money, but struggle to be consistent? Have you ever wondered what else you could be doing with the spare change sitting in the cupholders of your car? This is what Acorns was designed for.
Acorns started as a company that helped you invest your loose change wisely.
The platform is built on the idea of rounding up your purchases and investing the rest. For example, if you spent $2.50 on a cup of coffee, you could set up Acorns to take that extra $0.50 and invest it.
You can read our full review of Acorns here.
Acorns, like other investment apps, has different investment options.
At $1 per month you can direct your spare change automatically into an investment portfolio through the feature Acorns Invest and earn cash back through Acorns Found Money.
In addition, you have the opportunity to earn bonus investments from over 350 Found Money partners. You don't have access to the Acorns Spend checking account/debit card or the retirement account.
With Acorns Personal, you can unlock most of the other features that Acorns has to offer in addition to receiving the same benefits as Acorns Lite. At $3 a month, Acorns says this is their most popular subscription.
With this plan, you get the investment account, retirement account and the checking account.
With this platform, you'll get all of the bells and whistles that Acorns offers to their users. This includes all of the features of the Acorns Personal plan as well as Acorns Early.
With Acorns Early, you can start planning for future generations and investing on their behalf.
Acorns Invest rounds up each of your purchases to the nearest dollar and then invests that extra change into the portfolio that you choose.
For example, let’s say you just filled up with gas and the total came to $25.56. That remaining $0.44, before you get to $26.00, is charged to your card and is invested into your chosen portfolio. This is called Round-Ups.
Those Round-Ups are then invested into portfolios ranging from conservative to aggressive with a subsequent breakdowns of large cap stocks, small cap stocks, international stocks, real estate stocks, government bonds, and corporate bonds.
When it comes to investing in the stock market, bonds are more conservative and stocks are more aggressive. If you want more risk/reward, you go with a more aggressive portfolio.
There are no individual stocks with Acorns or Betterment.
Acorns has developed relationships with over 350 brands that will reward you for shopping with them.
These are popular brands that you likely already shop with like Apple, Airbnb, and Walmart.
Similar to cash back, these companies will return some of the money you spend directly into your investment accounts. Through the Acorns app, you will be able to see some of the cash back deals that merchants are offering.
For example, if Dollar Shave Club is offering a 5% investment if you purchase an item from their product line, they will take 5% of your purchase and give it back to you through Round-Ups.
This is cash back directly to your investment portfolio.
Based on your age, goals, risk tolerance, and lifestyle, Acorns will help you pick which IRA (Roth, Traditional, or SEP) is right for you.
There are a few drawbacks to consider however before you jump in with both feet. Unlike Acorns Invest, which rounds up your spare change, contributions to Acorns Later can only be made by one-time or recurring deposits.
There is a one-time minimum deposit of $5 and the monthly fee of $3 that also need to be taken into consideration. Depending on how much money you have in your investment account, $3 per month can be a lot of money.
As with any robo-advisor, your portfolio will automatically adjust with time as you get closer to your goal retirement age.
By subscribing to the Acorns Family plan, you'll have access to quickly setting up investment accounts for the next generation. These are custodial accounts that allow you to set aside money for your kids that will be invested and grow over time.
Once your kids are old enough, you can transfer the accounts to them or use the funds to provide their support or education funding. You'll also receive access to the full Acorns financial wellness system to allow you and your family to learn and build good habits together.
One of the keys to investing is starting early and if Acorns can help to build this habit in your kids early on, it may be a very valuable investment.
Betterment is a robo-advisor that allows automated and goal-inspired investments for everyday individuals.
The Betterment platform allows users to invest in portfolios of passive index-tracking equity and fixed-income ETFs. Betterment gives users access to tax advantaged savings accounts such as traditional and Roth IRAs.
One of the main differences between Betterment and Acorns is with Betterment Premium you have unlimited access to human financial planners.
Check out our full review on Betterment for more information.
Betterment offers two plans called Digital and Premium. Rather than charging a fixed monthly cost, they charge a percentage of assets under management ranging from 0.25% to 0.40% depending on the plan.
Digital (0.25% Asset Management Fee)
Premium (0.40% Asset Management Fee)
Betterment prides itself on helping its users invest toward specific goals.
When you set up your Betterment account, you can specify what goals you are shooting for. Maybe it’s a dream house, a tropical vacation, or a lump of cash to pay for your child’s education.
Whatever the goal, Betterment can help design the correct portfolio for you. Betterment utilizes ETFs which represent about 12 asset classes set up to match the varying levels of risk tolerance for your specific goals. They use funds from well known companies like Vanguard and BlackRock.
Users can also be more hands on with the ‘flexible portfolios’ approach which lets them modify the exact amount that is allocated to particular ETFs.
You can also easily set up separate sub-accounts for each goal to simply keep tabs on your progress and keep your motivation high.
One of the best features within long-term savings through Betterment is the ability to project how much you should expect to spend in retirement and set up automatic withdrawals at your desired frequency. While it is free to create a retirement plan through Betterment, be aware that funds are charged a management fee.
As with other robo-advisors, your account allocations will rebalance each time your portfolio strays from its original goal, making sure your financial hopes and dreams are always on track. When your allocations are rebalanced, the company will also purchase fractional shares so you rest assured that every dollar is invested.
Like Acorns, Betterment offers a mobile-first checking account, meaning there are no brick and mortar locations that you can access. At this time, no credit cards either.
Because of that, there is no reason to charge any account fees, so you can utilize Betterment’s checking account free of charge. In addition, every ATM or foreign transaction fee that you incur will be reimbursed and each account is insured by the FDIC up to $250,000.
Betterment Cash Reserve is a place for you to store your cash that pays you 6x the interest of the national average savings account.
One of the key benefits of investing with Betterment is taking advantage of tax loss harvesting. This feature is included with all Betterment accounts, however the benefit does not apply to retirement accounts that are tax exempt.
Betterment will automatically sell losing positions for a small loss and purchase back near identical assets to recognize capital losses. These losses can then be used to offset capital gains from investments, such as dividends. This is something that should be taken into consideration when deciding between Acorns vs Betterment.
Both investment apps are attractive options for investors that want to be hands-off when saving and investing in the short or long-term. However, those who are looking to trade individual stocks will have to look elsewhere.
At the end of the day, it comes down to the individual features you are looking for. We do prefer the fee structure of Betterment as it is fair to all investors regardless of account size. The Acorns fee structure is higher for those who have a low balance in their account.