I’m comparing them here, because they’re two of the biggest buzzwords in online investing right now. But there are key differences between Acorns and Robinhood. Keep reading to get a sense for which mobile investment platform is better for you.
Table of Contents
Acorns vs. Robinhood: Apples and Oranges
| Acorns | Robinhood | |
|---|---|---|
| Company Type | Micro-investing robo-advisor | Self-directed investment platform |
| Best For | Horrible savers | Beginning investors |
| Stands Out For | Automated, small-time investing | Simplicity and speed |
| Biggest Negative | Expensive fees | Too frictionless |
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Acorns and Robinhood are both mobile-first fintech companies that have attracted millions of users in the last few years. Both companies allow you to invest. Outside of that, there are more differences than similarities between the two.
Acorns offers a passive investment platform, and it charges fees. Robinhood is free and acts as a traditional investment brokerage.
Choosing between the two is more nuanced than this. But in its simplest form, the choice between Acorns vs. Robinhood comes down to whether you want to pay someone else to manage your investments or handle your portfolio on your own for free.
Acorns Explained: What’s Different?
Acorns stands out for the variety and novelty of its deposit methods. Most notably, it lets you round your purchases (from a linked account) up to the nearest dollar and automatically invest the change.
You can also benefit from the "found money" program called Acorns Earn. It's a cash back program with more than 350 partners — and a twist: The cash back gets automatically invested into your portfolio.
You can also fund your Acorns account in the old-fashioned way: by making one-time or recurring deposits from another account.
When you sign up, Acorns asks you some questions and recommends one of five portfolio plans made up of Exchange Traded Funds (ETFs) designed by Vanguard and BlackRock, both respected investment companies. You'll be well-diversified no matter which of the five pre-selected baskets you choose. Acorns' robo-advisor offers a conservative, long-term approach.
But when you factor in the fees, your returns may lag behind standard market indicators like the S&P 500.
Acorns offers three tiers of service ($1, $3 and $5 per month), with each of them unlocking more of Acorn’s products. Those products include retirement (IRA) and checking account options. Even at $1 per month, that’s quite a hefty fee as a percentage of your portfolio if you have only a few hundred (or even a few thousand) dollars under Acorns management.
Robinhood Explained: What’s Different?
If you get bored with textbooks and theory and prefer to learn by doing, Robinhood might be a good investment platform for you. But for certain kinds of folks, Robinhood could be downright dangerous.
Critics have hammered Robinhood for its lack of guardrails. Inexperienced investors can jump into risky options and cryptocurrency trades without encountering many warnings. Users can trade on margin, buy and sell fractional shares and access international stocks.
Robinhood gamifies investing with a simple app that removes as many pain points as possible. In an investing world with virtually no constraints and with no one telling you what to do, Robinhood offers higher risk and potentially higher reward.
What it doesn’t offer is a whole lot of data and research. Its users need to get their education elsewhere while using Robinhood to execute trades and monitor the market.
The companies’ lists of product offerings are different too. For example, you can contribute to an IRA with Acorns but not with Robinhood. You can open a cash management account with Robinhood but not with Acorns.
Free trading is no longer unique to Robinhood, but especially if you’re investing a modest amount of money, it’s paramount to achieving the best possible returns. Any Acorns vs. Robinhood comparison must take that into account.
Why Choose Acorns?
You may want to pick Acorns vs. Robinhood:
- If you have difficulty saving money. You probably won't notice your loose change getting automatically invested. This forced savings can add up over time. More importantly, it could help change your financial habits.
- If you're intimidated by investing. Acorns can eliminate complexity and decision making. You'll get a robo-advisor that guides your money to a well-diversified portfolio.
- If you have at least $10,000 to invest. Although it's often marketed to younger people with fewer assets, it's best to start using Acorns with at least $10,000, because anything less means you're paying relatively high fees. Even if you're paying $1 per month, if you have only $100 invested, you're paying 12% per year in fees, which is prohibitively expensive.
- If you're more risk-averse as an investor. Acorns is probably a more comfortable choice than Robinhood if you fit this description.
- If you're trying to save for retirement. Acorns offers a retirement account, while Robinhood does not.
- If you want a trusted source to manage your investments. Acorns' portfolio options are linked to Vanguard and BlackRock, which are safe, respected investment management companies.
Why Choose Robinhood?
You may want to pick Robinhood vs. Acorns:
- If you like being in control. If you'd rather handle your investing yourself rather than pay a trustworthy company to do it for you, Acorns vs. Robinhood is no contest.
- If you have a higher risk tolerance. In all likelihood, you'll be taking more risk on Robinhood, but you'll have a better chance at more reward.
- If you have less than $10,000 to invest. The fees on Acorns don't make much sense for smaller investors. Robinhood doesn't charge fees to trade.
- If you want flexibility. Robinhood gives you as many possibilities as there are investment strategies, while the options on Acorns are limited to one of five pre-built plans.
- If you prefer performance to fun. Acorn's "Round-Ups" are novel but impractical for long-term investing. Acorns and Robinhood both allow automated, recurring transfers, but only Robinhood is free. If you're willing to handle your own investing and you're disciplined enough to handle Robinhood's lack of guardrails, it's a more practical choice.
Final Thoughts
If you’re reviewing Acorns vs. Robinhood, start with an honest assessment of yourself. Take stock of your goals, your financial situation, your personality and your level of investment knowledge.
Acorns charges significant fees to let you save passively and invest your loose change.
Robinhood doesn’t charge you anything, but you have to make your own investment decisions.
Especially if you're a new investor, either choice could be a nice starting point to get you engaged with investing as a way to plan for your future. There are other options as well.
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