Thanks to modern technology and the abundance of mobile apps, taking charge of your finances has never been easier. As you likely know, the best way to ensure your money is working for you is to invest it. Even better, you don't need massive amounts of capital to take advantage of the stock market - instead, you can trade shares and get a sizable return automatically.
What We'll Cover
- What is Acorns?
- What is Robinhood?
- Comparing Acorns vs Robinhood
- Which One is Better for Beginners?
- Which One Allows Trading?
- Which One is Better For Retirement Investing?
- Which One Allows Crypto-Trading?
- What About Costs and Fees?
- Pros and Cons of Acorns
- Pros and Cons of Robinhood
- Can You Transfer Stocks From Acorns to Robinhood or Vice Versa?
- The Bottom Line: Robinhood vs. Acorns
Two of the most well-known investment apps are Acorns and Robinhood. Although these programs have some similarities, they're designed for different purposes. So, let's compare and contrast them to know which one should work best for your needs.
What is Acorns?
Acorns is an app that automatically pulls money from your bank account based on your transaction history. The name "Acorns" refers to the fact that the program rounds up your purchases to the nearest dollar amount. These tiny round-ups act as acorns that will grow into mighty oaks. Once the total reaches five dollars, the app withdraws the amount and puts it into your Acorns account.
When setting up your account, you can choose how risky or conservative you want to be. Acorns automatically places your money into mutual and index funds tied to the stock market. So, the better the market is doing overall, the more money you can earn as dividends.
The primary purpose of Acorns is to save money for retirement. Since you're depositing small amounts, the goal is to let them accrue for many years, so you have some extra money for your nest egg. The app also allows you to set up a Roth IRA account and a checking account. You can even get a debit card and make purchases.
One feature of Acorns is calculating your long-term earnings based on how much you invest regularly. You can see how a one-time investment will grow over time, or you can estimate based on monthly contributions. Finally, the app allows you to set up recurring payments to grow your money faster.
What is Robinhood?
Robinhood is an e-trading app that allows you to buy and sell fractional shares of different stocks. Unlike Acorns, you control which stocks you can buy, giving you more control over your money. That said, you can't invest in mutual or index funds, so you can't really put your money on "autopilot." You can invest in ETFs, which are a bit more stable but are less reliable than a mutual fund.
Overall, the primary purpose of Robinhood is to give you valuable insight into the world of stock trading. While the app is less involved or comprehensive than other programs, it also doesn't charge a commission. Also, you don't need to maintain a minimum balance as you do with other trading apps.
See Related: Acorns vs Vanguard: Which One Is Right For You?
Comparing Acorns vs Robinhood
At first glance, you may ask, "is Acorns better than Robinhood?" or vice versa. However, because each app focuses on a different investment strategy, it's hard to say whether one is "better" than the other. Instead, you can look at them as two potential options to help your money go further.
Here are some critical comparisons to understand how each app works and how they stack up next to each other.
Which One is Better for Beginners?
Technically, both apps are perfect for beginners because you don't need to know anything about stocks or investing to start. However, Acorns has a slight edge because someone else is buying and selling fractional shares. Instead, all you have to do is deposit money, decide how risky you want your investments to be, and let them build.
If you're trying to learn how to trade stocks and ETFs, Robinhood is also great for beginners. While it has limited trading options (more on that later), you can make some decent money from your investments. Plus, since you don't get charged a commission, there's not an expensive learning curve to master the art of the trade.
(but only slightly)
Which One Allows Trading?
Only Robinhood allows you to trade individual stocks and ETFs. The app also allows you to trade cryptocurrency and American Depositary Receipts. Unfortunately, you can't trade mutual funds, bonds, or index funds. Because these options are a bit more stable, they offer more reliable returns, although you can't make as much money as quickly.
The primary selling point of Robinhood is that you can buy fractional shares. This way, you don't need to pay for a full share of stock, which can be prohibitively expensive for top-tier companies. Basically, you can trade based on your budget, not which stocks are the cheapest.
Can You Day-Trade on Acorns or Robinhood?
Acorns doesn't allow day-trading, but Robinhood does. A day trade is when you buy and sell the same stock, option, or ETP in a single trading day. With a cash account, you can day trade as many times as you want. If you have a margin account (where you're borrowing money from a broker-dealer), there are some limitations.
As a general rule, you can't day-trade more than three days within a five-day period, unless you have at least $25,000 of portfolio value. You can find out more about Robinhood's day-trading restrictions here.
Which One is Better For Retirement Investing?
Acorns is the only account that's built for retirement. Not only is your primary Acorns account made for long-term investing, but you can open a Roth IRA to diversify your portfolio.
Robinhood doesn't have any retirement accounts, but you could theoretically be making trades to save money for retirement. However, Robinhood is built more for short-term and fast investment, meaning you're looking to get a decent return within a year or two instead of 20 or 30 years.
Which One Allows Crypto-Trading?
Again, Robinhood is the only app that allows stock trading, but Acorns does offer funds that are partially tied to cryptocurrencies. So, if you want to take advantage of the crypto market, you can still make some money via Acorns. As of 2022, Robinhood allows you to invest in almost 20 different currencies, including:
- Ethereum Classic
- USD Coin
For a full list of the cryptocurrencies available for trading on Robinhood, click here.
What About Costs and Fees?
Both apps charge nominal fees for their services, but Acorns charges a bit more than Robinhood. Here's a breakdown of the charges you can expect from each app:
Overall, Acorns charges you no matter what accounts you have, but both apps don't require a minimum investment or account balance. So, you can focus more of your funds on earning money, not paying overhead. Also, both apps don't charge to withdraw funds to a connected bank account.
Pros and Cons of Acorns
- Basic Retirement Planning - Since many Americans don't have a retirement account, Acorns makes it easy to set one up and contribute to it
- No Investment Knowledge Necessary - You don't need to know the difference between stocks, bonds, mutual funds, or ETFs to make money via Acorns
- Set Up IRAs - In addition to your regular Acorns account, you can set up a Roth IRA. If you have a family plan, you can also set up a traditional IRA, which offers tax deferrals
- Automatic Withdrawals - Setting these up ensures you can contribute to your account without thinking about it
- Con: No Control Over Your Finances - You can't decide where your money goes or which stocks to buy. Instead, your account fluctuates based on the market, which can be both good and bad
- Monthly Fees - If you have little money in your account, $3 per month can add up quickly
Pros and Cons of Robinhood
- Simple User Interface - Even if you've never traded before, you can master Robinhood's interface pretty quickly. Overall, this program is an excellent introduction to trading stocks and ETFs
- Buy Fractional Shares - You can start investing with as little as five dollars if you like
- Because there's no account minimum, you can build money from scratch and diversify your portfolio more easily
- No Commission on Trades - Comprehensive trading programs take a small percentage of your money, which can add up quickly if you're not paying attention. Fortunately, Robinhood doesn't charge anything, so you can trade with relative impunity
- Limited Trade Options - If you need help figuring out where to invest, bonds and mutual funds are excellent places to start. Unfortunately, Robinhood doesn't allow you to trade these securities, so you need to know where to put your money
- No Retirement Planning - If you're looking to start saving for retirement, you need to set up a different IRA outside of your Robinhood account. While you can contribute to a retirement fund with your earnings, doing so requires much more discipline than you need with something like Acorns
Can You Transfer Stocks From Acorns to Robinhood or Vice Versa?
Unfortunately, it's currently impossible to transfer funds from one account to the other. The issue is that Acorns doesn't allow ACAT transfers, which are from one trading account to another. While Robinhood does allow for these transfers, you won't be able to put money into your Acorns account directly. Instead, you'd need to withdraw funds to a bank account and then deposit them into Acorns or Robinhood.
Can You Transfer Funds From Robinhood to Another Trading Account?
Yes, Robinhood allows you to transfer money to any separate trading account, but you'll need to pay $100. You can do a full or partial transfer, but the fee is the same either way. Currently, you can't transfer cryptocurrencies from one brokerage to the next, though.
The Bottom Line: Robinhood vs. Acorns
Looking at both programs, you can easily set up accounts with both to maximize your investment earnings. Because each system focuses on a different aspect of trading, they're not necessarily mutually exclusive. Also, you could earn money from trades on Robinhood and then funnel it to your Acorns account to build over time. This strategy means you can potentially accrue a decent-sized retirement account with "free" money.
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