Betterment vs. Acorns: Which one is best for best for investing?
Moneywise.com / Moneywise.com
Updated: January 02, 2024
We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware that some (or all) products and services linked in this article are from our sponsors.
We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware that some (or all) products and services linked in this article are from our sponsors.
If you need a helping hand with investing, Betterment and Acorns are two of the most popular apps you can use. One is a fully-fledged robo-advisor, while the other is a microsavings app with many similarities. But both require $0 to open an account and are perfect for new investors.
However, choosing the right platform to invest with depends on your goals, how much you're investing, and timeframe.
That's why our Betterment vs. Acorns breakdown is covering the features you need to know and how to ultimately pick the right investing option.
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About Betterment
Betterment is a leading robo-advisor that was founded in 2008. It currently has over 730,000 investors and $33 billion in assets under management. And with a $0 funding requirement, it's an excellent way to invest with a small amount of money.
About Acorns
Founded in 2012, Acorns is the most popular micro investing app on the market. With over 9 million customers, Acorns helps millions of people save and invest on autopilot. It also has affordable starting plans and lets anyone begin investing regardless of how much money they have,
Betterment vs. Acorns – portfolios
Both Betterment and Acorns invest your money in various portfolios that match your investing goals and risk tolerance. This is a foundational feature for robo-advisors and microsaving apps alike, and it's why Betterment and Acorns are ideal for passive investors.
With Betterment, you can invest in a variety of portfolios like:
- Betterment Core Portfolio: Includes various Vanguard stock and bond ETFs.
- BlackRock Target Income Portfolio: A diversified basket of 100% bonds.
- Goldman Sachs Smart Beta Portfolio: Another bond portfolio that's designed for retirees who want lower risk.
- Innovative Technology Portfolio: Includes companies in sectors like robotics, AI, blockchain technology, and other innovative industries.
You answer an investing questionnaire when you sign up. From there, Betterment builds a portfolio of low-cost ETFs and bonds that matches your goals and risk tolerance.
Your Acorns portfolio is similar to Betterment since the app also invests in a mix of ETFs and bonds. The app recommends a portfolio depending on your age, time horizon, income, goals, and risk tolerance. Like Betterment, you're free to choose whatever portfolio you want regardless of what the app suggests.
Currently, Acorns has five core portfolios you can invest in:
- Conservative: A mix of government and corporate bonds.
- Moderately Conservative: A roughly even split between stocks and bonds.
- Moderate: A variety of large, mid, and small cap stocks plus some bond exposure.
- Moderately Aggressive: Mostly large cap stocks and some international stocks plus bonds.
- Aggressive: A completely stock-based portfolio with some international exposure.
However, Acorns only invests in 12 different ETFs across all portfolios, so it's more limited versus Betterment's portfolios.
WINNER — Betterment has more portfolio variety than Acorns, but both platforms invest in a variety of ETFs and bonds.
Betterment vs. Acorns – management fees
One main difference between Betterment and Acorns are the fees you pay:
- Betterment Fees: Betterment charges 0.25% in annual management fees for accounts under $100,000 and 0.40% for premium accounts over $100,000. Premium customers also get access to a human financial advisor.
- Acorns Fees: Acorns costs $3 or $5 per month depending on the plan you choose. The Personal plan, which costs $3 per month, unlocks the main investing feature plus features like retirement savings and Acorns checking. The $5 Acorns Family plan includes everything from the Personal plan as well as Acorns Early, the app's investing account for kids.
With its Personal plan, Acorns costs $36 per year in management fees. With Betterment, spending this much in annual fees requires investing roughly $15,000.
WINNER — Betterment is significantly more cost-effective for portfolios under $15,000 but gradually costs more for larger portfolios.
Betterment vs. Acorns – minimum investment
There's a $0 funding requirement for Betterment and Acorns, so anyone can open an account. Once you make a deposit with Betterment, it starts investing your money in the portfolios you select. With Acorns, it can start investing by rounding-up your spare change or through one-time or recurring investments. There's a $5 minimum for one-time or recurring investments.
The main difference between Betterment's and Acorns' investing style is this round-up feature. For example, if you purchase your morning coffee and a muffin for $5.25, Acorns can round-up your purchase to $6 and invest the additional $0.75 automatically. This helps beginner investors build good habits and invest automatically.
You can also create automatic deposits with Betterment if you want to invest regularly. The robo-advisor lets you set up weekly, biweekly, and monthly deposits. You can also set up two deposits on specific days per month, which is perfect for investing money right after your paycheck deposits. Finally, one-time deposits are also available.
WINNER — Both Betterment and Acorns have a $0 funding requirement and are very beginner-friendly.
Betterment vs. Acorns – account types
With Betterment, you can open a variety of account types, including:
- Roth, Traditional, and SEP IRA
- Individual taxable accounts
- Joint taxable accounts
- Trust accounts
- Betterment Cash Reserve
- Betterment checking account
Currently, Betterment doesn't support 529 accounts, custodial accounts, solo 401(k)s, or self-directed accounts.
As for Acorns, eligible account types include:
- Roth, Traditional, and SEP IRA through Acorns Later
- Individual taxable account
- 401(k) rollover
- Custodial accounts through Acorns Family
- Acorns checking account
The main difference is that Betterment supports joint and trust accounts whereas Acorns supports custodial accounts. This might make Betterment superior if you want to invest with your partner while Acorns is better for teaching your kids how to invest.
WINNER — Betterment is better for couples with its joint account while Acorns offers custodial accounts.
Betterment vs. Acorns – ESG investing
If you want to invest in companies that value environmental and social well being, ESG investing is for you. But not every robo-advisor or microsavings app offers ESG focused portfolios.
Thankfully, both Betterment and Acorns have ESG options you can explore. But Betterment is certainly superior since it has three socially responsible investing (SRI) portfolios:
- Broad Impact: Invests in ETFs that consider all ESG components, including ethical labor, lowering carbon emissions, and more company diversity.Climate Impact: Supports companies making an effort to lower carbon emissions and ones that fund green projects while divesting from holders of fossil-fuel reserves.Social Impact: This portfolio supports companies that promote minority empowerment and greater gender diversity.
- Broad Impact: Invests in ETFs that consider all ESG components, including ethical labor, lowering carbon emissions, and more company diversity.
- Climate Impact: Supports companies making an effort to lower carbon emissions and ones that fund green projects while divesting from holders of fossil-fuel reserves.
- Social Impact: This portfolio supports companies that promote minority empowerment and greater gender diversity.
In contrast, Acorns has one ESG portfolio called Acorns Sustainable Portfolios. This portfolio is powered by iShares BlackRock ETFs. But you can choose four different portfolio styles, ranging from moderately conservative to aggressive, similarly to regular Acorns portfolios.
WINNER — Betterment has more ESG portfolio options than Acorns.
Betterment vs. Acorns – Portfolio Rebalancing
Both Betterment and Acorns offer automatic portfolio rebalancing at no extra cost. This means each company can sell-off and purchase different ETFs or bonds to keep your portfolio composition aligned with your overall goals.
WINNER — Both platforms automatically rebalance portfolios.
Betterment vs. Acorns – security
Both Betterment and Acorns are secure financial services that use encryption and security features like two-factor authentication to help protect your personal and financial information. Cash balances also get FDIC insurance and up to $500,000 in SIPC insurance for your investments.
WINNER — Betterment and Acorns are both secure and provide FDIC and SIPC insurance.
Betterment vs. Acorns – other unique features
Betterment unique features
Some unique features you get as a Betterment customer include:
- Betterment Cash Reserve: This cash reserve account has a $10 minimum deposit requirement and is an excellent account for parking idle cash. It pays 2.25% APY (as of 9/26/22), which is on-par with many high-yield savings accounts.
- Betterment Checking Account: Enjoy a no-fee checking account that provides no ATM fees, foreign transaction fees, or overdraft fees. Plus, cash gets up to $250,000 in FDIC-insurance. You even earn cash-back rewards at thousands of brands when you spend with your Betterment Visa debit card.
- Crypto Investing: Betterment doesn't currently support crypto investing, but it's coming to the platform since its acquisition of Makara. Look for automated crypto portfolio investing in the future for this robo-advisor.
- Human Advice: Premium investing customers with portfolios over $100,000 get unlimited calls and emails with Betterment's team of certified financial planners. Regular Digital investing customers with smaller portfolios can also buy advice packages ranging from $299 to $399 to help with different areas of financial planning, like retirement savings or college planning.
- Planning Tools: Customers can use tools like Betterment's retirement planner or create goal-based investments and track their progress and net worth with a centralized dashboard.
- Tax-Loss Harvesting: Unlike Acorns, Betterment uses tax-loss harvesting to help optimize your returns by selling off specific assets at a loss to reduce some of your capital gains.
Betterment Cash Reserve APY Disclosure - Annual percentage yield (variable) is as of 9/26/2022. Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities. For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance.
Acorns unique features
- Spare-Change Round-Ups: Acorns is one of the pioneers of the spare-change round-up method of investing, and this is the foundation of how the app helps you regularly invest.
- Acorns Checking Account: This fee-free checking account helps you automatically invest your money when you shop. It also provides free ATM withdrawals from 55,000+ AllPoint ATMs and has up to $250,000 in FDIC insurance like Betterment's checking account.
- Acorns Earn: Earn cash back when you shop from 350+ brands in person plus from thousands of online brands.
- Bits of Bitcoin ETF: Choose to invest in Bitcoin through Acorns and diversify up to 5% of your portfolio in crypto. Acorns invests in the ProShares Bitcoin Strategy (BITO) to add BTC exposure to your portfolio without having to actually purchase BTC through a crypto exchange.
Betterment pros and cons
Pros
- Low annual management fees
- $0 funding requirement
- Wider portfolio variety than Acorns, including ESG portfolios
- Betterment Cash Reserve account pays interest on your cash deposits
- Utilizes tax-loss harvesting
Cons
- You need to pay for financial advice or have a portfolio over $100,000
- Custodial accounts aren't available
Acorns pros and cons
Pros
- Helps new investors build good habits with regular contributions
- Lets you invest in crypto through Bits of Bitcoin
- Custodial accounts are available through Acorns Family
- Simple pricing structure
- Earn more money with Acorns through the Acorns Earn program
Cons
- Not as many portfolio options as Betterment
- Portfolios are less diversified than Betterment and only invest in 12 ETFs
- Monthly fees are very high for small account balances
- Doesn't utilize tax-loss harvesting
Acorns vs. Betterment – which option should you choose?
We prefer Betterment over Acorns if you want more portfolio options and are looking to consistently invest money with recurring deposits or through larger lump-sum deposits. It's also superior to Acorns if you want more ESG-friendly portfolios. In contrast, we prefer Acorns over Betterment if you're relatively new to investing and need a helping hand with building good habits. But Betterment is our recommendation for long-term investing and retirement planning.
If anything, you can view Acorns as the training wheels for your investing bicycle. It's a useful app for learning how to consistently invest. And the fact you can open a custodial account for your kids is also a selling point.
However, Acorns monthly pricing is steep for very small portfolios, which is a downside since this app excels for new investors. With Betterment, you have stable, low fees and much more portfolio variety, making it a better long-term investing solution than Acorns.
The bottom line
Both Betterment and Acorns are useful tools for investing on autopilot. Choosing the right option depends on your goals, how much money you're investing, and how long you plan on investing for as well.
Acorns is an excellent app for beginner investors since it teaches the power of regular investing and compound interest. And Betterment is one of our favorite robo-advisors because of its low fee structure and portfolio variety.
Just compare Betterment's fees to Acorns and see which app is more cost-effective. And think about the types of portfolios you want to invest with and if you want to invest your spare change or larger sums of money.
Betterment Cash Reserve Disclosure- Betterment Cash Reserve ("Cash Reserve") is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients' funds are deposited into one or more banks ("Program Banks") where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option. Funds held in your brokerage accounts are not FDIC‐insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC‐insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details. Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 (or $2,000,000.00 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to four Program Banks). Even if there are more than four Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000.00 (or $2,000,000.00 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC's Form ADV Part II.
