Acorns review 2021 – Forbes Advisor

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Automatically save and invest in your future with acorns

Join over 8 million people and start investing your spare currency for the future.

Acorns offers a simplified, low-cost passive investing approach that is suitable for many types of investors. While the app’s user design and educational content is geared toward first-time investors, its flat-rate structure is actually more expensive for those just starting out (competitor Ellevest has a similar problem). As such, we recommend that potential clients weigh their appreciation of Acorns’ passive savings approach against potentially higher costs. It is perhaps best used by the people who need the boost the most to save a little more.

Who should choose the acorns?

Acorns’ robo-advisor features make the most sense for someone who is drawn to the platform’s “rounded” savings reputation: purchases made in linked accounts are rounded to the nearest higher dollar , and the balance is recorded in an investment account. For example, if you spend $ 4.50 for a latte on a linked credit card, $ 0.50 will be set aside for investment. If you’ve experienced joy with this pro-savings gadget, you might also be inclined to save for retirement with Acorns.

However, other robo-advisors provide more robust services at a lower cost. So, only those who think they will have an incentive to save more with Acorns should apply.

How acorns work

Acorns offers five separate robot-related products for Invest, Later, Spend, Found Money, and Early.

• Invest: A taxable investment account that places your money in exchange-traded funds (ETFs), based on your risk tolerance and financial goals. There are two ways to continuously fund the account: rounding and averaging cost in dollars. (Of course, you can always add ad hoc money.) The latter allows you to set up recurring contributions to your account for as little as $ 5. The first, as mentioned above, invests what is called “spare currency” from a linked account.

• Later: This is how Acorns refers to retirement. (We found this nomenclature a bit confusing: It’s not like your “Invest” funds are for day-trading or for immediate use. You are supposed to invest for the long term and it is expensive to sell your investments. too often. Perhaps Acorns should trust his clientele who knows what “retire” means.) Either way, “later” is just a way to put money into an IRA, a must for any robotic service.

• Spend: A checking account that comes with a debit card and avoids many fees, like the one for minimum balances. It also reimburses certain ATM fees. Another feature, called Smart Deposit, allows you to automatically siphon money from a direct deposit from your Spend account to other accounts, like Invest. (Although since you are configuring how much goes where, it’s not quite “smart”.)

• Money found: An online marketplace that offers a small percentage off purchases made at hundreds of major retailers, including Walmart. The cash back you earn by buying from Found Money is placed in your Invest account.

• Early: Available for those paying the most expensive level of Acorns, “Early” provides access to a UTMA / UGMA account, allowing parents to create accounts for their children without having to deal with red tape.

How Acorns invests your money

Like most other robo-advisers, Acorns offers you a diverse portfolio of low-cost ETFs that suit your risk tolerance and goals based on how you answer a handful of questions. For example, you’ll be asked your age, net worth, income, and when you might need to access funds.

Whatever money you have allocated to “Investing” will go into this mix of exchange traded funds.

For example, a profile that Forbes Advisor created for a young, upper-middle-class worker with a long investment horizon came back with an “Aggressive Portfolio” that attributed:

55% to large national companies via Vanguard S&P 500 (VOO)

30% to international equities via iShares Core MSCI International Stock (IXUS)

10% mid-cap via iShares Core S&P 500 Mid-Cap (IJH)

5% to small cap stocks via iShares Core S&P 500 Small-Cap (IJR)

Refreshingly, and unlike other competitors like Wealthfront, the profile only included four low-cost ETFs, all with minimal expense ratios or operating costs charged by the funds you invest in. This streamlined approach makes your investments much easier to understand without sacrificing return. Acorns selects your portfolio from a list of almost 25 ETFs.

On the flip side, a portfolio made up entirely of stocks, even for a risk-tolerant young worker, can be a bit too much. You can change the portfolio if it does, but be careful: your personalized portfolio is based on the questionnaire, so going against the grain may take too much or too little risk.

Those who wish can opt for Acorns’ new socially responsible investment (SRI) portfolio. This is a fairly standard course of action for robo-advisers, especially since young investors have shown interest in them. Wall Street likes these funds because they have higher fees. The problem is, many companies that you end up investing in often fail a common sense SRI test.

For example, Acorns uses the iShares ESG Aware MSCI USA (ESGU) which comes with an expense ratio of 0.15%, which is five times higher than the Vanguard S&P 500 ETF (VOO) that Acorns uses in its non-SRI funds.

To get an idea of ​​how much, consider the following: If you fund your account with $ 1,000 and contribute an additional $ 300 per month for 30 years with a 7% return, you will pay almost $ 10,500 in fees with ESGU, against more than $ 2,100 with VOO.

You may be able to forgo these funds in the name of socially responsible investing. But you should be wondering what it really means. Major ESGU investments include Apple, Alphabet (Google) and Facebook, all of which have engaged in questionable social practices (ranging from allegations of inhumane working conditions to theft of privacy to the facilitation of child pornography. ). Maybe you are better off going with the cheapest ETF and donating the savings to a cause of your choice.

Automatically save and invest in your future with acorns

Join over 8 million people and start investing your spare currency for the future.

Acorn fees and costs

Acorns advertises itself as charging a low fee, but it really depends on how you measure it. There are three levels of Acorns membership, each paying a monthly fee:

• Lite: $ 1 per month

○ Lite gives users access to Invest and Find Money.

• Staff: $ 3 per month

○ In addition to Invest and Found Money, Personal gives users access to Later and Spend.

• Family: $ 5 per month

○ In addition to all the features of Lite and Personal, Family provides access to Early, Acorns UTMA / UGMA investment accounts. They are basically investment accounts for children.

While these fees seem manageable, they’re actually quite expensive on an annual percentage basis, it’s the number of other investment apps and robo-advisers that charge their fees. Young workers starting out – the types of investors Acorns tries to attract – will end up paying more than they would with other bots.

Imagine opening a new investment account with only $ 100. If you used Betterment, which charges an annual percentage of 0.25% for its Betterment Digital base offering, your annual cost would be $ 0.25. If you opened an Acorns Lite account, the cost of one year for that $ 100 investment would be $ 12.

Consider a $ 10,000 investment in an Acorns personal account – $ 36 per year, or 0.36%, which is still more expensive than Betterment.

Naturally, the fees become a smaller and smaller proportion of your balance as you invest, but this can take some time.

In terms of investment costs, the expense ratios range from 0.03% (VOO) to 0.25% (two ESG funds). This is what you will pay if you invest in Early, Invest or Later.

A quick note on Spend: While the Acorns checking account is nominally free, it’s far from ideal that you have to pay $ 36 per year to access it, as some bots, like Betterment, give you access without such barriers.

However, you can think of the checking account as a supplement to access the $ 3 level, in which case the fees are less of a concern to you.

Benefits of acorns

The best way to invest is not to wait and start investing now – Acorns tries to make this as easy as possible. Without an account minimum, you can start recurring contributions fairly quickly and also round off your purchases on linked accounts to get money in the market even if you don’t consider yourself an investor.

An easy-to-use interface makes setting up your savings fairly straightforward, and you won’t be overloaded with a complicated array of ETFs. If you stick with a basic account, with no ESG funds, you will pay very little cost. If you’re someone who needs a helping hand to get started, Acorns’ robo service makes perfect sense.

Disadvantages of acorns

There are some big downsides to acorns. First, the installment fee structure, which is too high for people just starting out with low balances. Paying $ 36 a year when you’ve invested a few hundred just to access an IRA is bad business. While many robot advisors have a minimum account of $ 500 or $ 1,000, Betterment offers an alternative with no minimums and at lower fees.

Having to shell out $ 3 to access the checking account is a tough pill to swallow, and there is no mechanism to speak to a real financial advisor.

Meanwhile, some parents may like to have access to a UTMA / UGMA account, but anyone saving for college may wish to have access to 529 accounts. Additionally, there are no tax loss harvesting features, which will come in handy once you have accumulated more money in your account and need to offset the tax implications of selling winners. .

Automatically save and invest in your future with acorns

Join over 8 million people and start investing your spare currency for the future.

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