Acorns App Review – Should you Invest with Acorns?

There’s a new micro-investment app called Acorns, available for iOSthat’s creating some buzz so I thought I’d check it out. But before I dive into the app, let’s briefly speak about investing.

A Look at Investing

Investing for the future can be hard. Knowing what to invest in, and monitoring your investments can be a major time drain and for some it’s painful. And no matter how much you research, you’re never investing with certainty –  risk is always there.

I’m a pretty risk adverse person. I like to be paid for my work and my contributions.  But I understand the value in investing for your future. And I understand the importance of financial markets and their effects on the world.

But there’s one thing that catches me off guard. When people say they’ve made a killing off the market investing in stock xyz. I get all giddy and excited as a result – could I too, make thousands? But the second I begin to research how I’ll dive into the big money pit I see restrictions like minimum account balances, commission fee, management fee…. and my head begins to spin.

Once I level out and take a few steps back I realize; it’s almost uneconomical to invest with a few hundred dollars. You need a good amount of capital to have a shot at making some money.

Frankly, you should not be investing at all until you have an emergency fund set aside and then another $1,000+ to invest with.


Where Acorns Fits

Acorns is a unique concept. It aims to let its users invest their spare change. Yes, their change. It’s a spin from the micro-investments paradigm.

It works by letting you connect your credit card or debit card, and automatically rounds up the change from every purchase you make to add to your investment portfolio. So if you spend $1.75 on some random purchase, Acorns rounds your purchase to $2.00 and takes $0.25 to add to your portfolio.

It’s like a digital piggy bank. piggy-bank

It sounds cool, right? The money that’s sent to your Acorns portfolio is then invested by Acorn to hopefully make you some more money. Acorn says their team is compiled of investment analysts, mathematicians, and economists. People who know what to invest in and when. They make a special note that their portfolio management is helped by the father of modern portfolio theory, Dr. Harry Markowitz.

Sidenote: If anything, Acorns obviously has a good marketing team.

At any time, you can make a deposit into your account to boost your portfolio. You can also switch/choose between five different investing risk options. Ranging from aggressive to conservative. And you have the option to withdraw your money out of your portfolio anytime.

And I have to add. The app is beautifully designed.  You can watch how your investments are performing over time with visually stimulating graphs and the likes. My hat goes off to their design team too.


Let’s Look Deeper at where Your Money Goes

Investment is a tricky beast, especially when you begin taking a look at how Exchange Traded Funds (ETFs) work. But here’s the gist.

Acorns uses ETFs to invest your money. From their investments page, they invest in six index funds.


There are as follows:

  • CORP: PIMCO Investment Grade Corporate Bd ETF
  • SHY: iShares Barclays 1-3 Year Treasury Bond
  • VB: Vanguard Small-Cap ETF
  • VNQ: Vanguard REIF ETF
  • VOO: Vanguard S&P ETF
  • VWO: Vanguard FTSE Emerging Markets ETF

You’ll see that Vanguard is quite popular with Acorns.

Here’s what makes Acorns unique. Vanguard ETF’s typically require about a $3,000-$5,000 buy in to begin investing. Acorns appears to be using a manged mutual fund models for their ETF system, which allows you to invest while avoiding these large buy-ins.

The founders of Acorns, whom I assume thought this up, had a pretty neat idea.


Acorns Invests your Money

Acorns claims to have an automated portfolio management process that’s driven by experts. I found that there are two stand out jargon words that they use throughout their pitch:

  • Diversification: To maximize expected returns for a given amount of risk by carefully diversifying across multiple asset classes.
  • Automatic Re-balancing: Portfolio allocations can deviate from risk adjusted targets due to natural market fluctuations. Acorns automatically re-balances your portfolio to keep it aligned with your selected level of risk.

Here’s the reality. Acorns is just moving around your money through the 6 funds we pin pointed above based on your selected risk level. They simply allocate which funds your money is put into.

And on that note, here are the 5 risk levels and their distribution between the various stocks and bonds.

You’ll see the levels follow a simple investing rule: bonds are more conservative, stocks are more risky. Allocate accordingly.


How Acorns makes Money

Acorns makes money by charging you fees. As of January 1st, 2015 Acorns has changed their fees to be either $1 a month (for balances under $5,000) or .25% of assets per year (for balances above $5,000).

Prior to this change the fees included a monthly $1 fee for every active account and a management fee of 0.5% annually for your first $5,000 and 0.25% annually for any additional funds.


January 15,2015 Update: The new fee structure is a welcome change but doesn’t alter my overall opinion. The targeted user of Acorns is likely to use the service as a piggybank rather than as a large sum investment tool and in both cases there are better options.


Is Acorns Worth Investing With?

This is an interesting question and it will cause quite the debate. If you’re not investing already and Acorns can help you earn some extra money, why not, right?

But at the same time. Acorns is not the best deal in town when it comes to investing your money, especially considering their fees and the size of expected investments you’ll be working with.

According to TechCrunch,

On average, users are investing $3/day in roundups alone, and portfolios have expected returns ranging from four to nine percent annually.

But here is how I see it.

Acorns charges you a $1 per month to gain access to a small portfolio of specific asset allocation ETFs. Ones you’d have difficulty accessing without greater funds. But a well tuned asset allocation portfolio should not be your priority with small figure investments.


High Fees

My biggest problem with Acorns is that they are charging a very high flat monthly fee for investing a very small amount of money. You’re paying a dollar a month to invest a few dollars. Think about that.

And don’t forget to add to your calculations, the annual management fee -which is higher than what you’d normally pay for a passive index.

When you start thinking about it deeper,you’re paying a premium for using a shiny app on your phone. One that gives you the belief that you can invest well for your future by spending.

It’s my belief that it is cheaper to invest on your own. Just save the money you would put away into Acorns until you are able to open up a proper investment account. Heck, you can even invest in the same ETF’s that Acorns does and bypass their management fee. Because after all, you’re investing to make money for yourself, not for someone else.

Privacy Concerns

I’m also against giving up my banking information to use the Acorns app. You need to provide your bank account log in information before you can even test or play around with the app. And even though Acorns claims that nothing is stored, in this day and age, I like to avoid middleman interactions. You never know. Who would have guessed that hackers would have gained access to nude celebrity pictures, or gotten access into the servers of major retailers like the Home Depot and Target.

Mistakes happen, and inserting another party into your financial transactions may be opening the door to something unexpected.

I advise to err on the side of caution.


My Take Home Message

When your portfolio is small, you should be focusing on finding the lowest fees, and not on perfectly tuned asset allocation – which Acorns is targeting.  Using Acorns is only worthwhile if you can not invest in any other way. And chances are you can.


Update 1

Since writing this post I’ve found an excellent alternative to Acorns with a much lower fee structure. It works in a similar fashion to Acorns – it invests your money into a diversified set of ETFs. But the management fee is only .35% annually for balances less than $10,000.

The catch is you have to add a minimum of $100 per month to your portfolio to avoid a $3 monthly penalty. But to me that isn’t really a catch. You shouldn’t be investing your money if you can’t afford to put away $100 a month. Stay tuned for a review of Betterment in the near future too.


Update 2

Acorns has changed their fee structure for 2015 – see above section, “How Acorns Makes Money” for more detail. The changes make Acorns arguably a better choice than as the account management fees are now lower – .25% vs .35% for balances under $10,000.

That said, both services have their own merits and I recommend exploring both to see what fits you better.




There are 37 comments

  1. egg man 589

    I agree that the premium is too high.

    First of all, I can make a trade for an ETF(exchange-traded fun) through other mediums for $4.95/$9.95 (TradeKing or MotifInvesting). There, I may even rebalance my allocations for free. Acorns charges $12/year to do just that.

    On top of that, Acorns charges a percentage each year. Other institutions don’t do that.

    In essence, this kind of investing style is not very suitable for small portfolios, like myself.

  2. Ryan McBryde

    what if you were to use it as more of a Change jar of sorts or savings maybe even kick in 25$ a month or every couple of weeks that should make up for the 1$ a month would it be useful as an out of site out of mind savings ?

    1. Untanglr

      Great question. Like most things it depends on how much you invest initially and how much you add every month.

      If you’re planning to use Acorns as a change jar it’s a bad idea. Even if you add an additional $25 a month into your portfolio. At the end of the day, you’re going to be losing any returns you make, as you won’t be able to beat the management fees.

      That said, Acorns begins to become a more decent choice when you’re investing around $500-$800. Let’s say you invest $800 – you pay $1 monthly and the 0.5% yearly, which is a cost of $16 a year. That is 2% of your investment.

      It’s reasonable to expect your portfolio to keep pace with the inflation rate, which is about 3%, yielding you about $8 per year after fees. If you choose a riskier portfolio, your profits may be higher.

      1. Mike B

        So as of the January 1st update on there fees. Has you opinion changed about this app for someone who wants to put away $25 a month using this app?

        I just started this app out of curiosity and a similar situation to Ryan McBride. But I am college student close to graduating and trying to save as much as i can

        1. Untanglr

          On low balances, like yourself, my opinion has not changed. Here’s why. If you invest $25 a month and pay $1 in fees you’re effectively paying 4% in management fees! It’s crazy.

          I really like the idea of depositing your leftover change. But taking out a $1 from the change jar once a month defeats the purpose. If you’re able to invest more money – like $100 a month, I suggest taking a look at Betterment, which has a lower expense ratio of .35%. If you cannot contribute more I recommend saving it for a rainy day/emergencies in a savings account. Online Banks such as Ally, offer an interest rate around 1%.

          1. Scott

            But then what would I do with my change jar? Put it in a CoinStar machine and pay 9.8% to convert it back to cash?

            Also, in the cashless society, where I use Apple Pay, or Credit Card for fraud protection, I have no change. No change = no change jar. Acorns is an electronic change jar for the electronic payment customer. I used to have a change jar (bucket) in 1990 but in 2015 it’s not really practical.

          2. Untanglr

            That’s a really good point. An electronic change jar has no place today.

            I guess I’m a bit of a relic as I still make the bulk of my purchases in cash (Why? I like to physically see money leave my wallet). I toss my change into a box and once it fills up I go to TD Bank and use their coin machine free of charge (available to all account holders). No need to use a CoinStar machine or lose 9.8%.

            That said, Acorns is still a reasonable option when used as a platform to invest in ETFs with a larger sum of money(not change).

          3. Scott

            I think maybe we’re going to have to agree to disagree on this one. Once you take your change to TD Bank and turn it from small coins into something (cash?), what do you do with that cash? Spend it? If it went from cash to change to cash over the period of 5 or 6 months from pocket to shoe box to pocket, not only did it earn 0% interest but it actually lost interest to inflation. I just think you are comfortable with your real change sitting in a shoe box and I am happy with my electronic change sitting in Acorns. Even with the “high fees”, I earn money I would have not earned otherwise on my change bucket (arbitrage).

          4. Untanglr

            It depends on how much change you’re accruing. I don’t have more than a few dollars in my change jar at any given time. If I was to use Acorns as a piggy bank I’d lose money. Interest on a few dollars doesn’t outweigh a $1 monthly service fee. Putting small sum money into Acorns just doesn’t make sense. If however you’ve deposited a larger sum of money into Acorns AND you use it as a piggy bank then and only then does the picture change. The facts are in the numbers!

  3. Devin Nelson

    So here’s my question. How do taxes work? The acorns app stays very quiet about tax advice. Does the daily “automatic re-balancing” rack up capital gains? Daily?!?!? At the end of the year, won’t you have TONS of tiny, individual capital gains to keep track of and calculate when it comes tax time? Are accountants used to compiling all these? I’ve only been using Acorns for 1 day so far, and invested an initial $3,300. I have yet to see how often I “realize” capital gains (thus triggering a taxable event). It sounds like I may be in for a nightmare. Is this how it works?

    1. Aleks

      Although it’s not expressed very clearly. You will need to pay taxes on all realized capital gains, or deduct any realized capital losses. You won’t have to worry about the tiny daily capital gains or losses as Acorns will provide you with a Form-1099 at the beginning of each new year for the past year of investing with Acorns. That’s what you’ll use for your taxes.

      You can also see your net realized gain/loss on the history screen in the Acorns app. And you’re able to view your monthly account statements, trade confirmations, and past tax reports on their site.

      Hope that helps 🙂

    1. Untanglr

      Well, that’s a really open ended question. There are plenty of ETF’s out there. And asking what’s the best, is like asking what the best stock is – it’s tough to say. That said, Acorns splits their investments among:

      CORP: PIMCO Investment Grade Corporate Bd ETF
      SHY: iShares Barclays 1-3 Year Treasury Bond
      VB: Vanguard Small-Cap ETF
      VNQ: Vanguard REIF ETF
      VOO: Vanguard S&P ETF
      VWO: Vanguard FTSE Emerging Markets ETF

      I suggest if you plan on investing in a particular ETF to research them individually and draw your own conclusions about their risks and rewards. The one’s Acorns uses are quite popular and a good start. Zacks also provides an interesting list of the top ranked ETF’s at

  4. Rachael Lofgran

    I’m also a college student and I’ve started the Acorns app but I feel I don’t know enough about investments to even know if it’s good or not, what do you suggest is a great tool or app to learn the very basics of investing for beginners?

    1. Untanglr

      The Bogleheads’ Guide to Investing was one of the first few books that got me started. It offers a great basic explanation of different types of assets and how they work. It also goes over retirement accounts and strategies for fund placements with regards to tax efficiencies. I highly recommend it for a beginner.

      I also recommend reading, The Intelligent Investor. It’s one of the best books I’ve ever read when it comes to value investing. That said, if you’re new to the basics, start with Bogleheads and check this out afterwards.

      Since you’re a college student, look to see if your college library has them available. They’re both quite popular and that way you wouldn’t need to spend any money.

  5. Sherri RN

    I really wanted to try this app but there is no way I’m giving my banking log-in to some anonymous company. I wish there was a way to manually transfer the amount without giving up that info.

    Mint can keep track of my purchases just using my card number. Why can’t this app?

    1. Untanglr

      I agree with you. But since the app is designed to automatically round up your expenses and invest the difference it makes sense that they would require your banking information. One way to reduce risk would be to open a new checking account to use solely with Acorns. Or wait. Maybe one day they’ll adjust their sign up process to facilitate manual transfers only.

  6. furtdsolinopv

    My brother recommended I would possibly like this website. He used to be entirely right. This post actually made my day. You can not imagine simply how a lot time I had spent for this information! Thank you!

  7. Nicolas Ray

    Have been deliberating to use the Acorns App or not. Thanks for the information but now really can’t make up my mind. My main concern security so will do bit more research. Great article…

    1. Untanglr

      Thanks Nicolas. If security is your only concern, I’ll add that Acorns is pretty safe. Each account is SIPC Insured; up to $500,000 for fraud. They also have multi-factor authentication available, which really ramps up the protection.

    1. Untanglr

      Although it may seem silly, you should report it as a loss. You’re supposed to report every single dollar you earn to the IRS as every dollar is taxed. In your case it’s a loss, but it still carries the same weight and importance.

  8. Sam

    Opened up Acorns. But still unsure whether I should continue to use it or not.

    This automatic re-balancing and stuff are confusing me at best. I am not an investor and this is my first try at this, so forgive my lack of knowledge.

    Can somebody please help me understand the tax complications with this? Just like any other Misc event, Acorns will send me a Form-1099 with all the profits and losses, meaning 100’s of papers? or it is just one paper that shows, loss, gains etc?

    Also, I am planning to use it more just a spare change app. I am planning to invest a 100 or so a month on top of spare change to really see what is the fuss about. Is this worth my time and effort? will it be stressful at the end of the year? Will i still gain anything after fees and paying taxes, and tax preparation fees and all? please help me understand.

    1. Untanglr

      For taxes, one or two pages of paper will show your profits and losses for the year. It’s a simple process and your tax preparation won’t be difficult.

      Acorns is also a fairly solid investment tool to begin investing with- especially with more than just change. To really understand what Acorns does I recommend reading up on ETFs and the various funds Acorns invests into (see above post). When Acorns “re-balances” it simply alters how much you’re invested in between the 6 ETFs.

  9. Kevin

    I am a current college student that is interested in attempting to save/make money from investing or any other technique for that matter so I decided to open up an Acorns account in February of 2015. I have little to no knowledge of investing but I have been managing my account and I am impressed with how much it was been growing over the months. Acorns has changed the app for college students like my self and has removed the monthly fees for people under the age of 24 and/ or in school. With these new changes how do you feel about the Acorns app now?

  10. Sean

    This is late, but here’s the problem with this review. As I understand Acorns, the author isn’t the target audience for the app. And the review really isn’t written to that target audience either. The author is someone who has the discipline and the urge to research and save and invest. Acorns is supposed to make it easy for people who don’t. For people who don’t want to chose between saving money and investing it or spending it on beer. Most people who would ideally sign up for Acorns, I believe, wouldn’t even notice the money is gone, and that’s the point. It’s kind of like one of the main arguments for many of a 401k. The money is taken out before they receive their paycheck so they don’t even notice it’s missing, they aren’t required to make a conscious decision whether or not to save each week/month. For an undisciplined person like that, they don’t care if the fee is a little more expensive than if they had their own trade account and saved enough to make a minimum purchase. Because they know, if left to their own devices, they’d never save, nor would they open the trade account, nor would they spend the time researching what to buy. For them, when they ask “is this a good app” or “should I use it” they mean “is this a scam? Or if I sign up for it, will I really save some money?”

    1. Untanglr

      That’s a fair point Sean. I would however caution readers that investing your change is often silly – if you use the application as intended it will round your credit card purchases up to the nearest dollar and invest the difference. Unless you’re making hundreds of credit card transactions monthly it’s hard to claim you’re investing. And the fees alone may eat any potential gains in such a scenario.

      Acorns has recently been putting a greater emphasis on recurring daily, weekly, or monthly transactions where a fixed amount of your choosing is automatically transferred and invested. That’s certainly a better route if you plan to invest your money. But then Acorns is joining a larger playing field – comparing itself to better known players such as Wealthfront or Betterment.

  11. Jeff


    I’ll get right to the point. I get an email today saying has pulled $50 from a ING account I own. I am like What is that?? I google it and call them. “This happens sometimes” they tell me “when a customer TYPES IN THE WRONG ACCOUNT NUMBER.” Are you kidding me?? You don’t verify that the person is the legal owner of the account?? “Yes we do, we send two small deposits and the customer verifies the amounts we sent.” Ok, then how did your company pull $50 from my account because I never verified anything. “Well, they actually can withdraw up to $1000 before they’re required to provide verification. I don’t actually agree with this practice but our developers…” Well, have a nice time getting sued You are going to get your butt handed to you. “We can definitely get your money returned” she says “but, unfortunately, it will take 7-10 business days.” Yes, for real, people. Pulled money from my account with no authorization whatsoever and no attempt to verify that their customer was the legal owner.

    PREPARE TO BE SUED. Class action anyone?

    1. Dr deb

      Take a breath. Your bank should not have released the funds without your authorization. They’re returning it, albeit with a delay. I use acorns very.successfully and my banks have made far more serious errors. Why the law suit itch? Never made an error yourself huh?

  12. Tina

    Lol. “Lawsuit itch.”

    No kidding. I, too, have had far more worse transaction errors made by my own banking establishment than that of which was done by Acorns. That said, however, it is, indeed, a little disturbing that Acorns withdrew any money at all without first making sure the account was correct. Nevertheless, when I’d signed up this evening, they (Acorns) definitely made sure it was my account, as they asked a series of questions of which are the same ones my bank asks. Not until I answered them correctly would they allow me to make any kind of deposit. I’d surmise the OP’s problem happened prior to whatever small glitches Acorns has since fixed.

    Like the above poster said, I, too, am a little late reading this article. My question is: with an initial $1,000.00 deposit, a monthly deposit of at least $100.00, and my investments running as aggressively as Acorns will allow, will I make anything of much significance?

    I’m not well versed (at all) when it comes to understanding investing, nor do I care to be. What appealed to me is the fact that I’m a shopper who’s constantly using her debit card, so the thought that Acorns would simply round up on my purchases, deposit the change into some kind of aggressive portfolio, and I pump (maybe) $100.00 extra dollars into the account once per month is what had me sold.

    Still, I’m curious to see how much, if anything, I can make.

  13. Jason H

    Just started using this app and I setup a recurring deposit of $20. I like the round-up feature too. It’s a bit like Save the Change from BofA, but you’re investing it.

    Entered code D2KH74 and got $5 to start my portfolio….not bad! Free money is free money.

  14. Joanne L

    Is there fees and taxes on withdrawals, is it FIFO or is it the other way around where you pay taxes on the back end and do you get a 1099R?

  15. Chad

    I “invested” 10 dollars with acorn to try it out… In 3 months I made .13 cents and they charged me 3 dollars in fees…. Im gone. Good luck!!

  16. Clayton

    I’ve been using Acorns for almost a year now. I initially gained interest because a friend of mine mentioned it and also told me referrals get an extra $5, and, as a college student, I have no monthly fee (for 2 years since that is when I graduate). I hadn’t been putting much into it during the school year, but I had earned around 6% off of $100 total through 6 months. This summer I got an internship and I put $5 into my account every day since I’m not in an immediate need for cash. My tuition is paid for from scholarships and my parents pay my rent so all I pay is groceries and utilities. I find Acorns to be a great app for college students because it is free and gives you a slight introduction to investing.

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