When it comes to investing, it is important to know that you are in good hands. If you are thinking ofrobo-advisors to help you financially, youwillcome across two of the bestrobo-advisors available today: Betterment and Acorns.Both willallow you to invest passively without having to move an inch,but which is better for you?
In this article, we will compare Betterment and Acorns based ontheir ease of use,fees, capital,investing methodology,features,promotions,and security.
Who Should UseWhich?
If you are inexperienced and want to invest a little amount of your money or just your loose change,Acornscould be your best shot; which isn’t to say that experienced investors can no longer use it. It is an application that is meant to make investing simple –it canbe your first step to investing because of itsuser-friendlyinterface, this is especiallyusefulto people who are not familiar with online investments.
Bettermentis for people who have more money to investbecause of its powerful tool that can link multiple external accounts, retirement accounts, and brokerage accounts to each other. It’sa good choice for people who arewilling tolearn and ready to take ariskfor a bigreturn.
Ease of Use
What’s the best way of enticing you to choose Acorns over Betterment? The founder of Acornshas the answer, and he did it.Acorns, an award-winning app towards their design, is one of the most beautifully-designed applications on your smartphone. For Acorns, investing is not just all about making money, it’s also about doing your business easy and fun. And it’s not just their app that is beautiful, their website is equally pleasant-looking too.
Betterment’sapp, on the other hand, is not all bad. You can do your job just like how you can do your business with Acorns, but it ends there. You open the Betterment app, do your routine, and get out – that’s it. Some people may say simplicity is beauty, and thatthere’s no time to play and have fun while doing business.No, investing is serious but adding a little bit of beauty can help refresh your mind.
THE WINNER:Acorns. Both are equally easy to use and will allow you to do your business in the fastest way possible. But what makes Acorns stand out is that you can seebeautifulgraphs within their appthat will help you manage your investments. Unlike Betterment,you have to visittheir website to see these.
Fees
Unlike manual investing, using arobo-advisor will cost you. So what are the management fees forusing Acorns and Betterment? Acorns offera fixed fee of 0.25% a yearfor investments over $5000, whereas Betterment willbill you 0.25% to 0.50% yearly.
When using your Acorns account, you are sure how much you will be billed for that year– with their flat-rate fees, you can calculate your budget in no time. A Betterment account, on the other hand, offers a variable management fee, meaning your fees will depend on how much money you are going to invest.
Usingthe services of an Acorns account will cost you $1/month, you will only pay the 0.25% charge if you will invest more than $5000, or if your mportfolio reaches more than that amount. So if youthink you will not reach the $5,000-mark anytime soon, Acorns is the best app for you.
For investments reaching $5,000 to $100,000, both will have fees of 0.25%. But if you have more than $100,000 in your portfolio, Betterment will charge you a 0.40% management fee that could hurt your budget.
THE WINNER:Acorns.The rightappfor you depends on yourobjectiveandoutlookfor your investments over the long-run.Unless you have more than $5,000 to invest but less than $100,000, youcanchoose Betterment.
Capital
Acorns and Bettermentdo not haveaminimum investment requirement. Both are friendly to new investors who have a low risk tolerance, and to experienced investors who are ready to gamble. So if you have a small capital or a small taxable account, you do not have to worry about anything if your choice is only between Acorns and Betterment.
THE WINNER:Tie. With no minimum deposit, both apps encouragepeople to investhow much they want, in any way they want. But it’s important to note that Acorns willonly charge you $1/monthif your capital is below $5000.
Investing Methodology
Both Acorns and Betterment boast that they usetheModern Portfolio Theoryto determine investments. The main difference though is that Acorns says that their“portfolios are developed with help from Dr. Harry Markowitz, the Nobel Laureate commonly referred to as the Father of Modern Portfolio Theory,”which leads to a problem: Acorns leaves us with that statement.
Betterment has a3,386-word white paper entitled “Our Investment Selection Methodology,” which means to say that they want to educate you in the easiest manner possible. They have nothing to hide, all cards on the table, you just have to read and understand every decision they have made.
Asset Classes: A Betterment account supports Exchange-Traded Funds (ETFs) of up to13asset classes, which comparespositivelyto Acorns thatsupports Exchange-Traded Funds (ETFs) fromjust6asset classes.
THE WINNER:Betterment.Betterment wins this category with a broader asset class selection,andadd to that their comprehensive guide on how they handle your investments.
Features
With bothrobo-advisorscharging you yearly fees, why would you pay for their services?
Automatic rebalancing: This is a solutionto your investmentswhen they experience a drift. Driftis what occurs inyour portfolio over time as several investments grow faster than others.With automatic rebalancing, your portfolio will remain balanced.
No transaction fees. Without arobo-advisor,you’ll get chargedwithcommissionsfrom your broker every time you buy or sell.With Betterment or Acorns, you will not be paying any transaction fees whether you add or withdrawfundsfrom your account. The amount you can save from these transaction fees makesit a wise choice to use arobo-advisor.In addition, both services protect you if you have a low risk tolerance, with zero tax implications.
Acorns’core featureisRound-Up.Thesystemis that youconnectyour checking account and credit cards to Acorns and they willround-up every transactionto the nearest dollar and invest it. Not many apps link to your checking account and credit cards, so this is a perk. If you spent $3.16 atWalmart, you’ve just invested $0.84.These small investments of spare change are calledacorns. They add up little by little,and before you know it, you’re operating a profitable stash without moving an inch.This makes Acorns a unique investment app.
Betterment’score featureisTax-Loss Harvesting(TLH).Betterment explains TLH as “the practice of selling a security that has experienced a tax loss.” This is especially useful toinvestorsas theyare able to offset taxeson taxable accounts such as gains and income.AcornsdoesnotofferTax-Loss Harvesting, so if youwantto earn more now than when you give up work, Tax-Loss Harvesting can beadvantageous as it can bringbiggains over time to your portfolio.
RetireGuideis another big feature of a Betterment account. This is useful to those retired or retiring in the near future. Although not for everyone, it still adds up to Betterment’s fight against Acorn. More information onRetireGuidecan be foundhere.
THE WINNER:Betterment.Acorns’Round-Upis agreat feature and perfect fornon-savers, but itwill not generatemoneyas muchas Betterment’s TLH. If youwantyourmoney to grow faster automatically, TLHcan dothatfor you.Add to that theirReitreGuideand you are on your way to making money while asleep.
Promotions
Several companies will encourage you to invest with them using tons of enticing deals.But evenif these deals are great, you have to make sure that they are perfect for you, so it’s important to do your research before signing up.
Currently,students can invest for free using Acorns, as long as that student has a valid .eduemail address. With this promotion, they are targeting students as potential investors while they are still young. Andpossiblyso they can grow old with them, brilliant!
Betterment offers up to6 months of servicecompletelyfreeforeveryoneregardless oftheiroccupational status.Although time-limited,a six-month free service is still a big help, but knowing what the feeswill be after that initial six-month term is vital.
THE WINNER:Betterment. Because Betterment provides better features than Acorns, it’s safe to say that they can charge you for using their services. With their six months of free service, you can save as much as $250 every month.
Security
Acorns and Betterment are both protected under SIPC and registered with the SEC.SIPC does protect againstunsuccessfulbrokeragecompaniesfrom bankruptcy or othermattersof insolvency that might cause them to be unable to pay you your money back.
You’re insured up to $500,000 with each brokerage through SIPC for that.So whether you invest in Acorns or Betterment, your money is safe and secured.
It’s important to note that SIPC will not protect your assets from a stock market decline. If your investments’ value decline because of the stock market’s instability, you can’t ask SIPC to cover you.
THE WINNER:Tie. Security is a number one priority when it comes to money, especially when you are investing it. Acorns and Betterment are legitimate and above the board with what they are doing. Both offer safe and secure transactions without hidden fees.
The Bottom Line
If you’re looking for a user-friendly investment app, both the Acorns app and Betterment app aredesigned well,centered on a smart system, and prepared to help you save and invest your spare change today.Neither the Acorns app nor the Betterment app rates higher than the other.
In the battle of Acorn vs Betterment, for the average investorBettermentis the clear winner. Although Acorns may seem cool and fun because of its Round-Up feature, it will not make you rich enough to get on a day when you retire. With Betterment having been found in2008, it has a few years head start on Acorns, which was founded in 2012.
OUR ADVICE: Do not limit yourself to just onerobo-advisor. UseBettermentto manage your overall investments while you useAcornsto save and invest your spare change.
Visit our Betterment vs Wealthfront reviewhere to decide if Betterment or Wealthfront is right for you. In the Betterment vs Wealthfront review, you will also find information on Vanguard. Vanguard is another investment app that can help you play the stock market without vetting traditional financial advisors and paying an exorbitant management fee.
In addition to playing the stocks, you can manage exchange-traded funds, tax-efficient investing, asset allocation, direct indexing, and your taxable accounts. Whether you compare Wealthfront vs Betterment, Acorn vs Betterment, an investing app against traditional financial advisors or anything in between, there are often multiple solutions depending on your needs. Robo advisors have helped people as they build their investment account, savings account, and retirement accounts.
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