As dividend growth investors, we are always looking for easy ways to invest as much as possible! Google “dividend investing products” and you will find countless apps and services to help get your investing proposition started, in order to reach financial freedom as soon as possible. Heck, that is how we stumbled on our app review of Robinhood, which is a “no trade fee” investing platform. One product that has gained a lot of publicity and is growing in popularity is the Acorns app. So what we decide to do? Hop on Acorns website, review the product, and put together a pros and cons list to help any potential users make a decision!
What is Acorns?
Acorns is an investment App that allows users to “round up” their purchases and invest the spare change into various portfolio structures. After downloading the app on your phone, a user would link a bank account(s) to the app. Each day, the amount of spare change remaining after a purchase added into your investment account with Acorns. You are then free to invest the spare change in any one of the investment products offered.
On their website, Acorns touts five different portfolio blends that investors can choose from based on the investors risk portfolio, ranging from conservative to aggressive. Within each bucket, Acorns has selected six ETFs to help investors achieve their desired investment strategy and displayed their respective asset allocations. The conservative option has a larger allocation of bonds while the aggressive option has more large cap and real estate stocks.
2019 Update – Acorns has expanded their product offerings. The company now offer Acorns Core, Acorns Later, and Acorns Spend. Here is a brief description from each account, per there website. For more information about each, here is the webpage that includes and informational video.
- Acorns Core – Invests your spare change in a traditional brokerage account
- Acorns Later – The IRA account for the brokerage. This can include a Traditional, Roth, and SEP IRA
- Acorns Spend – A checking account and debit account, allowing users to invest while spending on purchases.
Acorns – Pros and Cons
Of course – a review wouldn’t be a review without the pros and cons. We are going to do a dig into the Acorns app on what we like/dislike and hopefully come to a grand conclusion. Let’s check out the nuts to the application.
1.) Low Fee Structure for Accounts Under $1 Million – We updated this from our initial posting of our article, as the fee structure has changed over the years. As of Feb. 2019, the fee structure is as follows and is relatively simple: $1/month for an Acorns Core account, $2/month for Acorns Core + Acorns Later, and $3/month for Acorns Core + Acorns Later + Acorns Spend. The fee structure remains true until investors have over $1 million in assets. Acorns is also only $1/month for College students.
2.) Can Invest Small Dollar Amounts Easily – Lanny wrote an article earlier in the year about why he is trying to invest only $3,000 or more with each purchase. One of the major deterrents to small dollar amount investments through brokerages is how quickly the trading fees will pile up. Since Acorns rounds up after each purchase, small dollar amounts can get invested relatively quickly. Of course, other apps like Robinhood have found ways to offer low-cost investment options.
3). App is Easy To Use – The design is sleek and very user friendly. It is easy to track the progress of your investments and review your investment options. A cool feature when selecting your investment options is that the app will easily project the market value and targeted income X number of years down the road based on which investment option you select. Acorns seems to strive to make the user experience as easy as possible.
4). No Minimum Deposit – The website touts that you can get started with as little as $5! Anyone can start investing at any time.
Commissions for Accounts over $5,000 – The app’s fee structure increases once our account crosses $5,000. over this mark, the app charges you .25% on your over all account balance. For perspective, the fee for Lanny’s investment account of ~$180k would be $450 annually and Bert’s investment account of $70,000 would be $175. While this is lower than the fees for many mutual funds, there are many ETFs that charge investors lower fees. Coupled with the next con, .25% seems awfully high. Heck, the high fees are what drove Bert to sell his mutual funds in favor of individual stocks earlier in the year. [Feb. 2019 Update] Based on our discussion in the Pros section, the fees calculated based on a $5,000 threshold. It has been increased to $1 Million.
2). Lack of Investment Options – Part of the beauty of Acorns is the simplicity of the concept. The app prides itself on making investing easy for users and taking a lot of the stress of of the investment making decision. However, what if you don’t fit one of these risk profiles? What if you want to pick individual stocks? The app may not be the best fit for you.
3) Lack of Investment Account Options – Eureka! [Feb. 2019 Update] You are now able to have retirement accounts with Acorns – Roth, Traditional and SEP! This may be the alternative to Robinhood, where you can’t have a retirement account.
Are we opening Acorns accounts immediately upon completion of this review…no. In our opinion for the type of investors we are, the app would not be a bad fit.
The cons heavily outweigh the pros for us since we both have accounts over $5,000 and invest in individual stocks, [Feb 2019 Update] The updated fee structure significantly changes the cost cost of using the app. Sure, while $1/month for a traditional account is more than the Free Robinhood, it is not a significant fee.
Further, we do believe Acorns is a great app and investing platform for the right target audience. Student investors or beginning investors without a lot of disposable income would be a great fit for this app, since you can invest small dollar amounts and turn every day transactions into investments using the “Round Up” feature. It is a great idea and can be a great tool to build a portfolio for the right individual.
Have you used Acorns? If you haven’t, do you know anyone that has used the investing app? Are there any other Pros or Cons that we missed? What are your thoughts about our analysis? Are you signing up for the app after reading the review?
-The Dividend Diplomats
Photo Credit: Acorns
*Disclosure: there may be affiliate links above*
**Article was updated in Feb. 2019 to reflect changes in the platform from the original posting**