Betterment vs. Acorns: Which Investing Platform is Best in 2022?
Two top robo-advisors, Betterment and Acorns, will invest your money for you if you don’t know where to start (or simply want to hand off your investments). Betterment is the largest robo-advisor, while Acorns is known for letting you save by rounding up your change. Keep reading to learn which one you should pick.
SustainFi Updated April 1st, 2022
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At a glance
- Both Acorns and Betterment offer good portfolio options. Acorns makes saving easier, but Betterment gives you more investing choices
- Best for beginners who need help saving: Acorns. Acorns is easier to use for beginners and lets you save and invest your spare change
- Best portfolio selection: Betterment. Betterment lets you choose among six portfolios, including three socially responsible investing options
Keep reading to learn more.
What is Betterment?
Founded by Jon Stein in 2008, Betterment is the first and most successful robo-advisor judging by assets under management (which reached $29 billion in early 2021). The robo-advisor uses algorithms based on the Modern Portfolio Theory to create the right portfolio to meet your goals, such as saving for retirement or growing your wealth.
Betterment has two service tiers, Digital and Premium. Betterment Digital charges a 0.25% annual fee, and there is no minimum balance. Betterment Premium charges a 0.40% fee, and you need at least $100,000 to get started. In return, you get access to human financial advisors.
🔔 Check out the full Betterment review.
What is Acorns?
Acorns is a robo-advisor that lets you invest spare change from everyday purchases in diversified portfolios made up of exchange-traded funds (ETFs). The company was launched in 2014 by the father and son duo, Walter and Jeff Cruttenden, to make investing accessible to everyone. Acorns has since expanded to retirement and checking accounts.
The robo-advisor grew its assets under management from $3 billion in 2020 to $4.7 billion in 2021. It has over 9.5 million users. Acorns is best known for having no minimum balances, letting you save your spare change and being beginner-friendly.
🔔 Read the full review of Acorns.
Betterment vs. Acorns: Account types
Both Acorns and Betterment support:
- Individual and joint taxable investment accounts
- Retirement accounts, including traditional, SEP, Roth IRAs, and rollover IRAs
In addition, Acorns offers custodial accounts (Acorns Early), which let account-holders create UTMA/UGMA accounts for children. Acorns Early is only available if you sign up for the Family Plan.
In contrast, Betterment supports trusts.
💰 The winner: Tie. Both Acorns and Betterment offer enough account types to suit most investors. Acorns also has custodial (UTMA/UGMA) accounts, while Betterment offers trusts.
Betterment vs. Acorns: Checking accounts
Both Acorns and Betterment can set you up with checking accounts.
Acorns offers checking accounts that come with a metal Visa debit card. The card offers free access to over 55,000 in-network ATMs. Your account is FDIC-insured for up to $250,000 and includes fraud protection, direct deposit and mobile check deposit options. Acorns Earn lets you earn bonus investments when you shop with over 350 brands like Apple, Chewy and Sephora.
Betterment offers two cash management accounts:
- Betterment Cash Reserve, a high yield savings account, is FDIC-insured and pays a 0.35% APY as of April 2022
- Betterment Checking Account, a no-fee checking account that comes with a Visa debit card. The account is FDIC-insured for up to $250,000 and reimburses all ATM fees. You can get cash back rewards from thousands of brands like Dunkin, adidas and Walmart
💰 The winner: Betterment. Both Acorns and Betterment offer checking accounts with a debit card, but Betterment gives you the choice of two accounts, one of which earns an APY.
Betterment vs. Acorns: Minimum investment
Both Acorns and Betterment have no minimum investment. Compare this to working with a human financial advisor, some of whom require $250,000 or more to get started.
Although Acorns has no minimum, it will start investing your money when you have at least $5 in your account.
There is no minimum for the Betterment Digital plan. The premium plan, which gives you access to fiduciary financial advisors, requires a $100,000 investment.
💰 The winner: Tie. Both Acorns and Betterment have no minimum investment.
Betterment vs. Acorns: Management fees
Betterment and Acorns have different fee structures. Acorns charges a fixed fee per month, while Betterment charges an annual fee of 0.25% – 0.40% of the assets under management. Neither Acorns nor Betterment charges any account opening fees.
Acorns has two membership plans that cost $3 or $5 a month. As of September 2021, Acorns Lite ($1/month) is no longer offered. The two plans offered today are:
- Acorns Personal ($3/month), which includes personal investment, retirement, and checking accounts plus a metal debit card
- Acorns Family ($5/month), which includes all the Personal features plus Acorns Early, which offers investment accounts for kids
The fees are competitive for higher account balances. However, $3-$5/month may be expensive if you have very little invested. If you only have $1,000 in your account and sign up for Acorns Family, you are paying 6% each year. (You could argue that it’s still worth it because Acorns helps you save money you would have spent otherwise.)
In contrast, Betterment charges an annual fee of 0.25% of assets under management ($25 annually on a $10,000 investment). Betterment Digital charges the same management fee for traditional and socially responsible portfolios. 0.25% is one of the lower fees among full-service robo-advisors. The premium plan costs 0.40%.
💰 The winner: It depends. Because Acorns charges a flat monthly fee, it can be more expensive than Betterment for small account balances and cheaper for larger balances. For example, if you sign up for the Acorns Personal plan, it costs the same as Betterment Digital if you invest $14,400. Acorns is cheaper if you invest over $14,400.
Betterment vs. Acorns: Fund expenses
When you invest through a robo-advisor, you also need to pay the fees of the funds in your portfolio. (They are deducted automatically.) The money goes to the fund manager, not to the robo-advisor company.
We found that the funds in the Acorns and Betterment core and socially responsible portfolios cost roughly the same. For example, if you invest in 70% stocks and 30% bonds, the Betterment Core portfolio will cost you 0.07% and the Broad Impact Portfolio 0.17%. Likewise, the Acorns Moderately Aggressive portfolio will cost 0.05% for the core version and 0.16% for the sustainable option.
💰 The winner: Tie. The funds in Betterment and Acorns portfolios cost roughly the same. They are also in line with other robo-advisors, like Wealthfront. Note that the overall cost will change if your risk profile changes, but the difference appears small.
Betterment vs. Acorns: Socially responsible investing
Catching on to the ESG investing trend, both Acorns and Betterment offer ESG or sustainable portfolios. Betterment refers to them as the Socially Responsible Investing (SRI) Portfolios or Impact Portfolios. Broadly speaking, ESG portfolios score better on environmental, social, and governance metrics like carbon emissions, worker treatment, diversity, and governance.
Although Acorns ESG Portfolios invest in more funds, both Acorns and Betterment pick from the line-up of low-cost sustainable ETFs from iShares (except the Betterment Climate Impact Portfolio). Both robo-advisors choose the iShares ESG Aware MSCI USA ETF (ESGU), the iShares ESG Aware MSCI EAFE ETF (ESGD), and the iShares ESG Aware MSCI EM ETF (ESGE). Learn more about Acorns ESG portfolios.
Unlike Acorns, which only offers one sustainable option, Betterment has three:
- The Broad Impact Portfolio: Betterment’s general ESG option includes ESG funds for U.S. stocks, emerging and developed markets stocks, and, for non-taxable portfolios, U.S. high-quality bonds
- The Climate Impact Portfolio. The Climate Impact Portfolio emphasizes the “E” or environmental factors in ESG. This portfolio features a low-carbon footprint stock ETF (CRBN) and ETFs that divest from fossil fuel reserve owners. According to Betterment, carbon emissions per dollar of revenue for the 100% stock Climate Impact Portfolio are half of those of the conventional (Core) Portfolio. The portfolio adds green bonds – bonds that fund environmentally friendly projects – through a green bond ETF
- The Social Impact Portfolio. The Social Impact Portfolio adds two impact funds that promote gender diversity and ethnic and racial inclusion. These funds are the SPDR SSGA Gender Diversity Index ETF (SHE) and the Impact Shares NAACP Minority Empowerment ETF (NACP)
🔔 Read the full review of the Betterment Impact Portfolios.
💰 The winner: Tie. When we compared the ESG scores between Acorns and Betterment (Broad Impact Portfolio), they were quite close. However, Betterment gives you the choice of three portfolios vs. Acorns’ single sustainable option.
Betterment vs. Acorns: Automatic savings
Acorns lets you save more through automatic round-ups. When you buy something with your Acorns debit card or another linked card, Acorns rounds up your transaction to the nearest dollar and invests the change into your Invest account portfolio. For example, if you just bought a coffee for $3.59, Acorns charges your card for the remaining $0.41 and invests it in the portfolio you’ve chosen.
According to Acorns, the average user invests over $30 a month through round-ups.
💰 The winner: Acorns. Betterment doesn’t offer round-ups.
Betterment vs. Acorns: Tax-loss harvesting
Tax-loss harvesting is a tax reduction strategy that involves selling a fund or stock that has experienced a loss. By realizing this loss, you can offset taxable gains on other investments. The sold fund is replaced with a similar one, maintaining an optimal asset allocation.
Betterment offers automatic tax-loss harvesting at no additional cost at the ETF level. A more advanced tax-loss harvesting strategy, selling individual stocks that have lost money (also called direct indexing), is not available. (If you are interested, you can check out Personal Capital.)
In addition to tax-loss harvesting, Betterment offers Tax-Coordinated Portfolios. To take advantage of that, you need to open both a taxable investment account and a retirement account with Betterment. Betterment will then hold income-earning assets like bonds in your tax-advantaged retirement account and stocks in your taxable account. This will ensure an optimal asset allocation while reducing taxes.
💰 The winner: Betterment. Acorns doesn’t offer tax-loss harvesting.
Betterment vs. Acorns: Human financial advisors
The Betterment Digital plan doesn’t come with access to human advisors, though you can buy a package for an extra fee ($299-$399 for 45-60 minutes). Human advisors are Certified Financial Planners (CFP), the most rigorous certification for financial professionals. CFPs also pledge to be fiduciaries, meaning that they promise to act in your best interest.
Here are some of the packages:
- Getting Started: $299
- Retirement Planning: $399
- Financial Check up: $399
- College Planning: $399
- Marriage Planning: $399
Betterment Premium customers get ongoing access to fiduciary financial advisors.
💰 The winner: Betterment. Acorns doesn’t have any human financial advisor options.
Betterment vs. Acorns: Automatic rebalancing
Both Betterment and Acorns will automatically rebalance your portfolio. Automatic rebalancing means that the robo-advisors will buy or sell investments to get to your optimal asset allocation, like 80% stocks and 20% bonds.
Sometimes when one asset class, like stocks, does much better than another one, like bonds, your portfolio may “drift” and become riskier (or less risky) than it should be. Automatic rebalancing solves that.
💰 The winner: Tie. Nearly all robo-advisors now offer this feature.
💰 The Overall Winner
- It’s very close, so the winner depends on who you are
- Best for beginners and those struggling to save: Acorns. Acorns Invest is a great option for beginners, especially those who are struggling to save
- Best portfolio selection: Betterment. Betterment lets you choose among six portfolios. In addition, it may be cheaper for low account balances. For an extra fee, you can also get access to human advisors
- Neither robo-advisor offers advanced customization options. If you want to change up some of the funds in your portfolio, M1 Finance may be the better choice
🔔 Want to compare more options? Check out the top 10 investing apps.
- Acorns vs. Stash
- Acorns vs. M1 Finance
- Acorns vs. Robinhood
- Acorns vs. Wealthfront
- Betterment vs. M1 Finance
- Betterment vs. Personal Capital
Annual percentage yield (variable) is as of 4/1/2022. 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.
NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.