Acorns Review 2021 – Forbes Advisor - Forbes

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Updated: Oct 7, 2021, 1:13pm
Acorns offers a simple, low-cost passive investing solution that’s well-suited to new investors. While the app’s user interface and educational content is designed for beginners, its flat-fee structure is actually somewhat more expensive than percentage-based fees for those who are just starting out (competitor Ellevest has a similar problem). That’s all to say, Acorns is perhaps best utilized by folks most in need of a nudge to save a bit more, not beginners with low balances looking for the cheapest option.
The robo-advisor features of Acorns make the most sense for someone who is drawn to the platform’s “round-up” savings claim-to-fame: Purchases made in linked accounts are rounded up to the nearest dollar, and the balance is saved in an investment account.
If you spent $4.50 on a latte on a linked credit card, for instance, an additional $0.50 would be charged to your card and added to your investment account. If you’ve experienced joy with this pro-savings gimmick, you may be inclined to save for retirement with Acorns as well.
Still, competing robo-advisors provide more robust services at a lower cost. Only users who think they’ll be enticed to save more with Acorns need apply.
Acorns offers users five main saving and investing products: Invest, Later, Spend, Found Money and Early.
Like most other robo-advisors, Acorns gives its customers a diversified portfolio of low-cost ETFs suited to their risk tolerance and goals, based on how they answer a handful of questions.
You’ll be asked your age, net worth, income and when you may need to access the funds. Acorns picks your portfolio from a roster of nearly 25 ETFs. Forbes Advisor signed up with a profile for a young, upper-middle-class worker with a long investing horizon. Acorns came back with an “Aggressive Portfolio” that allocated:
Unlike other competitors such as Wealthfront, our Acorns portfolio consisted of just four low-cost ETFs, all with miniscule expense ratios—the operating fees charged by the funds you invest in. This simplified approach makes your investments much easier to understand without sacrificing returns.
On the other hand, a portfolio consisting entirely of stocks, even for a risk-tolerant younger worker, may be a bit too risky. You can change to a different portfolio, but be careful: Your customized portfolio is based on the questionnaire, so by going against the grain you may end up holding too little risk, rather than too much.
Those so inclined may opt for Acorns’ new socially responsible investing (SRI) portfolio. This is a pretty standard course of action for robo-advisors, especially as younger investors have shown an interest in them. Wall Street loves these funds because they have higher fees. The problem is many of the companies you end up investing in often fail a common-sense SRI test.
For instance, Acorns uses the iShares ESG Aware MSCI USA (ESGU) that comes with a 0.15% expense ratio, which is five times as high as the Vanguard S&P 500 ETF (VOO) that Acorns uses in its non-SRI fund.
To get a sense of how much, consider the following: if you seed your account with $1,000 and contribute an additional $300 monthly for 30 years with a 7% return, you’ll pay nearly $10,500 in fees with ESGU compared to more than $2,100 with VOO.
Perhaps you’re fine forgoing those funds in the name of socially responsible investing. But you should ask yourself what that really means. ESGU’s top investments include Apple, Alphabet (Google) and Facebook, all of which have engaged in questionable social practices (from claims of inhumane work conditions to pilfering privacy to facilitating child pornography). Maybe you’re better off going with the cheaper ETF and donating the savings to a cause of your choosing.
Acorns bills itself as a low-fee option, but that really depends on how you measure this platform’s fees. There are two Acorns membership tiers, both of which charge flat monthly fees:
While those fees appear manageable, they’re actually pretty expensive on an annual percentage basis, which is how many other investment apps and robo-advisors charge their fees. Younger workers just starting out—the types of investors who Acorns is trying to attract—will end up paying more than they would at other robos.
Imagine you opened a new investment account with just $100. If you used Betterment, which charges an annual percentage of 0.25% for its basic Betterment Digital offering, your annual cost would be $0.25. If you opened an Acorns Personal account, the one-year cost for that $100 investment would be $36.
Naturally, the fees become a smaller and smaller proportion of your balance the more you invest, but that could take a while.
In terms of investment costs, the expense ratios range from 0.03% (VOO) to 0.25% (two ESG funds). This is what you’ll pay if you invest in Early, Invest or Later.
A quick note on Acorns Spend: While this checking account is nominally no-fee, it’s less than ideal that you need to pay $36/year to gain access to it since some robos, like Betterment, give you access without such barriers. Still, you may view the checking account as an add-on to get into the $3 tier, in which case the fee matters less to you.
The best way to invest is not to wait and start investing right now—Acorns tries to make that as easy as possible. With no account minimum, you can start recurring contributions pretty quickly and also round up your purchases on linked accounts to get money in the market, even if you don’t think of yourself as an investor.
An easy-to-use interface makes setting up your savings rather simple, and you won’t be overburdened with a complicated array of ETFs. If you stick with a core account, absent ESG funds, you’ll pay very little in fees. If you’re someone who needs a nudge to get going, Acorns’ robo service makes a good deal of sense.
There are a couple of big drawbacks to Acorns. Foremost is the tiered-fee structure, which is too high for people starting out with low balances. Paying $36 a year when you have a few hundred invested is a bad deal. While many robo-advisors have an account minimum of $500 or $1,000, Betterment provides a no-minimum, lower-fee alternative.
Needing to cough up $3 to get access to the checking account is a tough pill to swallow, plus there’s no mechanism to talk to a real-life financial advisor.
Meanwhile, some parents may like having access to a UTMA/UGMA account, but anyone saving for college may wish there was access to 529 accounts. Plus there’s no tax-loss harvesting features, which will come in handy once you’ve accumulated more money in your account and need to offset the tax implications of selling winners.
Earn a $75 bonus after receiving 2 qualifying direct deposits in a new Acorns Spend account.

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