There are thousands of different ways to invest these days and almost just as many types of investment platforms. Three of the most popular platforms to invest through are traditional investment brokers, micro-investing apps, and robo-advisors. Each one offers different benefits, and I decided to review three of the leaders within their respective platforms to uncover the differences: Acorns vs Robinhood vs Betterment.
In general, the three investment platforms specialize in different areas of investing:
Below I’ll give a comprehensive review of Acorns, Robinhood, and Betterment, as well as compare and contrast the differences between these leading investment platforms.
Acorns Overview: Micro-Investing
Micro-investing definition: Regularly investing small sums of money, sometimes just a couple of dollars.
The Acorns Invest platform works by rounding up your purchases and investing the difference. For example, if you spend $19.20 at the grocery store, $0.80 will be automatically deposited into your Acorns account. Once your account reaches $5, Acorns automatically invests it based on one of its pre-set portfolios.
You likely won’t even notice the money you are saving and investing, and after a while, it can really start to add up. That is why the Acorns platform works best for someone who needs a nudge and gentle reminder to save and invest.
If you are someone who is good at saving money and regularly invests their savings, you might be better off with a traditional broker like Robinhood (more on Robinhood further below).
However, someone who occasionally forgets to invest, or doesn’t want to deal with the hassle of investing money every month, can benefit from Acorns doing all the hard work for you.
|Platform Fees:||$1, $3, or $5 per month|
|Types of Investments:||ETFs|
|Account Types:||Brokerages, IRAs|
|Best For:||Those who need a nudge|
On top of their core “Acorns Invest” service, Acorns also offers:
- Acorns Later: Invest in retirement accounts like a Traditional or Roth Individual Retirement Account (IRA). You can also set up reoccurring contributions to grow your retirement savings.
- Acorns Spend: The Acorns debit card product.
- Acorns Early: Investment account options for your children. This is also a great platform to help your kids learn about the value of investing.
- Acorns Earn: A type of cashback program that Acorns calls “found money.” With this program, you earn discounts when spending money with Acorns Found Money Partners, and that extra money automatically goes into your Invest account.
- Easy Investing: The biggest benefit of Acorns is that it makes saving and investing extremely easy.
- Low Minimums: Acorns does not have a minimum to get started, and will start investing your money once you reach just $5.
- Transparent Fees: Acorns appears to be very transparent about their monthly fees, so at least you know what you are getting into.
- Fees: While the fees are low and transparent, they still exist. Many other brokerages today are free to use.
- Flexibility: You are limited to using one of Acorns’ pre-set portfolios.
- Not Enough on its Own: Rounding up your expenditures and spending the difference is a nice way to jumpstart your savings, but it’s likely not going to be enough to retire off of on its own.
Get Started with Acorns:
Other Micro-Investing Apps:
- Stash: Stash Invest is another popular micro-investing app that helps you start investing, just like Acorns. Plus, Stash is currently offering a $5 bonus for new users.
Robinhood Overview: Traditional Investing
Robinhood is the investing app that took the investment world by storm shortly after it launched in 2013. It is the original zero-fee investment app offering commission free trades on stocks and exchange traded funds (ETFs).
Robinhood set a new standard, and even investment giants like Charles Schwab were forced to respond – Schwab now offers free trading on stocks as well.
Robinhood is defined as a “traditional broker” because the user must both deposit money into a Robinhood account and execute trades through Robinhood, just like you would with Charles Schwab, Fidelity, or E-Trade. The user is responsible for making investment decisions and executing trades.
|Speciality:||Stock and ETF Trading|
|Types of Investments:||Stocks, ETFs, Options, Cryptos|
|Best For:||Active Investors|
As a traditional brokerage, Robinhood is best for two types of “active” investors:
- Active Traders: Active traders are people who are constantly trading individual stocks, ETFs, options, and even cryptocurrency. Anyone who wants to actively trade stocks and move in and out of the stock market on a daily basis may be able to benefit from Robinhood’s zero-commission platform. In addition, with Robinhood Gold, you can open a margin account and trade on margin for $5 per month (not recommended for beginners).
- Active Investors: Active investors are active in owning their investments, but not necessarily trading frequently. These are investors who are buying and holding over a long period of time, but can still benefit from Robinhood’s zero-commission platform and selection of blue-chip stocks and low-fee ETFs.
Technically, you could classify Robinhood as a micro-investing platform as well. Since you can buy fractional shares, you can invest with very small sums of money. The difference between Acorns vs Robinhood is that with Robinhood, you need to make the trade to invest your money. Acorns does it for you.
Last, Robinhood offers a free stock (valued between $2.50 and $200) to every new user who joins the app as a bonus incentive to join!
- Commission-Free Trades: Robinhood has made investing more affordable and accessible to the masses.
- Great for Beginners: For millennials and new investors who want a simple and modern app to invest through, Robinhood is the answer.
- Lacking Information on Platform: The Robinhood trading platform is very sleek and easy to navigate, but it also lacks some pertinent information. The most notable is the expense ratio associated with ETFs.
- Investment Options: Robinhood does offer great ETF options, but it does not offer any index funds on its platforms.
- Account Options: Robinhood does not offer any tax-advantaged accounts.
Get Started with Robinhood:
Other Traditional Investment Brokers:
- Charles Schwab: a leading investment broker that offers high-quality index funds and ETFs, superior customer service, as well as commission-free stock trading.
- Vanguard: the pioneer of index investing and a top choice for passive, long term investors.
- Fidelity: another well-established brokerage firm, and the first to offer $0 expense ratio funds.
- Webull: a new online broker designed for a day trader or active trader. Webull offers in-depth charts and analysis tools for a low cost.
Betterment Overview: Robo-Advisors
Betterment is one of the best robo-advisors on the market right now.
A robo-advisor, simply stated, manages your investments for you similar to how a traditional investment advisor would. The obvious difference is that a robo-advisor does it automatically by using an investment algorithm, instead of relying on a human to make investment decisions.
Robo-advisors are online platforms that do 99% of the work for you when it comes to investing.
Most robo-advisors require three simple steps to get started:
- Answer a set of questions: Outlining everything from your personal information so that they can invest on your behalf, to your investment goals and risk tolerance.
- Connect a Bank Account: To then fund your robo-advisor account.
- Let the Robo-Advisor do the Rest: The robo-advisor then invests and manages your portfolio on your behalf in exchange for a small management fee.
|Platform Fees:||0.25% management fee|
|Types of Investments:||ETFs|
|Account Types:||Brokerage, IRAs, 401(k)s|
|Best For:||Passive investors|
Betterment is best for passive investors who are in it for the long run.
The key question to ask yourself before signing up with Betterment is if the 0.25% management fee they charge is worth the benefits they provide, which is primarily automatic tax-loss harvesting and managing investments on your behalf.
- Automatic Tax-Loss Harvesting: Betterment is known for its tax optimization strategies. Technically, this is something that everyone could do on their own, but you have to know how to do it the right way and then take the time to do it yourself.
- Easy Set-Up: Betterment makes it very easy to get started.
- Passive Investing: Signing-up typically takes the most time and effort. Once you are signed up, Betterment manages your portfolio for you.
- Management Fee: The 0.25% management fee from Betterment can really add up, especially as your investments grow. For every $100,000 you invest with Betterment, you have to pay $250 per year.
- Flexibility: While Betterment does offer best-in-class ETFs and investment options, you cannot choose exactly where you invest your money (like with most robo-advisors).
Get Started with Betterment:
- Blooom: a robo-advisor that specializes in 401(k) optimization. Check them out to get your free 401(k) check-up!
- M1 Finance: a unique robo-advisor that is free and allows you to invest in custom or pre-termined asset allocations that they coined “pies.”
- Wealthfront: a robo-advisor offering similar features and benefits as Betterment.
Acorns vs Robinhood vs Betterment Comparison
Specialty and Core Offering
- Acorns: Micro-investing.
- Robinhood: Tradional Investing.
- Betterment: Robo-advisor.
The biggest difference between these three investment platforms is what they specialize in offering.
Acorns is primarily a micro-investing app that allows users to invest small sums of money at a time thanks to their round-up feature. They offer other services but are most well-known for their classic micro-investing platform.
Robinhood is a traditional broker where investors can invest on their own with commission-free trades. Robinhood is a versatile broker that caters to active investors, cryptocurrency traders, low-cost ETF investors, and more. While they are a good option for beginners, there are many other online brokers out there that provide similar features and are worth exploring.
Betterment is a robo-advisor that automatically invests for you. They are most well-known for their low-cost structure and tax optimization strategies.
- Acorns: $1, $3, or $5 per month.
- Robinhood: Free.
- Betterment: 0.25% management fee.
While Acorns vs Robinhood vs Betterment all offer different cost structures, each charges a fair price for the amount of service and value they provide.
Robinhood is free, but also offers the least value. At the end of the day, you are responsible for managing your own investments.
Acorns charges a small monthly fee, and in return will automatically save and invest money on your behalf.
Betterment is the most expensive of the three, but also returns the most value by automatically managing your investments and optimizing them to minimize tax impacts.
Types of Investment Accounts
- Acorns: Brokerages, IRAs.
- Robinhood: Brokerages.
- Betterment: Brokerages, IRAs, 401(k)s.
The differences between your investment account options are laid out above, and also show where Acorns and Betterment outshine Robinhood.
Robinhood does not offer any tax-advantaged accounts and you are limited to using a taxable brokerage account. This is a huge negative if you are saving for retirement.
Acorns and Betterment both offer a range of IRAs to help you save for retirement, and Betterment also offers 401(k) options (primarily for businesses).
Investment and Asset Class Options
- Acorns: ETFs.
- Robinhood: Stocks, ETFs, Options, Cryptos.
- Betterment: ETFs.
Last, Acorns and Betterment both have limited investment options, but this is not surprising given the type of investment platform they are.
For passive investors using Acorns and Betterment, the selection of low-cost ETFs that they offer is solid.
Robinhood offers the most investment options vs Acorns and Betterment, but typically offers less than its traditional broker competitors. While Robinhood is one of the only traditional brokerages to offer cryptocurrency investments, it does not offer any mutual funds or index funds on its platform.
Therefore, a majority of people using Robinhood end up either buying individual stocks or ETFs.
Account Minimum Balance
- Acorns: $0.
- Robinhood: $0.
- Betterment: $0.
None of the three online trading platforms have a minimum balance required to open an account, which makes all of them great options for beginners or new investors.
Acorns does require a $5 minimum investment before it will invest money on your behalf, but that is an extremely low barrier to entry.
Start Investing Today:
Summary: Acorns vs Robinhood vs Betterment Review
Deciding between Acorns vs Robinhood vs Betterment is a really deciding between types of investment brokers. To find the best investment platform for you, you need to understand your goals and what you are looking for out of an online brokerage:
- Acorns: The micro-investing platform best for investors who need a nudge.
- Robinhood: The traditional investing platform best for investors who want a simple platform to manage their own investments through.
- Betterment: The robo-advisor platform best for passive investors who want someone else to take the wheel and optimize their investments and tax strategies for them.
The bottom line is that once you know your investment goals and style, you can pick the best investment platform for you and start investing today!