Betterment vs. Acorns: Which is Better for Investing? A Detailed Analysis
**Betterment vs. Acorns: Which Robo-Advisor Is Right for You?**
Do you want to start investing but need help figuring out how to begin? Robo-advisors will save the day! To help you determine the best app for your needs, we’ll discuss two of the most popular platforms: **Betterment vs. Acorns**.
Betterment and Acorns are among the industry’s top financial planning and investment platforms, designed to automate your savings and investments. They make investing easy by directly managing your money, saving you time and effort compared to doing it all on your own. Both provide similar features with a few important differences.
Knowing these details, along with the advantages and drawbacks of each app, will help you decide which platform better suits your financial goals and investment preferences.
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### What Is Acorns?
Acorns is an investment app best known for its unique **Round-Ups** feature. This feature works by investing the spare change from your purchases. For example, if you buy a donut for $1.50, Acorns will round up the cost to $2 and invest the extra $0.50.
Besides Round-Ups, you can automatically send money to Acorns periodically or make one-time payments. This makes Acorns especially suitable for people who find it hard to save money. You might not even notice you’re investing, which adds to the app’s convenience.
Acorns is ideal for hands-off investors with its automated investment feature that places your money in a diversified portfolio of exchange-traded funds (ETFs) managed by reputable firms like Vanguard and BlackRock. The platform is designed for beginners, featuring an easy-to-use interface and educational content.
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### How Does Acorns Work?
The standout feature of Acorns is the **Round-Ups**. You can also make one-time payments or set up scheduled automatic contributions from your bank accounts.
Acorns offers various ETF portfolios and account types tailored to your financial goals.
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### Acorns Portfolio Types
When you sign up and start investing, you can choose from the following portfolios based on your risk tolerance and goals:
– **Aggressive:** Invests in stocks only (large domestic companies, international stocks, small-cap, and mid-cap stocks).
– **Moderately Aggressive:** Mix of large-cap stocks, international stocks, and some bonds.
– **Moderate:** Balanced mix of stocks (large to small cap) and bonds.
– **Moderately Conservative:** Combination of stocks and bonds.
– **Conservative:** Bonds-only portfolio.
– **Acorns Sustainable Portfolio:** Invests in companies focused on environmental and social responsibility.
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### Acorns Products and Services
Acorns offers a broad range of account types:
– **Acorns Invest:** Starts investing with as little as $5. Automated contributions and ETF investments.
– **Acorns Later:** An Individual Retirement Account (IRA) to help you invest for retirement with potential tax benefits.
– **Acorns Checking:** A money-saving checking account with minimal fees, no overdraft, ATM fee reimbursements, and automatic investing features.
– **Acorns Early:** Custodial accounts for minors (UTMA/UGMA) to save for educational expenses or other child-specific needs.
– **Acorns Earn:** Cashback program that puts money back into your investment account when shopping at select retailers like eBay, Apple, Uber Eats, and Walmart.
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### Acorns Management Fees
Acorns charges a flat fee based on your subscription type:
– **Personal Account:** $3 per month for saving, investing, and bonus investment products.
– **Family Account:** $5 per month, which includes the Personal plan benefits plus Acorns Early accounts.
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### Acorns Minimum Investment
You can open an Acorns account with **no initial investment required**, but you need a minimum balance of **$5** to start investing.
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### What Is Betterment?
Betterment is one of the leading robo-advisors in the U.S., aiming to help you make the best financial and investment decisions for your money.
By investing with Betterment, you gain access to automated investing, personalized portfolio building, a variety of portfolio options, and Certified Financial Planner (CFP) guidance for premium account holders.
Betterment is famous for its **automatic tax-loss harvesting**, a feature that rebalances your portfolio to minimize capital gains taxes.
This platform is perfect for hands-off investors looking for professionally built and personalized portfolios.
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### How Does Betterment Work?
Betterment uses computerized algorithms for automated portfolio management. It caters to both high- and low-end investors, letting you invest towards specific financial goals.
You can choose your goal from the following categories:
– Retirement (Savings)
– Retirement (Income)
– Safety Net
– Major Purchase
– General Investing
– Cash Goals
Betterment also offers an FDIC-insured checking account and a cash reserve account with an APY of 2.00%, catering to everyday spending and saving needs.
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### Betterment Portfolio Types
Betterment suggests portfolios based on your goals and risk tolerance, but you can customize your choice:
– **Core Portfolio:** Long-term investments in various stocks and bond ETFs globally.
– **Innovative Technology:** Stocks and bonds in high-growth, high-risk sectors like clean energy, semiconductors, blockchain, virtual reality, and nanotech.
– **Socially Responsible:** Investments in ethical, environmentally, and socially responsible companies. Categories include Broad Impact, Climate Impact, and Social Impact.
– **Goldman Sachs Smart Beta:** Aims for companies that could outperform with low costs but higher risk.
– **BlackRock Target Income:** Bonds-only portfolio for reduced market volatility exposure.
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### Betterment Account Types
Betterment offers several account types to suit your goals:
– Traditional, Roth, and SEP IRAs
– Trust accounts
– Cash Reserve account
– Checking account
– Individual taxable account
– Joint taxable account
Betterment’s **Cash Reserve** is a no-fee cash account that currently pays a variable APY of 2.00%. The **Checking account** offers mobile-first instant sign-up benefits.
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### Betterment Management Fees
Betterment charges:
– **Digital Account:** 0.25% annual fee with a minimum opening balance of $10 for automated portfolio management.
– **Premium Account:** Also 0.25% annual fee for accounts with $20,000 or more; balances below $20,000 incur a daily portion of a $4 monthly fee.
– **CFP Access:** Available for Premium holders at an additional 0.15% fee.
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### Betterment Minimum Investment
Betterment lets you open an account with **$0 minimum deposit**. Once you deposit funds, investing begins according to your selected goals. You can schedule automatic investments monthly, bi-weekly, or weekly.
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### Betterment vs. Acorns: Pros and Cons
Both apps have their strengths and weaknesses.
**Betterment Pros:**
– Lower fees for balances under $14,400
– Includes automatic tax-loss harvesting at no extra cost
– Offers wider portfolio and investment options
– High-yield Cash Reserve account paying 2.00% interest
– Access to Certified Financial Planner guidance (premium plan)
**Betterment Cons:**
– Only invests through ETFs (no direct indexing)
– No custodial accounts for minors
– High minimum balance ($100,000) for premium benefits without additional fees
**Acorns Pros:**
– Unique Round-Ups feature for effortless investing
– No minimum balance to open an account
– Cashback rewards with 350+ retailers nationwide
– Easy-to-navigate and beginner-friendly interface
– Offers Bitcoin-linked ETFs for cryptocurrency exposure
– Low flat monthly fees
**Acorns Cons:**
– Higher fees for smaller account balances compared to Betterment
– Limited customization of portfolios
– No access to financial advisors
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### Which Should You Choose: Betterment or Acorns?
If you are a low-net-worth investor looking for varied portfolios, lower fees, and added features like tax-loss harvesting, **Betterment** is likely the better choice. Its Cash Reserve account with competitive interest, broader investment options, and financial advisor access add extra value.
If you prefer a beginner-friendly platform with automatic saving features like Round-Ups, no minimum deposit, cryptocurrency exposure through Bitcoin ETFs, and cashback rewards, then **Acorns** may be more suitable.
Ultimately, the best robo-advisor for you depends on your investment style, goals, and personal preferences.
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### Frequently Asked Questions (FAQs)
**Is Acorns better than Betterment?**
It depends on your needs. Betterment offers lower fees for smaller balances, tax-loss harvesting, and more portfolio options. Acorns excels with its beginner-friendly design, automatic saving features, and cashback rewards.
**What are the cons of using Betterment?**
Betterment invests only in ETFs (no direct indexing), lacks custodial accounts, and has a high minimum for premium features.
**Is it worth keeping money in Acorns?**
Yes, especially if you need help saving. The Round-Ups feature and cashback rewards make investing painless and convenient.
**Is Betterment worth the fee?**
Definitely. Betterment offers advanced features, competitive fees, and attractive cash account yields, making it a strong robo-advisor option.
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### Conclusion
This comparison of **Betterment vs. Acorns** highlights their unique approaches and features. Both apps provide excellent options for building your investment portfolio and generating passive income.
Your choice should align with your initial investment capacity, financial goals, and personal preferences. Whether you pick Betterment, Acorns, or even both, you are making a positive step toward financial empowerment by starting your investment journey.
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**Related reads**:
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