Robinhood and Acorns are two investment platforms with very different approaches to helping you grow your money. Robinhood gives you complete freedom to invest in individual stocks and options along with ETFs, while Acorns focuses on helping users build diversified portfolios with low-cost ETFs. Both platforms boast commission-free trading and fractional shares, making them good choices even if you don’t have a large amount of money to invest.
So, is Robinhood or Acorns the better brokerage for your investing style and goals? In this guide, we’ll compare the two platforms head to head to see how they stack up.
About Robinhood and Acorns
Robinhood is a mobile-first brokerage that put commission-free trading on the map when it launched in 2014. The company offers trading of nearly all US stocks and ETFs, introduced options trading in 2017, and more recently launched trading for major cryptocurrencies. Currently, the platform has more than six million users in the US.
Acorns was also founded in 2014, but with a focus on helping users invest in ETFs and developing balanced portfolios. The platform currently has around 3.7 million users and manages over $1 billion in assets.
On the surface, Robinhood and Acorns have a number of features in common. Both platforms offer commission-free trades and don’t require a minimum account balance. Those characteristics alone buck traditional brokerages, but Robinhood and Acorns go a step further by allowing users to purchase fractional shares of stocks and ETFs.
However, what you can invest in and how you manage your finances is very different between the two platforms.
Robinhood vs. Acorns: How Do They Differ?
Robinhood is similar to traditional brokerages in that you can invest in almost any US stock or ETF through the platform. There are relatively few limitations, and no pre-made portfolio bundles that you are forced to choose between. Like a traditional brokerage, Robinhood also allows users to invest in options, and the platform has recently introduced trading for major cryptocurrencies as well.
Thanks to this flexibility, Robinhood can be used by a wide range of traders and investors. Active traders can place orders commission-free, while long-term investors can curate and manage a custom portfolio through the platform.
Acorns is designed primarily for long-term investors. Instead of choosing your investments one-by-one, users invest in one of five pre-made portfolios that differ primarily in the proportions of asset classes they hold. These portfolios, in turn, are made up primarily of low-cost ETFs from Vanguard and Blackrock. Importantly, investors cannot customize the contents of their chosen portfolio.
Another difference between Robinhood and Acorns is that Acorns has a lot of automation features built in. To start, Acorns will automatically rebalance users’ portfolios to maintain the desired balance of stocks and bonds. Robinhood doesn’t have any such rebalancing, which can be good or bad depending on your investing goals.
Acorns is also built to help users automatically manage their personal finances. Acorns accounts link to debit and credit cards as well as to checking accounts. If you turn on the “round up” function, Acorns will automatically round up every transaction to the nearest dollar and transfer the difference from your bank account to your investing account. You can also add multipliers to double, triple, or quadruple the amount of money being transferred with every purchase.
This feature can be a huge help for anyone wanting to consistently save for retirement without having to think about making large transfers. Of course, you always have the option to turn these transfers off or to make one-time or recurring transfers from your bank account to investment account.
It’s worth noting that at this time, Robinhood only allows investing accounts. The platform does not support retirement accounts.
Acorns, on the other hand, can be used for either individual investing accounts or Roth, traditional, and SEP IRAs.
Robinhood vs. Acorns Pricing Comparison
Robinhood is completely free to use. There are no commissions and no fees. That said, you can upgrade to Robinhood Gold for $5 per month. This allows you to get access to deposited money more quickly and allows you to invest on margin. In addition, a Gold account includes Morningstar stock research reports and Level II trading data from the Nasdaq exchange.
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Acorns doesn’t have commissions, but the platform isn’t entirely free. Acorns Core starts at $1 per month and allows you to create an individual investing account. If you want an IRA, the service costs $2 per month. Finally, if you want a checking account and debit card from Acorns, you’ll pay $3 per month. Note that you don’t need the Acorns checking account, as you can link accounts from most major banks.
Is Robinhood or Acorns Better?
Whether Robinhood or Acorns is better for you depends on your investing style and goals. Robinhood is by far the better choice if you want to invest in individual stocks and ETFs, since you have total control over your investments. Acorns falls far short in this respect since you can only invest in a limited selection of ETFs, and even then only through pre-made portfolios.
But, if you’re looking to invest for major financial goals, it’s a lot harder to choose between the two. Robinhood is best for self-directed investors who want to craft their own portfolios, and who are willing to put in the work to keep them balanced over time. Acorns is better for investors who want a simple, ready-to-go solution that they can invest in and forget about.
If you’re investing for retirement, the fact that Robinhood doesn’t support IRA accounts is a major disadvantage. But, having to pay $2 per month for an IRA with Acorns isn’t ideal either. That money can add up over time, especially if you’re only contributing a small amount of money each month.
One other important factor to consider is how much you want paying attention to your investment account. Acorns makes it easy to ensure you’re consistently putting money away for savings thanks to its “round up” feature. With Robinhood, it’s easy to make transfers – but you need to remember to do it.
Alternatives to Robinhood and Acorns
There are a number of good alternatives to Robinhood and Acorns. Which ones are worth looking into depends on whether you are more interested in trading individual stocks or creating a balanced portfolio for long-term financial goals.
When it comes to trading individual stocks, a number of major brokerages are now offering commission-free trades with no account minimums. Charles Schwab, E*TRADE, and Ally Invest are all strong competitors to Robinhood that offer better technical charting capabilities for short-term traders. But, keep in mind that none of these brokerages currently offer investing in fractional shares.
For long-term investing, and particularly for retirement investing, consider Betterment or Wealthfront. Both of these services allow you to invest in pre-made portfolios of ETFs and keep them balanced for you over time, as Acorns does. But, the fees are significantly lower if you have a small portfolio and there are more options for customizing your investments.
Conclusions For Robinhood vs. Acorns
Robinhood and Acorns are both strong investment platforms that have led the way for commission-free trading and investing in fractional shares. Robinhood is the better option for self-directed investors and anyone who wants to invest in individual stocks and ETFs. Acorns is significantly more automated and easier to use, and so is the better choice for long-term investors who want to save money without much work. Both platforms have their advantages, so it’s up to you to decide what your investing style and goals are.