When it comes to investing in the stock market, one of the very first steps is choosing a brokerage to invest with. In the past, there were not many options and the services were all quite similar. Today, there are dozens of choices available all with very unique offerings. It is easy to become overwhelmed when researching different investing apps.
Rest assured, our goal is to make that process a lot easier. Here's an overview of two investing apps that are very popular among millennial investors.
Robinhood and Acorns are revolutionizing the way the world thinks about investing. While both are unique and different in their own ways, they both strive to achieve one common goal. That is, to break down the barriers of entry to the market by offering cheap and efficient services.
Robinhood is a commission free stock trading app that allows you to trade stocks, ETFs, options and crypto. It is geared towards beginners who want to invest in the simplest way possible. The brokerage is intentionally basic with a fantastic user interface.
Acorns is designed to make investing as easy as possible with the spare change round up model, however they do charge a fee. It's going to cost you from $1 to $5 a month to invest with them. Instead of buying individual stocks, your money is invested in 1 of 5 prebuilt portfolios.
Right off the bat, Acorns and Robinhood have very different investing models. Choosing between the two largely comes down to whether you want to follow an active investing strategy or a more passive one.
In this article, we will be comparing the online broker’s Robinhood vs Acorns by their features so you can assess which is the right one for you.
Robinhood Review 2020: Best Investing App?
||Open A Robinhood Account Here|
Acorns Investing Review 2020: Is It Worth It?
||Sign Up For Acorns|
|Fees||None||$1/Mo To $5/Mo Subscription|
|Assets||Stocks, ETFs, Options, Cryptocurrencie||ETFs (5 Portfolios Only)|
|Individual Stock Investing||Yes||No|
|Round Up Investing||No||Yes|
|Best For||Beginners, Fee Sensitive Investors||Forgetful Investors, Bad Savers|
Forget about imagining it; it’s already here.
The free trading app Robinhood opens doors for beginning investors, or any savvy investors for that matter, looking to get their feet into the game without paying trading commissions.
About ten years ago, two friends and roommates (and aspiring finance wizards) at Stanford University launched Robinhood. Following graduation, they headed to New York City, where they had great success building two finance companies selling trading software to hedge funds.
Along the way, as they gained familiarity with the system in the world of finance, they realized that big Wall Street firms pay effectively nothing to trade stocks, while most Americans must pay up to $10 for every trade.
They made it their mission to find a way to give everyone – yes, even people without significant wealth – access to getting into the financial markets. Two years later, they headed back to Cali and founded Robinhood, a company that leverages technology to encourage everyone to participate in the larger financial system.
Robinhood has had such an impact on the brokerage industry, it is now referred to as the "robinhood effect." By lowering the barriers to entry, millennials and Gen Z members are flooding into the stock market. Almost every brokerage out there has also followed suit by eliminating trading commissions entirely.
You can read our full review of Robinhood here.
It’s startlingly simple to open a Robinhood account right on your smartphone (or online).
Just plug in a few answers, like your contact info and how you’ll fund your account, and in less than an hour, approval notification will be sent to you by Robinhood. Then it’s onto the next step: launching your soon to be stellar investments.
Don’t have the cash to open a sizeable account? No worries. Robinhood doesn’t have a purchase minimum. This means investors can get started right away. Of course, to invest, you’ll need enough to purchase the investment you have your eye on.
But you can start small, then gain momentum as you go along and become more confident and acquire more know-how.
Once you’re ready to go, you won’t be bogged down by account verifications. Robinhood uses instant verification with many major banks. Bank transfers of up to $1,000 are available immediately for investing, and the same goes for profits of up to $1,000 from selling stocks. Deposits larger than $1,000 will take around five business days to process.
Want to invest in a schedule? You can set up automatic deposits out of your bank account weekly, biweekly, monthly or quarterly.
Robinhood gives new users a free stock!
If you sign up with this link, you will get a free stock worth $2.50 to $200.
You just have to open and fund a brokerage account with any amount of money. The free stock is based on a lottery system. It could be a higher or lower value stock, but it will be between $2.50 and $200.
How, you may ask, does Robinhood make any money?
Good question. According to the site, they generate revenue from Robinhood Gold, its margin trading service, which starts at $5 a month; interest from customer cash and stocks, much like a bank collects interest on cash deposits; and rebates from market makers and trading venues
Robinhood Gold gives investors who can tolerate more risk the ability to trade on margin, which is also known as borrowed money. You must opt into the service, which has a flat monthly fee based on margin (Robinhood refers to this as buying power) as well as your account size.
If you’re new to investing and wary of risk, we say skip this option for now until you’re familiar with all the ins-and-outs.
There are a few other ways that Robinhood makes money, but it is a little bit more complicated. You can rest easy knowing that they are making money by providing this useful service to investors. They are not operating a charity. In fact, Robinhood itself is now worth around $7.6 billion!
This feature is currently being rolled out to select users, but will be available to everyone at some point.
Robinhood clients can buy fractional shares of companies that make it easier to afford some of the higher-priced stocks.
An example of this may be Amazon. Amazon is currently trading at over $2,000 per share. If a client funds his or her account with only $1,000 and wants to buy Amazon, they won’t be able to do this on traditional brokerage accounts.
On Robinhood, those who have the fractional shares feature can now buy shares of stocks like Amazon in $1 increments. This makes it easier to have a well diversified portfolio with a lesser amount of money. This feature makes them very competitive with M1 Finance who also offers fractional investing.
With Robinhood, you're not just limited to stocks and ETFs. You also have the ability to buy and trade options contracts as well as cryptocurrencies like Bitcoin and Ethereum. This gives investors greater ability to diversify their portfolio and hedge against declines in the stock market.
Historically, these investment vehicles have been more volatile than the stock market and investors should do significant research before deciding to pursue more advanced investing strategies.
Robinhood offers a special feature for clients who open brokerage accounts.
Any money sitting idle earns a decent APY. This makes the Robinhood account double as a savings account, helping to bolster annual returns. This is a great option for your emergency fund which you want to keep in a liquid online savings account.
For those looking for a bit more from Robinhood, they offer a service called Robinhood Gold for just $5 per month.
You do not need to use the margin feature if you choose to subscribe to Gold. If you take on margin, you will pay monthly based on how much they loan you.
Robinhood sources all of its important documents and tax forms directly on its website and app. This goes for stocks, options, crypto, ETFs, all of the important forms and documents you need will be at your fingertips.
However, it is important to understand that no paper tax forms or statements will be mailed to you. Everything is handled electronically in order to save money.
Deposits can be made directly on the mobile app or through Robinhood’s website. You can transfer up to $50,000 per business day into the normal Robinhood account. Robinhood allows for $1,000 of instant deposits and after that will take 3-5 business days to process requests. There are no extra charges or fees for this.
This means that you can start investing your first $1,000 immediately before the bank transfer is complete!
It is only fair to add a section about Robinhood’s application due to its simple and clean nature.
From personal experience, Robinhood’s app makes it perfect for the beginner investor. Robinhood has made it the goal to lower the barriers associated with investing and make it easy for everyone. Their user friendly platform does exactly that.
That being said, intermediate to advanced traders may find that the trading platform is very limited. It does not have sophisticated research tools and data. For that, we recommend checking out Webull.
Robinhood’s customer service number can be found on their website and operates during market hours (9:30 AM - 4:00 PM EST Monday - Friday) when the market is open. Other than that, Robinhood’s extensive FAQ page is the most convenient and easiest way for clients’ questions to be answered.
This is one area where they are lacking. Robinhood does not have the best customer support, as it is very costly.
If you open a regular taxable brokerage account, there are no fees to invest or place trades as well as no minimums.
Starting at $5 per month, Robinhood Gold offers access to research reports, margin trading, level II data, and making larger deposits with quicker access to funds.
Margin is only available in Robinhood Gold and $1,000 of it is supplied monthly with the $5 fee. To borrow more, clients must pay 5% yearly interest. This interest is calculated daily and contingent on the end of the day margin used.
This interest is accumulated every day and billed at the end of the month. This bill can be found in the Gold Billing section of the Account overview.
Critics of the Robinhood app say it’s not a full-service venue. For example, there aren’t advanced trading tools, ways to gain more knowledge about investing or a full range of investment options. You won’t be able to open an IRA, or trade mutual funds or bonds.
Many online stock apps offer up-to-the-minute education and valuable advice in much the same way a stockbroker would do. So do your homework ahead of time. The most successful Robinhood users do the research and are clear in where they want their money invested. Trades can be executed in a flash, as Robinhood handles market orders, stop orders, limit orders and stop-limit orders.
But enhanced info for users is in the works at Robinhood, as they now offer analyst ratings from an independent investment research company. You can also scour lists of the top movers and earnings calendars.
Want to know how another fledgling (or more advanced) investors are doing? You can take a peek at the most popular purchases, as well as how many got in on the deal and how much each investor paid per individual share.
Acorns aims to look out for the financial best interests of the up and coming generations of investors, harnessing the strength and empowering step of micro-investing.
Acorns invests your spare change into an expert built stock portfolio to help clients grow their wealth. Depending on the client's investment style and time horizon, they can choose between 1 of 5 different portfolios of stocks and bonds.
How much does it cost to sign on? There’s a monthly fee of just $1 for Acorns Core, the basic platform. Other offerings are slightly more each month.
Acorns Core facilitates micro-investing of as little as one cent. Buy something for 99 cents, and Acorns will round it up to $1, with that extra coin tossed into your investment account. This spare change comes from any purchases made from a linked debit or credit card or even your PayPal wallet.
Acorns is an excellent tool for those who are bad at saving money or forgetful. It runs behind the scenes 24/7, automatically rounding up and investing. You can accelerate this investing tool by putting a multiplier on your round up or by making additional recurring or one time deposits.
Acorns automatically invests money into different ETFs (Exchange Traded Funds), to create well-diversified portfolios for investors. These different ETFs track various assets including stocks, bonds, and real estate. More money is allocated to different sectors and asset classes contingent on the client's risk tolerance.
There are just 5 different portfolios ranging from conservative to aggressive. There are no individual stocks.
The portfolios were developed with the help of the Nobel Price winning economist, Dr. Harry Markowitz. The underlying distributors of these ETFs are reliable companies such as Vanguard and BlackRock.
Acorns will make automatic investments daily, weekly, and even monthly. There are many different settings and features that allow clients to fund their portfolios. One of the more unique ways is through Acorns Roundup.
This service rounds-up to the next dollar on any purchases made and automatically invests the money into your well-diversified portfolio of choice. This allows clients to be continuously investing as they spend which will help put them on track for their future.
If you're not already in the habit of saving and investing on a regular basis, an automatic system like this might be exactly what you need in order to get started.
Acorns offers customer service through its “Acorns Help” section on its website and app. Here, you can submit a question, provide a phone number, and customer support will get back to you as soon as the report can be processed.
Acorns’ application is clean and easy-to-use. Clients can leverage its simplicity to easily navigate their portfolios and the different features and setting that Acorns allows.
The Acorns Grow section of their website and app provides up-to-date news and articles surrounding different ways to make money and providing unbiased articles relating to the markets. This is a great educational resource for new investors.
Found Money partners available through Acorns allow clients to automatically earn bonus investment cash by spending at certain businesses. Spend, save, and invest. A simple process that Acorns is striving for through this feature.
The list of found money partners for Acorns is quite impressive. It also works with companies many of us use frequently, not obscure ones that nobody has heard of.
This list includes:
Think: Christmas shopping! With Acorns, it is possible to invest found money while making purchases you would have been ordinarily making. It's like a cash back rewards program, but even better because that money is automatically put to work in your portfolio.
For those looking to kick things up a notch, the Acorns Round Up multiplier allows you to accelerate your spare change round up. If you do the standard 1x, it will just be the spare change from each purchase. If you put a multiplier on it, it will be a multiple of that amount!
For example, you can round up by 2x, 3x or even 10x!
On a $0.50 round up from your morning coffee, that could be accelerated to as much as $5.
If you're interested in simplifying your financial life even further, Acorns Spend might be useful for you. Spend is a checking account and debit card that easily integrate into the Acorns system and can allow you to set up direct deposit into Acorns and run your financial life on the platform.
With Spend, you'll also have access to over 55,000 fee-free ATMs nationwide and around the world, gain access to up to 10% bonus investments when you use the card, and your account will be FDIC insured up to $250,000.
Looking to set your kids up for financial success? Acorns Early is a custodial account available for those looking to plan for the future of their children.
You have to be 18 or older to have a brokerage account, but you can open a custodial account to invest on behalf of your child. This is also one of the ways you can invest as a minor or teen. Once the minor is of age, the account can be transferred to them.
If you have more than one kid, you can have multiple accounts too!
Lastly, one more feature to share is the retirement accounts. These are referred to as Acorns Later.
Acorns offers the following retirement accounts:
You can set up recurring contributions, or invest your spare change. Acorns automatically follows a strategy known as dollar cost averaging, which is ideal for retirement investing. Rather than putting all of your money into the market at once, you do it slowly over time.
When you create an Acorns account, not only are you preparing for your future, you're also preparing for the future of the planet. Through a partnership with an organization called One Tree Planted, Acorns has committed to plant a tree for every new user that signs up for any of their plans.
In 2019 alone, Acorns planted 178,000 trees, bringing their total to over 438,000 trees planted! So if you're a socially-conscious investor, Acorns is looking out for you.
Acorns now offers three services which are Lite, Personal, and Family.
Lite is $1 per month and comes only with the taxable brokerage account. No retirement or checking.
Personal is $3 per month and comes with the taxable brokerage account as well as the retirement and checking accounts.
Family is $5 per month and comes with the taxable brokerage account, retirement, and checking accounts as well as the custodial accounts.
Both Robinhood and Acorns offer cutting-edge opportunities to get into the game of investing.Robinhood puts you in the driver seat. It is 100% up to you to decide what you invest in. There are no prebuilt portfolios and no investment guidance of any kind. That being said, Robinhood is completely free while Acorns charges a small monthly fee of $1 to $5 depending on the plan you choose. While this may not sound like a lot, these fees do add up, especially for small accounts.
Consider this... If you had just $100 invested with Acorns, that $1 fee would add up to $12 per year. That's a 12% fee just for managing your money! Most robo-advisors charge an asset management fee of less than 0.50% for comparison. The more you invest with Acorns, the lower the percentage fee becomes.Robinhood does not offer retirement accounts, while Acorns offers them through Acorns Later. There are also ways to accelerate your investments through Acorns Earn, similar to a cash back program. Robinhood does not offer anything like this. Acorns automatically rounds up your purchases and invests the spare change. There is no guesswork involved, and it is impossible to forget about it.
Both platforms offer free dividend reinvestment for investors. That means that when investments you own distribute dividends, they can be immediately invested back into buying more shares of the stock. By doing this, you're able to minimize the cash drag on your portfolio and maximize your compound interest earning potential.
With Robinhood, it is up to you to budget your money and contribute to your account on a weekly or monthly basis. If you have trouble budgeting and saving money, Acorns was designed for you.
It comes down to whether you want to be in charge or not. If you want to build a portfolio from scratch and pay zero fees, Robinhood allows you to do exactly that. If you are looking for some hand-holding for a small fee, or you are bad at saving money, Acorns was designed for you.