If you’re looking for a great way to start investing with a low barrier to entry, robo-advisors Betterment and Acorns can help. Betterment allows you to set multiple investing goals and offers tax-advantaged investing, while Acorns offers a clever automatic investing function that makes building your portfolio very easy.
Betterment is better for those looking for tax-efficient investing as well as the ability to use accounts for multiple goals. Acorns is ideal for those who have small amounts of money and want to start investing. Here’s what you need to know about Betterment versus Acorns as you make the best decision about where to put your money to work in the market.
How much would you like to invest?
|Amount minimum to open account||
|Account fees (annual, transfer, inactivity)||
|Current promotions||Three months free for new customers who are referred by an existing Betterment account holder.||Acorns Core ($1/month) is free for college students.|
|Tax loss harvesting|
|Offers fractional shares|
|Ease of use|
|Mobile app||iOS, Android||iOS, Android|
|Customer support||Phone, Email|
Neither Betterment or Acorns require an account minimum to open. You can open an account and start investing without worrying about meeting a threshold. However, with Acorns your money won’t be invested until your account balance reaches $5.
Like all brokers, both Betterment and Acorns charge fees. Betterment charges an annual fee of 0.25% of your account balance for portfolios of up to $100,000. After that, you pay an annual fee of 0.40% — account balances above this threshold get you access to a team of financial advisors.
Acorns, on the other hand, charges a flat monthly fee, depending on the type of account you have:
Once your portfolio with Acorns reaches $1 million, you can contact customer support for next steps.
When you divide the fee annually, Acorns can seem more expensive than Betterment, at least for smaller balances. For example, if you have $2,000 in your account, and you pay $1 per month ($12 per year), that’s like paying an annual fee of 0.60% of your balance. The bigger your balance, the more you benefit from the flat fee. With $200,000 in a Betterment account, you’re paying $800 a year, but that same amount with the Acorns flat fee would still be $12.
Because both companies rely on mixes of exchange traded funds (ETFs) for their portfolios, you also need to be aware of expense ratios. These are the fees charged by the company that maintains each ETF; the fee is deducted from your fund balance, rather than being charged separately. Expense ratios at Betterment are between 0.06% and 0.17%, while at Acorns they range from 0.03% to 0.15%. What you end up paying depends on your portfolio allocation and the funds used.
Both Betterment and Acorns are robo-advisors that create investment portfolios tailored to your investing goals and your risk tolerance.
Both brokers offer various IRA choices, including traditional IRAs, Roth IRAs and simplified employee pension (SEP) IRAs. However, Acorns will automatically choose an IRA type for you based on your needs, while Betterment offers more control over what type of IRA you choose.
In addition to offering investment choices, Betterment offers Betterment Everyday, an FDIC-insured high-yield savings product. Acorns doesn’t offer a high-yield savings account, but it does offer Acorns Spend, which is an FDIC-insured checking product that comes with a debit card and reimbursed ATM fees.
Betterment offers more flexibility in saving for individual goals, while Acorns offers the ability to earn extra cash back for investing when you shop with different partners. Betterment does have a better tax-coordinated portfolio which spreads your investments over your various accounts, based on strategies to minimize your overall taxes.
Acorns provides you the ability to round up your purchases and invest the difference in addition to setting an automatic investment, so it’s easier to get a small boost each time you use a connected account to make purchases.
When considering Betterment versus Acorns, here are some of the advantages that come with opening a Betterment account.
If you’re just looking for a robo-advisor to help you start investing with small amounts of money, there are some advantages to choosing Acorns versus Betterment.
Betterment offers a little more freedom and flexibility by allowing you to set up multiple accounts for different goals and allowing you to choose your own IRA option. Additionally, Betterment has the additional option to access financial advisors when you want someone to talk to. If you want to set it and forget it with goals and tax-efficient investing, Betterment can be a good choice.
On the other hand, Acorns can be a good choice for beginners who are less worried about fees and who just want to get started with small change. The option to use roundups and earn Found Money through partners can help those who want to invest but aren’t sure they can commit a set amount of money each month.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.