Investing is essential for growing your wealth and having your money work for you. If you are new to investing and not sure where to start, taking the first step is exciting but it can also be nerve-wrecking. Luckily, there are tons of financial technology tools and apps available that make it easy to invest and save—no matter how experienced you are.
Acorns is a popular investment and savings app that is known for being beginner-friendly and helps you to get the most of your savings.
Betterment is another financial-tech tool that focuses on growing your net worth through solid investments made through its platform.
Both offer solutions for anyone looking to bolster their savings and get started on investing. With that said, determining which platform to choose can also be overwhelming, especially if you aren’t sure what best meets your needs and what the different products have to offer.
This post will compare product features of both Acorns and Betterment. That way you can choose for yourself which platform best suits your personal financial goals.
Acorns: Made for the Everyday Saver
Acorns is a micro-investing app that works by linking to your bank account and rounding up purchases you’ve made to the nearest dollar. The Acorns app will then automatically invest the difference in savings through its Round-Up feature. This happens once you’ve reached a minimum of $5 in micro-savings. Acorns places investments in ETFs (exchange-traded funds) that you have selected personally.
The concept behind Acorns is that you are planting the seeds of your future wealth. If you want to take control of your savings and also start to invest, Acorns is a great first step.
How does Acorns Work?
Once you have the Acorns mobile app set-up and linked to your account, it will start to build on your savings automatically through their round-up feature (which we highly recommend that you enable.) The best thing about Acorn is that once it’s set up, it becomes entirely automatic and hands-off. This makes it super easy to use and is a great way to start saving more.
Acorns Breakdown
| Monthly Fees | $1, $3, or $5. |
| Minimum Account Balance | $0 |
| Account Types | Individual and joint brokerage accounts, Roth IRA, SEP IRA, Traditional IRA, trust accounts and custodial accounts. |
| Investment Type | Exchange-Traded Funds (ETFs) |
Acorns Product Features and Services
Early- This lets you open investment accounts for your children. Investments can start automatically, and be as little as $5 per day, week, or month.
Later – Acorns lets you open an IRA (individual retirement account) so that you can invest during your retirement. As an added bonus, IRAs are tax-advantaged accounts.
Invest with Round-Ups ® – Round-Ups is the feature that we mentioned before. It helps you to get more from your savings through rounding-up on your spending and investing the difference. It’s a great tool because it helps you to save automatically and without you even realizing it. When you’re going about your day, paying for gas, groceries or whatever else, Acorns saves a small amount from each one of your purchases.
Earn Rewards – Earn is a cash-back program with over 12,000+ brands to choose from and will give you cash back rewards on your purchases.
Acorns Fees
Acorns charges a fee of either $1, $3, or $5 per month, depending on your plan. Annually this comes out to either $12, $48, or $60. There are no additional fees required to manage your accounts besides the main subscription fee. Acorns also lets you manually deposit money into your account.
For those that want to invest more, Acorns has another program called Found Money. Found Money is similar to other traditional, cash-back rewards programs, and works by giving you back a percentage of your purchase. The key difference is that Acorns takes the cashback puts it towards your investment portfolio. This happens automatically and without the lift of a finger.
Acorns Portfolio
Acorns users have the option of selecting between five different portfolios. The portfolios to choose from allows you to match your investments based on your risk tolerance. If you prefer low-risk investments and want to be conservative, then Acorns has you covered with investment options like their short (or ultra-short) term government bonds.
Fun fact: Acorns’ portfolios were developed with the help of Dr. Harry Markowitz. Dr. Markowitz won the Nobel Prize in Economics Sciences in 1990 (partly because of the work he did on portfolio development theory.)
Acorns ETFs
Acorns lists the following as their ETFs:
- Large Companies
- Medium Companies
- Small Companies
- Developed Markets
- International Companies
- Emerging Markets
- Real Estate
- Corporate Bonds
- Government Bonds
- Short-Term Government Bonds
- Ultra Short-Term Government Bonds
- Ultra Short-Term Corporate Bonds
- Ultra Short Term Corporate Bonds
- US Aggregate Bonds
- Short Term Bonds
Acorns Pros
- Invests spare change: Acorns helps you to earn on spending by investing the leftover change from your purchases.
- Beginner-and-user-friendly: Acorns is known for having a pleasing and easily navigable UX/UI. This is a big bonus when it comes to user-experiences and is especially helpful if you’re just getting started.
- No account minimum required: Acorns won’t charge you for not running a balance and starts investing once you’ve saved as little as $5!
Acorns Cons
- No tax-loss harvesting: Tax-loss harvesting (TLH) is helpful when it comes to lowering tax liabilities. If you’re new to investing, it’s not likely that you’ll feel the impact of this, but for higher-net worth individuals it’s an important consideration to keep in mind.
- Limited investment classes: Acorns may appear to have a wide variety of ETFs to choose from, but it actually has fewer options than its competitors like Betterment and other robo-advisors.
- Spare change won’t cut it: Acorns is a great way to stretch the money you are already spending. While rounding-up is a great starting point, it’s financial impact is not big enough to prepare you for retirement on its own.
If you want to keep reading to learn more about Acorns, then you should also check out this previous blog from our site.
Betterment: Made for the Investor
Betterment is the first company to have come out with robo-advisors, and it still remains one of the best robo-advisors available on the market today. Robo-advisors provide financial and investment advice to clients with little to no human involvement.
Betterment Breakdown
| Betterment Details
|
0.25% (Digital); 0.40% (Premium) |
| Minimum Account Balance | $0 |
| Account Types | Traditional IRA, Roth IRA, SEP IRA, Brokerage, Trust, Savings Account, Checking |
| Investment Type | Exchange-Traded Funds (ETFs) |
If you are committed to growing your net worth through investments, then Betterment is an excellent choice for you. With robo-advisors handling most of the work, you’ll hardly have to do anything to maintain your portfolio.
It’s easy to get started. Just set up your account, answer some basic questions about your finances and goals, then Betterment will generate a list of investment options for you that accommodates your level of risk tolerance.
If you ever want to talk to a human financial advisor, you can also do so with Betterment for a fee of $199 or $299 per session.
Betterment has a wide array of highly diversified portfolios of index funds and invests your money in up to 14 various asset classes.
Though Acorns does have some ETFs in its investment roster, Betterment still outweighs in terms of the breadth and depth of their investment opportunities:
- US Total Stock Market
- US Large-Cap Value Stocks
- US Mid-Cap Value Stocks
- US Small-Cap Value Stocks
- International Developed Stocks
- International Developed Bonds
- Emerging Market Stocks
- Emerging Market Bonds
- Short-Term Treasuries
- US Short-Term Bonds
- Inflation-Protected Bonds
- US Municipal Bonds
- US High-Quality Bonds
If you choose to setup a Betterment IRA, the investment options are sightly different from the previous list. See below:
- US Total Stock Market
- US Large-Cap Value Stocks
- US Mid-Cap Value Stocks
- US Small-Cap Value Stocks
- International Developed Stocks
- International Developed Bonds
- Emerging Market Stocks
- Emerging Market Bonds
- Short-Term Treasuries
- US Short-Term Bonds
- Inflation-Protected Bonds
- US High-Quality Bonds
Overall Better(ment) Returns
Since the company was founded in 2008, Betterment has boasted higher returns than the market median, with an average annual investment return of just under 8.8%. The best part again is that, once you have customized your account, it will continue to manage itself. It can automatically reinvest dividends, periodic rebalancing, and also tax-loss harvesting to insulate yourself from market dips.
Betterment Pros
- Automatic rebalancing: it’s normal and to be expected that your portfolio will, from time to time, stray from its target. The automatic rebalance feature will adjust your portfolio automatically when it goes off course.
- Tax-loss harvesting: TLH (tax-loss harvesting) is one of Betterment’s distinguishing features, since not all robo-advisors include it in their product offerings. TLH helps reduce your tax liability and lowers taxes on investments.
- Low management fees: Betterment fees start at 0.25%, which is low compared to other fully-integrated robo-advisors. The fee charge being a percentage is also an advantage for smaller portfolios.
Betterment Cons
- Limited customization: Unfortunately, there isn’t much you can do when it comes to customizing your investment portfolio. Betterment will however let you specify your stock/bond allocation.
Click to read our full review on Betterment.
If you’re interested in checking out Betterment for yourself, here.
Betterment vs. Acorns: The Key Takeaways
- Acorns helps to maximize savings and investments money you are already
- Betterment allows for seamless and friction less investing, and includes tax advantages that benefit bigger investment portfolios.
What’s the main difference?
Acorns is great for the everyday penny-pincher and saver. It’s a smart way to start investing and uses micro-investing as a tool to get stated. Betterment, on the other hand, is more geared towards committed investors who want to pay less in taxes on their investment returns.
Determining which product best meets your needs is going to hinge on your financial situation and priorities. Both are great products and options to get you going on your finance goals.
