Is Acorns a Good Way to Invest?

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Acorns is a micro-investing app that first became available in ​2012​. It wasn't the first savings app on the scene, but it's unique in that it helps you to save ​and​ invest. Acorns grew to nearly ​7 million users​ by ​February 2020.​ Could so many investors be wrong? It depends on a few pros and cons.

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How Does Acorns Work?

Your Acorns investing journey begins when you link a financial account to the app. It can be a bank account, a debit card or a credit card. Acorns refers to this as your "funding source." You can link more than one.

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Let's say you stop at the supermarket on your way home from work to get something for dinner. Your tab comes to $34.75 and you use the debit card you've linked to Acorns. The app will round your tab up to an even $35 and divert the extra 25 cents to an Acorns investment account in your name. You can invest as little as ​$5​ a day, or even $5 a week or a month if that's more your comfort level.

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Acorns calls this practice "round-ups," and it doesn't involve intimidating amounts. Your purchases are only rounded up to the next dollar, not to the next $50 or $100. It's money you'll probably never miss – just your spare change here and there.

The Acorns Investment Service

Acorns will invest your change when it adds up to $5 from all your linked accounts over a series of purchases. Your money goes into exchange-traded funds, an investment vehicle that's often referred to as "ETFs." Your investment dollars are spread out over a diversified array of asset types and classes with ETFs. They're one of the less risky investment options out there.

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Twelve different ETFs are included in all of Acorns' five available investment plans or portfolios. Each portfolio holds from four to six ETFs. The portfolios are designed by investment powerhouses, BlackRock and Vanguard, and their management is taken care of by Acorns experts.

Acorns will determine the plan and risk level that seems right for you based on your answers to a series of questions that will establish the income you're working with, your existing net worth, your employment status and your goals. You can check your investment reports on the app at any time, and a support team is available if you have concerns or questions.

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You Have Some Control

Acorns leaves some choices and options up to you – your involvement isn't limited to running about town and swiping your debit card. You can schedule automatic transfers in addition to your round-ups to take place daily, weekly or even monthly.

As for those five portfolios, you can accept the one Acorns recommends for you or you can override that choice and decide which one you want. What you can't do is invest your Acorns account in anything other than these five options. You can't mix and match investments, plucking one or more from each of the five available portfolios. Acorns reserves the exclusive right to determine what ETFs are included in each of them.

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How Much Does This Cost?

Acorns is best suited to novice investors, those who are just getting their feet wet at this ETF game. And it won't hold you by the hand and guide you for free. There are no investment account minimums to start with, and Acorns doesn't charge any commissions, but you must subscribe to the service.

You have two choices here. The subscription fee for an Acorns Personal account will run you ​$3 a month​, or you can buy into the family plan for ​$5 a month​. You can effectively share it with your kids.

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But both these tiers are a little pricey compared to alternatives, such as traditional investment advisors, when you consider how little you're actually investing and how much that money can return.

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