When it comes to investing in the stock market, the very first step is choosing a brokerage to trust with your money. In the past, there were not many options and the services were all quite similar. Today, there are dozens of choices available and all have very unique offerings.
Unfortunately, it is easy to get 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.
If you prefer watching instead, check out our video on this topic below!
Robinhood is a commission-free stock trading app that allows you to trade stocks, ETFs, options, and crypto. It is geared toward 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-Ups model. This is particularly effective for forgetful investors or people who don't want to actively think about their investments. 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 brokers, Robinhood and Acorns, by their features so you can assess which is the right one for you.
|Fees||None||$3/Mo or $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|
|1 Free Fractional Share Worth $5 To $200, 18 Companies To Choose From||Download|
|Win Up To 12 Free Stocks Worth Up To $3,000 Each||Download|
|$10 Bonus (When You Deposit $100+)||Download|
|Win Up To 5 Free Stocks Worth $3 To $2,000 Each||Download|
|Free $10 Bonus When You Invest $5+||Download|
The trading app Robinhood opens the doors for investors, experienced and novice, who are looking to get their feet into investing without paying commissions.
About ten years ago, two friends at Stanford University launched Robinhood. 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 the financial markets. Two years later, they headed back to California and founded Robinhood, a company that leverages technology and encourages 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 Zers are flooding the stock market. Thanks to Robinhood, almost every brokerage has now eliminated trading commissions entirely.
You can read our full review of Robinhood here.
Opening a Robinhood account is incredibly simple. Just download the app and answer a few questions.
In less than an hour, an approval notification will be sent to you by Robinhood. Then it’s onto the next step: launching your soon-to-be stellar investments.
Are you worried that you don’t have the cash to open a sizeable account? No worries. Robinhood doesn’t have a minimum balance. This means investors can get started right away.
You can start small and gain momentum as you go along, becoming more confident with each trade.
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 on 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 the button below, you will get a free stock worth anywhere from $2.50 to $225.
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 $225.
Robinhood offers zero commissions on stocks, options, ETFs, and crypto. This has led to countless other brokerages following suit and eliminating pesky trading commissions.
Robinhood clients can buy fractional shares of companies. This makes it easier to afford some of the higher-priced stocks.
For example, let's take a look at Amazon. Amazon is currently trading at over $3,000 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, however, users 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.
Many platforms offer individuals the chance to invest in a retirement account. And that is certainly true with Robinhood. However, there is an added perk with their IRA offering.
Robinhood offers you an extra 1% on every dollar you contribute to your IRA. This may not sounds like a lot, but it can actually turn into over $26,000 when you reach retirement.
A match is actually quite common with 401k accounts, but not with an IRA.
Robinhood offers a special feature for clients who open brokerage accounts. This is their cash management account.
Any money sitting idle earns a decent APY with Robinhood. This makes the Robinhood account double as a savings account which helps bolster annual returns. This is a great option for your emergency fund which you want to keep in a liquid online savings account.
Additionally, it makes for faster transfers into your Robinhood account. You won't have to wait 3-5 days for your funds to settle if you're holding them in your Cash Management account.
For those looking for a bit more from Robinhood, a service called Robinhood Gold is available for just $5 per month.
This includes the following:
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 money you have available to you.
Robinhood sources all of its important documents and tax forms directly on its website and app. This goes for stocks, options, crypto, and 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!
While many online brokerages are seriously lacking in their customer support, Robinhood has made a few recent changes to help customer find the answers they are looking for. First, they have an extensive help center with hundreds of questions and answers. If you cannot find the answer to your question, you can also request an email or phone call within the app. When you request an email, you will generally receive an answer within 1 business day. With a phone call request, you can expect a phone call within 30 minutes generally.
Learn more about Robinhood Customer Support!
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, lower interest rate with margin trading, level II data, and making larger deposits with quicker access to funds.
With Robinhood Gold, members get the first $1,000 of margin with the $5 fee. To borrow more, clients must pay 7.25% yearly interest. This interest is calculated daily and contingent on the end-of-the-day margin used. Without the Gold subscription, the interest rate is 11.25%.
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 many 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. So do your homework ahead of time. The most successful Robinhood users do the research and are clear on 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 other new (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 generation of investors. This is done by harnessing the strength 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 small monthly fee of just $3 for Acorns Personal, the basic platform. There is also a family plan which costs slightly more each month.
Acorns Personal 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 penny 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.
Read our in-depth Acorns Review here.
Acorns automatically invests your 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 Prize-winning economist, Dr. Harry Markowitz. The underlying distributors of these ETFs are reliable companies such as Vanguard and BlackRock.
This gives investors a significant amount of confidence that their money is being managed well. In some ways, Acorns is a hybrid between an app like Robinhood where you manage your investments yourself and working with a financial advisor.
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 your purchase up to the next dollar 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 regularly, an automatic system like this might be exactly what you need in order to get started.
Investors who don't want to devote any additional brain space to investing will come to appreciate all of the automation potential that Acorns offers.
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:
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. On top of that, they also offer a browser extension that automatically scans for Found Money while you shop.
According to Acorns, the average Found Money user ends up saving around $3 per month which covers the cost of the cheapest plan.
For those looking to kick things up a notch, the Acorns Round-Ups 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 integrates 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 planting 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.
In addition, Acorns has also released Sustainable investing. This allows investors to invest in socially- and environmentally-conscious companies. This ETF is powered by iShares by BlackRock and is brand new to the platform.
Acorns offers two different plans: Personal, and Family.
Personal is $3 per month and comes with a 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's 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. By paying this fee, you gain access to significant automation and can essentially set it and forget it with your investments.
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 cashback 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.
Both Acorns and Robinhood have a $0 trading commission. With Robinhood, you can buy individual stocks or ETFs. Acorns, on the other hand, gives you the option to choose from 5 portfolios based on your risk tolerance. These portfolios are curated and monitored by dozens of financial experts.
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.