Investing is a topic that often intimidates people, but Acorns and Robinhood have made it easy for beginners to start investing.
Acorns is a service with an investor-friendly interface. Acorns automatically invests your spare change in the market and manage your portfolio based on your goals.
Robinhood has no monthly fee or account minimums, so you can trade stocks and ETFs commission-free.
Acorns vs Robinhood both offer quick signup processes with no account minimums or fees.
Let's get into the details of which is better for you to use.
What Is Micro-investing?
Micro-investing is just like investing, except you invest smaller amounts of money more frequently than large amounts of money less often.
Acorns and Robinhood are both designed for micro-investing where Acorns has automatic investments that manage your portfolio based on your goals and Robinhood has commission-free trades with no account minimums.
Acorns invests spare change whereas Robinhood requires purchases to be made manually.
Robinhood also offers Robinhood Gold, which allows for margin trading and after-hours trading with fees starting at $50 a month.
Now, let's talk about Acorns vs Robinhood and the pros and cons.
Acorns vs Robinhood Pros And Cons:
Acorns has automatic investments that manage your portfolio based on your goals in mind.
Acorns also include Acorn Spend, Acorn Wealth, Acorn Retirement, Acorn Alerts, Acorn Social, Acorn Invests which are all different features that vary in price.
Acorns Invest allows for investing for retirement while Acorns Wealth provides investment tools to tackle long-term financial goals (e.g., paying off student loans, making a down payment on a house).
Acorn Alerts provides you with updates about your account and Acorns Social is for connecting to friends. Acorns Invests is Acorn's robo-investing service.
The maximum amount you can invest with Acorn is $250,000. Acorns only allow investment in ETFs which are passively-managed index funds that track an asset class or market benchmark. Acorns is only available in the United States, Australia, and New Zealand. Acorn does not have any retirement accounts such as IRA or Roth IRA.
There are no minimums, account fees, or pre-set portfolios on Robinhood. Acorns vs Robinhood make it easy to get started investing for beginners with little money because Acorns charges $12 a month and Robinhood does not charge any monthly fee.
Robinhood also has an automatic investment feature that lets you set up recurring purchases. Acorns vs Robinhood both offer commission-free trades to save money on fees for buying and selling stocks, funds, or ETFs.
There is no retirement account option with Robinhood like Acorns has Acorn Retirement which allows users to invest in IRA accounts. The maximum amount Acorns has is $250,000.
When comparing Acorns vs. Robinhood, Acorns allows for a higher maximum investment amount of $500,000 with Acorns Retirement.
Robinhood does not have Acorn Spend or any tools to tackle long-term financial goals like Acorns does. These are just some key differences between Acorns and Robinhood so let's compare Acorns vs Robinhood and find out which is better for you to use.
How To Manage My Money So I Can Start Investing
It's important to understand how to manage money before you start investing. If you mismanage money today, you will continue mismanaging money when you start investing.
Mismanaging money will only lead to you losing money in the stock market.
There are three things you need to do before investing:
- You have to live on a budget so you know how much money you earn and spend each month.
- You need to pay off your debt so you don't have any high-interest payments.
- You want to save up three to six months of expenses put away in an emergency fund before investing.
There are several things Acorns and Robinhood do not offer like IRA or Roth IRA accounts, retirement account options, college savings plans for children, budgeting tools, or debt payoff tools.
But once you get on track with money management you can start investing with tools like Acorns and Robinhood.
Paying off credit card bills with Acorns Spend is a great way to pay off high-interest rates because that extra cash goes into an Acorns Core Portfolio.
The great thing about Acorns is that it's so easy to use: the first $5,000 of your investment goes towards a risk-free portfolio and after that Acorns uses the Modern Portfolio Theory to put your money in a diversified portfolio.
With Acorn Spend, you can link up your debit or credit card and Acorns invests that cash for you when it comes into the account!
This is amazing if you are trying to pay off debt because Acorns will invest your extra change from everyday purchases.
After you have saved enough money and paid off your debt with Acorn Spend, it's time to start investing 15 - 20% of your household income.
Why Does Paying Off Debt Impact My Investing?
Get out of debt will jumpstart your approach to investing. You are basically giving yourself a raise by paying off debt.
How? Because the money you are paying the debt collector will be kept in your pocket for you to start investing and use for other financial goals like buying a house or paying for your kid's college.
Paying off debt allows you to save toward your financial goals with no limitations. This is the ultimate path to building wealth!
The main thing to remember is you have to start with a detailed budget so you can make sure your money is going to the right spending categories.
Having a plan will help you attack your debt and pay it off quickly.
How Do I Open An Acorns Account?
To open an Acorns account, you need to download the Acorns app (it's available for iOS and Android).
You also need your Social Security Number, Driver's License or Passport number, and one more form of ID. Acorns will use this information to verify your identity.
Once logged in, Acorns will ask you some questions about your risk tolerance (low-to-medium, medium-to-high, or high) and your investment goal.
Acorns offers Acorn Spend - a debit or credit card that you can link to Acorns through the app - which is a great way to start investing if you're not sure how much money you want to invest monthly. Acorn Spend is affordable because Acorns charges a flat monthly fee of $0.25 for each transaction and the majority of banks charge an additional service fee to use debit or credit cards.
Acorn Spend is great if you want to invest that extra cash from your paycheck because Acorns will automatically transfer money into your Acorns Core Portfolio when it comes in!
How Do I Open A Robinhood Account?
To open a Robinhood account, all you need is your name, address, and email.
If you want to add money to your account immediately, you will need your bank account routing and account number.
Once you add your bank account, it can take up to five days for the money to transfer.
Robinhood does not charge any fees and takes 0% commission on every trade!
If you're interested in the Robinhood platform but are not sure how much money to invest monthly then Acorns is a great way to start because Acorns will automatically transfer that cash into your Acorns Core Portfolio when it comes in!
Acorns vs Robinhood: Which Is Better?
When comparing Acorns vs Robinhood, Acorns lets you set customized goals, which is awesome for saving up money to buy something.
Acorns doesn't have a minimum balance requirement but Acorns Invest charges $0.25 per transaction outside of the core account and Acorn Invests charges $12 if your monthly investment amount is less than $500 or 0.25% per year on all Acorns $0-100,000.
Acorns Acorn Spend charges $0.50 for credit and debit transactions.
With Acorns, you can invest in Acorn Retirement which is awesome if you are looking to save money towards retirement or your children's college fund because there are no minimums required on Acorn Retirement accounts. Robinhood does not offer this benefit as Acorns does.
With Acorns, you can link your bank account to Acorns Acorn Spend which is great because Acorns invests the money for you when it comes in.
Acorns has an automatic investment feature called "roundups" that puts spare change into a portfolio without any extra effort on your part. While comparing Acorns vs Robinhood, roundups are Acorn's innovative approach to investing and saving.
Final Words: Acorns vs Robinhood
Acorns and Robinhood are both great low-cost solutions to start investing for retirement.
Investing is necessary to build wealth and you have to get control of your money so you can start building wealth today!
Remember, start with living on a detailed budget and below your means so you are able to invest 15 - 20% of your household income each month.
Are you currently investing? Why or why not?