Is Investing With Acorns Worth It?

Is the return on investment that Acorns offers worth your time and energy? Could you be better off investing your change somewhere else?

What is Acorns

Acorns is a US-based financial technology and services company that offers micro-investment services. The company was founded in 2012 and is based in California. The Acorns app is known for its Round-Up Investing System. The app will link to your bank account, debit card, or credit card and automatically round up purchases to the nearest dollar. This allows the investor to take their spare change they may often forget about and turn it into investments automatically. Whenever you make a purchase with your linked credit or debit card, Acorns rounds up to the nearest dollar and micro-invests the change. Acorns also offers retirement investment options and cash-back from over 350 major retailers.

Acorn offers two plans:

Acorns Personal ($3/month):

• Acorns Invest: Index fund investing capabilities through “Round-Ups” and account contributions

• Acorns Later: Offers tax-advantaged investment options like individual retirement accounts (IRAs) starting with just $5.

• Acorns Checking: This service acts as your bank account, offering free withdrawals at over 55,000 ATMs nationwide, no account fees, and the ability to earn up to 10% in bonus investments

Acorns Family ($5/month):

• Everything in Personal (Invest, Later, and Spend), plus Acorns Early. This allows you to open an investment account for kids, or a custodial account, for your child and begin investing for them as a minor.

How does it Work?

You bought lunch for $10.25. Acorns will round this purchase up to $11 and deposit the change of 75 cents into your investment account. Acorns then diversifies your investments across 7,000 stocks and bonds.

Details to Consider

Account fees – monthly fees start from just $3 per month for a personal account and just $5 per month for a family account with unlimited kids.

Low risk – you can start investing from as little as just $5, so there is limited risk involved in your investments due to the low value.

Average annual return on investments – earn an average of 7.5% interest (based on historical performance) on all your investments with Acorn.

Waiting period to cash out – if you want to withdraw your investments, you may need to wait for up to 11 days before you receive your funds.

Account transfer fees – if you want to switch to another investment platform, you will need to pay $50 per ETF to transfer your shares over.

Ease of use – Acorns is perfect for new investors who are just starting out. Their website uses simple terminology with examples and explanations suited for clear language.

Investment for kids - Acorns allows you to not only save but invest for your kids’ future. Once your kid comes to age, they will gain ownership of their investment account.

Limited Options - Acorns currently only offers 5 different ETF options.

These 5 ETF options are:

• Conservative –Comprised of short term government bonds (40%), ultra short term corporate bonds (40%), ultra short term government bonds (20%)

• Moderately Conservative – Comprised mostly of large-company stocks (24%) and government and corporate bonds (60%), along with medium company stocks (4%) and international company stocks (12%)

• Moderate – Comprised of large-company stocks (35%), medium company stocks (5%), small company stocks (2%), international company stocks (18%), government & corporate bonds (40%)

• Moderately Aggressive – Comprised of large-company stocks (47%), medium company stocks (6%), small company stocks (3%), international company stocks (24%), government and corporate bonds (20%)

• Aggressive- Comprised of large-company stocks (55%), medium company stocks (10%), small company stocks (5%), and international company stocks (30%). If time is on your side, the Acorns aggressive portfolio might be for you.

Bottom Line

Acorns is a super convenient and easy application to use, perfect for new or beginner investors to start their investment journey. The automatic roundups make saving and investing easy, leaving investors surprised by how quickly their change can accumulate. Acorns are perfect for investment education for minors, letting them explore interest and investment with little risk and small balances. However, the possible rate of return on investment is quite average at around 7.5%. For the average investor that keeps their money in ETFs or Mutual Funds, this may suffice, but for more experienced investors, this rate of return may be quite low, especially after you factor in the fees Acorn takes for themselves. While a $3 to $5 fee every month doesn’t seem too bad, when you consider the small amount of money that one is investing with their spare change, the fees can add up and take a sizeable percentage of your gains.