Betterment vs Acorns | Which Robo-Advisor is Best for You?

Betterment vs Acorns, which is the best robo-advisor for you? If you want your spare change directed into an investment account, then choose Acorns. If you want financial advisors and a comprehensive robo-advisor, then Betterment is best.
Betterment vs Acorns Comparison

Betterment vs. Acorns — Overview

When it comes to investing, sometimes simple is best. There are nearly unlimited options available to investors, from real estate to small-change investing. A straightforward, easy-to-use robo-advisor is often preferred by investors who’d just like to get started or learn as they go,

Fortunately, there are many such robos on the market today. Betterment and Acorns, the two we put head-to-head today, both strive to be intuitive, user-focused investment tools that help clients start putting their money to work immediately.

*Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link.

Betterment recently acquired Makara, a cryptocurrency robo advisor. Soon Betterment will begin offering diversified cryptocurrency ETFs.

Quick Summary: Acorns vs. Betterment

  • Betterment is best for serious investors. With no investment minimums, extensive investment options, and goal-based investing,
  • Clients who want to get started investing with spare change will like Acorns best.
  • Betterment benefits investors who want human financial advice.
  • Both options offer low fees and both are acceptable options for the beginner investor.
  • Crypto funds are available at both Betterment and Acorns

What is Betterment?

Betterment is a well-known robo-advisor, and for good reason. One of the largest stand-alone robos, Betterment is now over a decade old. Betterment serves beginning and advanced investors alike, with services ranging from the basics, like automatic rebalancing, to more high-end options, like human financial planners.

Betterment robo investing accounts are goals-based. The robo uses your risk tolerance and your financial goals to create the appropriate investment mix for you. The basic digital Betterment has no account minimum. All clients can access socially responsible portfolios, crypto and financial advisors. They also offer a tax-loss harvesting to save money on taxes. Those that want to attempt to beat the market can opt for Smart Beta portfolios and retirees might prefer the income portfolio.

What is Acorns?

Acorns is an investment platform that focuses on “spare change” investing. Though not a full-fledged robo-advisor, Acorns offers users the ability to invest their leftover change from purchases into fractional shares of ETFs (exchange traded funds). The idea behind the Acorns platform is that investing should be easy, automated, and available to everyone.

There are many account types available at Acorns. While they don’t offer a savings account yet, they do have an online checking account. They also offer custodial accounts. All of their investment accounts invest in low-fee exchange traded funds (ETFs). And, Acorns recently added a Bitcoin cryptocurrency fund for those interested in adding digital coins to their portfolios.

Betterment vs. Acorns — Top Features

FeaturesBettermentAcorns
OverviewGoals-based digital investment manager and advisor-led robo advisor. All clients have access to Certified Financial Planners and cash management.Automated investment management robo-advisor that invests "spare change" in a portfolio of ETFs.
Minimum Investment AmountDigital-$0
Premium-$100,000 minimum
$0 - Acorns automatically invests round-ups after the total reaches $5.
Fee StructureDigital - 0.25%  AUM
Premium - 0.40% AUM
Acorns Personal - $3 per month 
Acorns Family - $5 per month 
Top FeaturesDigital and live investment management with CFP advisors. Socially-responsible, income and smart beta portfolios. Tax-loss harvesting. Cash management. Crypto ETFs available.Ability to save and invest money while you make everyday purchases; "found money" partners, such as Lyft and Walmart, make additional contributions to your portfolio. Bitcoin ETF available.
AccountsSingle and joint taxable accounts, Roth, Traditional, Rollover, and SEP IRAs. Checking. Trusts.Individual taxable, IRAs, checking and custodial accounts.
Promotions and WebsiteFree Betterment investment management promotionVisit Acorns

Betterment Top Features

  • Low fees and no minimum balance requirements for Betterment Digital
  • Synch external accounts for free portfolio overview
  • Human advisors available for all clients
  • Socially Responsible and Smart Beta portfolios available
  • Tax loss harvesting available
  • Comprehensive cash management
  • Crypto currency funds (coming soon)

Acorns Top Features

  • Low fees and commission-free ETFs
  • Automated investing based off everyday purchases
  • Additional accounts available at higher fee tiers, including debit cards, IRAs, and children’s accounts
  • Bitcoin ETF

Betterment vs. Acorns — Who Benefits?

Acorns is a great starting place if you don’t have much to invest but would like to make your everyday purchases count. Acorns uses a “round up” feature that rounds your purchases to the nearest dollar, then invests the spare change. You might not get rich quickly this way, but every little bit helps!

Betterment robo investing is better for investors who want a human to talk to. Betterment digital clients can purchase a low cost financial planning package. (Also available to non-Betterment clients)

Both of these robo-advisors are good if you don’t want to spend too much in fees. Acorns charges a flat rate of $3 or $5, depending on your chosen plan. Betterment’s 0.25% AUM for their Digital plan puts them squarely in line with what other robo-advisors of their caliber are charging.

Either robo will work for the beginne, though Betterment has more features and investment options.

Betterment app
Betterment Mobile App

Fees and Minimums

Though these may be very different investment tools, Betterment and Acorns do have one thing in common: they aim to be affordable.

Of course, some robo-advisor do offer free investing; robos like M1 Finance, for instance, offer myriad account types for no fee and a small account balance requirement.

Betterment Fees and Minimums

Betterment does not require a minimum balance for Betterment Digital investment accounts. Their fee of 0.25% AUM is reasonable considering all of their features, and this fee drops to 0.15% AUM when accounts are valued over $2 million.

If you want to open a Premium Betterment account, you’ll have to put up a little more up front: the account minimum is $100,000. Clients will pay 0.40% AUM for Premium accounts, or 0.30% when their account grows to over $2 million.

Acorns Fees and Minimums

There is no minimum investment required for an Acorns account. Investments will be made on your behalf automatically once your round ups reaches $5.

Account fees are quite reasonable at Acorns as well. Clients can expect to pay $3 per month for Acorns Personal, which includes an Acorns Portfolio, an IRA, and a checking account. This amounts to an annual fee of only $36.

The fees rise to $5 per month for Acorns Family, which includes everything from Acorns Personal plus “Acorns Early,” which is an investment account for children. This amounts to an annual fee of $60.

Betterment vs. Acorns — Deep Dive

There are many other things that set these two investment options apart, from available help to extra services. Read on to see which robo-advisor might be the best fit for your individual needs.

Betterment vs. Acorns — Human Financial Planners

Of the two, only Betterment offers human financial advisors. Betterment Digital clients can purchase a low cost financial planning package targeted to specific goals like portfolio review, retirement, or college planning.

Acorns, on the other hand, is truly designed to be a low-maintenance, automated investment tool.

Betterment vs. Acorns — Tax-Loss Harvesting

Betterment does include tax-loss harvesting for taxable brokerage accounts in its repertoire. This is unsurprising, as many robo-advisors offer tax-loss harvesting as par for the course. Tax loss harvesting offsets investment gains with losses to lower your total tax bill. This ultimately saves you money.

Acorns does not offer tax-loss harvesting. While this may seem unfortunate, it makes sense: though Acorns can accommodate larger investments, its “found money” model does not position it as a first-choice robo-advisor for wealthier investors. Investors who are adding a few dollars at a time to their account are less likely to need tax-loss harvesting.

Betterment vs. Acorns — Investments

Again, in this category, Betterment has more options. Betterment clients can open a brokerage account with a number of stock, bond, socially responsible investing options, and more.

Betterment Investments

  • US. Total Stock Market Stocks; Large-, Mid-, and Small-Cap Value Stocks
  • International Developed and Emerging Market Stocks
  • US. Bonds including: High Quality Bonds; Municipal Bonds; Inflation-Protected Bonds; High-Yield Corporate Bonds; Short-Term Treasury Bonds; Short-Term Investment-Grade Bonds
  • International Developed and Emerging Market Bonds
  • Socially responsible investment funds
  • Income and Smart Beta portfolios
  • Crypto portfolios

Acorn Investments

  • Large Stocks
  • Small-Cap ETFs
  • Corporate Bonds
  • Government Bonds
  • Emerging Markets ETF
  • Real Estate
  • Bitcoin ETF

Betterment vs Acorns – Performance

Many investors consider returns as a factor in choosing a robo-advisor. But, that might not be as important as you would think, and here’s why.

Betterment, Acorns and many popular robo-advisors strive to match the returns of the overall investment market. This is wise as active portfolio managers rarely beat the returns of a passively managed market-matching portfolio.

Within each robo-advisor portfolio, you’ll have an allocation of low-fee ETFs from various asset classes, such as US stocks, International stocks, corporate bonds, real estate etc. During any one year, one asset class will have better returns than another. But, over time, there is not one asset class that outperforms the other consistently. Recently the US Stock market has performed exceptionally, with the S&P 500 annual returns topping a 26% annual return in 2021. But, other years international stocks have prevailed and even bonds. That’s why it’s important to own a diversified portfolio.

The best performing robo-advisors any year will have greater allocations to outperforming asset classes. It’s unlikely that one winning robo advisor will continue that outperformance over long periods of time.

Another factor when comparing Betterment vs Acorns performance is your asset allocation. Greater allocations to stocks typically yield higher returns as over long periods of time, stocks have outperformed bonds.

According to recent data from Backend Benchmarking, as of September 30, 2021, a 60% stock 40% bond portfolio at Betterment yielded 20.02% annual return and the same allocation portfolio at Acorns returned 16.95%. Betterment outperformed Acorns in the 2, 3 and 5 year annualized return periods. While the 4 year annualized return’s were tied.

Betterment vs. Acorns — Which is Best? The Takeaway

From the Deep Dive above, it may seem like Acorns has no chance. Betterment clearly offers a deeper pool of investment options and tools, with its inclusion of human financial advisors, tax-loss harvesting, myriad investment strategies, and more.

However, it’s important to note that Acorns is not trying to be Betterment. Acorns is quite good at what it set out to do: help investors invest their small change, which will gradually turn into more impressive investment portfolios.

Acorns is a good option if you want an investment platform to get your feet wet. It’s also a nice way to set up an automated investment account for your children for a low fee. Just realize that by adding more money to your account, your capital will grow more quickly. Investing only small change, means it’ll take a long time to build up significant wealth.

Betterment, on the other hand, is the right choice if you’re looking for a full-fledged robo-advisor. Betterment offers more tools, portfolios and features. The platform also gives clients benefits like Socially Responsible Investing and Smart Beta portfolios, which are not available at Acorns.

Overall, two questions remain: Are you hoping to build your portfolio slowly with your forgotten pennies? Or are you looking for an established robo-advisor with more bells and whistles to help you manage a larger portfolio?

Read the Betterment Review

Read the Acorns Review

FAQ

Is Acorns a bad idea?

Not necessarily. Acorns is a niche product, though: You’ll need to do more than invest your spare change if you want to make an impact in your investment portfolio.

Who is better than Acorns?

Stash is a close competitor. We have also compared Acorns to M1 Finance and Robinhood in the past and found that there are some important overlaps — and differences!

Can you Get Rich Using Acorns?

Maybe, but you’ll need to invest more than your spare change. Once you start growing your investment portfolio past several thousand dollars, I’d add in a robo-advisor like Betterment or Wealthfront or Schwab Intelligent Portfolios and allocate at least several hundred dollars a month to an investment account.

Check out our FREE robo-advisor comparison chart for ideas.

Betterment vs M1 Finance

FeaturesBettermentM1 Finance
OverviewGoals based automated investment advisor with financial advisors.Free robo-advisor with opportunity to customize investments.
Minimum Investment AmountBetterment Digital - No minimum
Betterment Premium-$100,000 minimum
$100
$500 for retirement accounts
FeesDigital-0.25%
Premium-0.40%
Zero fees for investment management
M1 Plus-$125 per year
Top FeaturesGoal-based investment portfolio. Tax-loss harvesting. socially responsible, smart beta and income options. Human financial advisors.Thousands of investments to choose from. Pre-made investment portfolios including socially responsible funds.
Accounts AvailableSingle and joint taxable brokerage. Roth, traditional, rollover and SEP IRA. Trust. Checking. Savings.Single and joint taxable brokerage. Roth, traditional, rollover and SEP IRA. Trust. Business.
InvestmentsLow-cost, commission-free ETFsIndividual stocks and ETFs
Fractional SharesYesYes
Financial AdvisorsYesNo
Contact & Investing AdvicePhone (M-F) and email support, 7 days per week.Phone (M-F) and email, 7 days per week.
PromotionsFree management fee promotion (time limited)Ongoing free investment management.

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Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t  believe is valuable.

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