Robinhood vs. Acorns: Which Broker is Better?

In this Article: A Robinhood vs Acorns comparison. From low fees to robust mobile applications, find out what is different between the two platforms.

The financial industry has made tectonic shifts in the past 20 years. The outdated view of hiring a broker and paying them commissions every time a security is bought (and sold) is nothing like how investing works today.

Investors can thank the internet for this shift, as well as the broad competition that brought prices down dramatically, culminating in almost all major brokerages cutting commissions to $0 in 2019.

But the most significant transition has been from a model of paying commissions for every transaction, to one where investors pay a flat, low fee based on the dollar amount of assets invested.

If the account grows, the investment manager earns a higher fee. But if the account drops in value, the investment manager makes less. So, incentives are aligned for you and the people managing your money – as it should be!

Robinhood and Acorns have many different features, but what they have in common is a focus on new investors and a penchant for low fees, no account minimums, and zero commissions.

Let’s look further into what makes Robinhood and Acorns two unique platforms and discuss what type of investor is best suited to each. Read along in our Robinhood vs Acorns review.

Robinhood vs Acorns: Side-by-Side Comparison

Overall, Acorns is better than Robinhood. Try Acorns today and enjoy a $5 sign up Bonus.

Robinhood Overview

Robinhood is a modern brokerage making huge inroads with young investors. This brokerage pioneered commission-free trading, which is now a common practice among online brokerages (including Schwab, TD Ameritrade, E-trade, and Fidelity).

Robinhood offers an enviable suite of no-cost trading. All common stock and ETF trades, options and cryptocurrency trading is commission-free. (Some extra costs & holding fees are incurred to trade gold and cryptocurrencies. A full breakdown of Robinhood’s fee schedule is available here.)

A brokerage with no account minimum, zero commissions and a nifty mobile app would be enough on its own to attract a lot of new investors. But Robinhood has found itself at the nexus of some cosmic forces to become almost a household name in 2020.

For starters, the COVID-19 pandemic sent everybody home from work, so what better way to stave off boredom than to learn how to start investing, right?

But the real boost came from a beast mode stock market rally that began in April and quickly racked up a 40% gain – with most of the high octane moves coming from the Nasdaq and its preponderance of internet and cloud-based technology stocks.

Today there are entire Reddit communitiestalking about trading on Robinhood. Whether Robinhood turns this recent success into becoming one of the 2 or 3 largest brokers remains to be seen.

Rapid-fire traders have loved zero commissions, but the party only lasts as long as people are making money from the endeavor.

Advantages of Robinhood

• Robinhood allows users to invest in cryptocurrencies (a big part of why Robinhood is popular with Millennials). They also provide fractional-share investing, for as little as $1.
• No account minimum. (A $2000 account minimum needed to trade on margin.)
• They offer high-yield savings account currently paying over 0.3% per year interest. This account also provides a debit card, free ATM withdrawals, and FDIC insurance up to $1.25 million.
• Robinhood does offer margin accounts, which come with interest costs and other fees (*beware: margin is a debt instrument. Leverage must always be considered with caution, as you can lose more than you have in your account!)
• Top-notch mobile app. Probably best in class. Allows users to trade and transfer funds from their phones.

Disadvantages of Robinhood

• During times of severe market volatility, the platform has crashed on a couple occasions. (This is not isolated to just Robinhood; other online brokers have uptime issues as well when financial markets are seeing frenzied activity.) Robinhood’s customer agreement absolves the firm of any liability from these outages, despite some customers’ attempts to sue over outages in 2020.
• There’s not much in the way of customer support compared to larger online brokerage houses like M1 Finance, Schwab, Fidelity, E-Trade, and TD Ameritrade.
• Lack of comprehensive research and trading tools that are standard (and free) at other brokerages. For $5/month Robinhood offers access to Morningstar stock and fund reviews, as well as more in-depth Level II market quotes for stocks.
• Only taxable accounts can be opened on Robinhood – sorry, no IRAs available here.
• While ETFs can be bought & sold, traditional mutual funds cannot, nor can individual bonds. An overall more limited selection of securities available than at other pure brokerage firms.
• Options trading interface on the app has been described as “clunky” and “counterintuitive”.

Who Should Use Robinhood?

Investors who want to steer their own ship, and do not require comprehensive market researchor charting service will appreciate the bare-bones pricing of Robinhood. And the mobile app is very slick; many traders can do all their trading only from their phone.

Also, many investors are interested in trading cryptocurrencies, an investment bereft with shady exchanges and clunky trading policies. Having a large brokerage offer commission-free trading eases the discomfort many newcomers face.

Overall, an investor who has some experience trading stocks and doesn’t need access to additional research will be happy at Robinhood.

New investors may also appreciate the app-based platform’s simplicity and ease but find themselves searching for more support and tools as they grow more advanced in their investing journey.

Investors starting small and attracted to the fractional shares program will find Robinhood appealing, but also may find themselves outgrowing the platform later down the line.

Learn More: Robinhood Review

Acorns Overview

Part savings account, a budgeting app, investing platform, and bank, Acorns is a novel hybrid focused on the adage:

“From the tiny acorn grows the mighty oak.”

More than 7 million investors, most of them millennials, have joined Acorns in recent years.

Acorns pioneered the Automatic Round-Up, where you link up banking accounts, debit cards & credit cards, and then just go about your everyday spending. Your purchases then get rounded up (to the nearest $1), the spare change being funneled into an Acorns investing account.

Acorn users can set up multiple linked cards, so they automatically round up all purchases, or they can choose to manually round up specific transactions through the Acorns app. In the case of the latter simply log on to the app and select which purchases you’d like to have rounded up.

In addition to the Round-Up feature, investors using Acorns can also make deposits like they would with another broker, either via check, ACH, or wire transfer.

An Acorns investing account – the piggy bank where all that digital spare change goes – is another iteration of the robo-adviser model.

Automated portfolios that offer a mix of standard ETFs range from very conservative (with a high concentration of government bonds and ultra-safe investments) to very aggressive (with a high concentration on U.S. growth stocks).

Start trading investing today on Acorns. Enjoy a $5 Sign Up Bonus. 😊

Want to Learn More? Check out our Acorns Investing Review.

Acorns Features

There is no minimum balance needed to invest through Acorns, you can start in just minutes. The monthly service fees are small at only $1-5 per month, for three account levels:

• Lite ($1/month): Allows one taxable account
• Personal ($3/month): Allows an individual retirement account (IRA) and a checking account in addition to a taxable account
• Family ($5/month): Includes everything from above levels, and also an Acorns Early account for children.

Advantages of Acorns

• Let’s be frank; people need help saving money. Being able to set aside small savings, and having it happen behind the scenes, without thinking about it (or talking yourself out of it) is vital. It really is a piggy bank, except now your piggy bank is going into investments that can grow over time.
• Acorns does a great job of removing the inertia most young investors face. Mental blocks like, “I don’t have enough money to invest” or “How do I even start setting aside savings?” are a big impediment. Acorns aims to you help you help yourself.
• It’s almost impossible to find a platform that manages your money for you – even at a minimal level – without charging any asset management fees. But at Acorns, there are NO management fees. (*the ETFs that make up your portfolio holdings do have individual expense ratios, however, in the range of 0.03% – 0.20% per year).
• Cash back for purchases is common. But who provides investment dollars back? Acorns does! Their Found Money program offers cash bonuses at select retailers that go right into your investment account.
• Acorns is an excellent platform for setting up custodial accounts for minors, such as Uniform Transfers to Minors Act (UTMA) accounts and Uniform Gift to Minors Act (UGMA) accounts.
• Many brokerages require a minimum deposit of $500-1000 to initially set up and fund an Individual Retirement Account (IRA). With Acorns, you can do it with a collection of spare change!

If you are ready to level up your investing experience, then try Acorns.

Disadvantages of Acorns

• Unlike Robinhood and more traditional online brokerages, Acorns does not offer self-directed trading of individual securities.
• Portfolio construction options are limited with only 7 ETFs used in various proportions to make 5 portfolio choices, ranging from very conservative to very aggressive.
• Monthly fees can add up for small accounts. Accounts with low balances could see a high percentage of their balance go toward monthly fees over the course of a year.

Who Should Use Acorns?

Acorns is uniquely suited to young investors, especially college students who want an investing app. They can get up to 4 years of no-account fees with a verified .edu email address.

It is hard to find a better, more affordable tool to help brand-new investors get started on their investment journey. Acorns also offers useful educational resources to further one’s education on investing, budgeting, and retirement planning.

Acorns vs Robinhood: Which App is Better for Retirement Investing?

Robinhood is an entirely DIY brokerage firm, with minimal tools to assist those in retirement planning, and does not even offer retirement accounts (non-taxable accounts) to be held there.

Acorns, on the other hand, is supremely focused on helping people set long-term goals, and offers tools to project how your investments and decisions today will shift and grow over time.

Security and Protection: Are My Investments Protected?

Funds invested at both Robinhood and Acornsare protected by SIPC (Securities Investor Protection Corporation) insurance for up to $500,000, and up to $250,000 in cash investments.

Cash account balances at Robinhood are FDIC insured up to $1.25 million. (*Cryptocurrency account balances are not insured through SIPC or FDIC)

Checking accounts at Acorns through Acorn Spend are FDIC insured for up to $250,000.

Robinhood vs Acorns: Which One is Best?

As you can see in our Robinhood vs Acorns review, both platforms have attractive features. Variables such as how much time you want to spend, how difficult setting aside savings has been for you, and your overall investment risk tolerance is key to making this decision.

Robinhood is a brokerage for people who want to micromanage everything and make all their own decisions.

Acorns is a savings platform with an investment component and made for people who specifically don’t want to make their own investment decisions – they just want to save and grow, steady and slow. Overall, Acorns is a better investment platform than Robinhood.

Additional Reading:

• Acorns vs Betterment
• Acorns vs Stash