It’s been common knowledge for ages that investing is a critical part of achieving personal finance goals. Yet, for one reason or another, many people do not invest their money. Perhaps one lives paycheck to paycheck, with little left over – that’s understandable. Maybe investing simply does not seem all that interesting; besides, the instant gratification of a shopping spree or an overpriced dinner does much to relieve our overcharged dopamine receptors. Worst of all, investing may seem too complicated, intimidating, or inaccessible.
Thanks to the advent of robo-advisors and the general “appification” of our worlds, investing is closer to home than ever. Gone are the days when you had to deal with registered brokers, a Montgomery Burns type presiding over a gloomy, mahogany-paneled chamber – which, to say the least, could be an intimidating, altogether stuffy experience. In fact, investing is now done with the simple click of a button; essentially, if one owns a computer or smart phone, one has access to a broker, plain and simple. There are really no excuses left not to invest.
There are many great investing applications out there for beginners. Just do a search and you are bound to get a dizzying number of results. Robinhood and Vanguard are amongst the most popular, but we’d like to recommend and compare two applications that are especially geared towards the uninitiated: Betterment and Acorns.
Betterment, in the words of Modest Money’s Bob Haegele, “puts your portfolio on auto-pilot”. Founded in 2008, Betterment rose from the ashes of a global financial crisis to receive glowing reviews across the board. In a nutshell, Betterment is a standard robo-advisor that gives users the option of investing in mutual funds, bonds, and exchange-traded funds (ETFs).
Acorns is all about planting the seeds of wealth. That’s because Acorns links to your bank account and rounds up every purchase you make to the nearest dollar. This rounded difference is then automatically invested for you. For someone who has never been in the habit of investing or saving, this is a great way to passively start accumulating wealth.
Which, then, is the best program for the beginner investor? Which platform is the fittest, trimmest, and meanest? Let’s take a look at the details so as to get a clearer picture of the Betterment vs. Acorns debate.
Betterment – A Low-Cost Advisor
Betterment affords all the industry standards and conveniences one expects from a modern robo-advisor. Not only is Betterment an easy-to-use and balanced platform, but it also features automated tax-loss harvesting, automatic balancing, and minimal management fees.
- Tax-Loss Harvesting: this is an important feature that many robo-advisors are lacking. It is automatic to boot, which means that you don’t have to spend time pondering the details of your tax bills on investments. In essence, tax-loss harvesting lowers your tax liability by selling some investments at a loss to reduce taxable gains you’ve achieved on other stocks sold at a profit.
- Automatic Rebalancing: another important feature that gives you peace of mind, “automatic rebalancing” adjusts your portfolio’s assets to achieve personalized target goals.
- NO Account Minimums: a defining aspect of the modern robo-advisor is low account minimums and fees, which allows everyone to get their feet wet investing. Betterment is no different, and takes things a bit further by not charging penalties for having $0 account balances. Plus, it takes as little as $5 to start investing.
- Account Types: Betterment sports a variety of account types, including individual, joint, traditional IRA, Roth IRA, SEP IRA, inherited IRS, trust, checking, and savings.
Acorns – Save and Invest
While Betterment is geared more towards those committed to investing and building their net worth, Acorns is a great application for those having trouble saving, or just wanted to get started somewhere.
Launched in 2014, Acorns is available on both Android and iPhones. Built with the help of investing guru Harry Markowitz, Acorns is the perfect app for those just starting out – think of Acorns as a kind of advanced, digital piggybank.
- Acorns Portfolios: Acorns offers five different portfolio types which cater to varying personal risk tolerances. Rather you are conservative or progressive when it comes to your finances, Acorns has you covered.
- Found Money: the “Found Money” feature helps you invest even more by giving you a percentage back on all purchases from select popular retailers.
- Low Fees and Rates: with Acorns there are no fees associated with the management of your portfolio. Rather, there are flat rates of $1, $3, and $5 per month, dependent on your selected membership option.
- Account Types: Acorns offers IRA and Brokerage account types, and all investments are in ETFs.
Betterment vs. Acorns – And The Winner Is…
Obviously, there is no clear winner here. Acorns and Betterment are two different platforms aimed towards two different types of investors.
If you are new to investing and are looking to start saving a dollar here and a dollar there, Acorns is a great platform to facilitate the frugal side of you. It is also an easy-to-use and incredibly intuitive platform, so even the most tepid are sure to find it easy to pick up.
Betterment, on the other hand, is a classic robo-advisor for those more committed to investing with the long-term goals. Sporting all the features you would expect from a modern investment platform, it is sure to meet the demands of all but the most serious of users.
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