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Millennials are now in their mid 20s to mid 30s, starting families, and looking towards the future.
However, many millennials aren’t doing much investing.
According to Business Insider, only about a third of millennials actively contribute to a retirement account.
This isn’t a surprising trend.
Many millennials reached early adulthood or entered the workforce just as the stock market came crashing down in 2008.
With that in mind, it’s easy to see why many are skittish about investing.
But the popular trend of microinvesting is changing all of that.
What Is Microinvesting?
Microinvesting is exactly the same as normal investing, just with smaller amounts of money.
Instead of opening an investment account in a broker’s office with a few thousand dollars as a minimum…
…you can open an investment account from your mobile phone and start with as little as five bucks.
While it’s still an early concept, microinvesting has definitely been a game changer.
Many apps have sprung up to lure the attention of the millennial market into investing on Wall Street.
A few of these companies have millions of users and billions of dollars in the market.
Today, we host a face-off between two of the pioneers of the microinvesting industry: Robinhood vs. Acorns.
Both seek to capture a piece of the millennial investing market, but their strategies are very different.
Each investment platform offers a different type of experience, but both platforms exist to help you reach your financial goals.
Robinhood is your traditional, individual, taxable investment account, while Acorns has been a trailblazer for micro- and robo-investing services.
So, let’s get down to business and compare these two investment platforms so that you can decide which one is a better fit for you!
Robinhood
Robinhood is a company that strives to bring investment capabilities to everyone.
The firm eliminated obstacles for users to get started.
As the company led the wave towards a democratized investing world through commission-free trading and no account minimums, they brought a new look to trading platforms.
The Story of Robinhood
Founders Vladimir Tenev and Baiju Bhatt may not be robbing the rich, but they have set out to lower the bar to investing for everyone – and they are doing just that.
After college, these two Stanford classmates moved to New York and built two finance companies, which sold stock trading software.
From this experience they learned that for large institutions, stock trades are virtually free, while the average Joe pays up to $10 a trade.
Determined to democratize access to trading in the stock market, they moved back to California to start Robinhood in 2013.
Although Robinhood was only formed in 2013, it has quickly become a force to be reckoned with in the finance industry.
There are currently 22.4 million users on Robinhood.
Major brokerages like Fidelity, Charles Schwab, and TD Ameritrade have begun copying Robinhood’s fee-free trades model to compete for investors’ dollars.
While it is still early in Robinhood’s existence, there is a good possibility they (along with their competitors) have permanently altered the investing landscape.
Robinhood: Account Minimum
There is no minimum balance requirement to open a Robinhood account, and there is no minimum balance fee.
You don’t even need the minimum dollar amount of whatever stock you choose to invest because Robinhood offers fractional shares!
For example, if you have your eye on Amazon, and it is trading at $1700 per share, you can invest in a fractional share.
Then, recurring investments allow you to set continuous investment patterns, whether it is weekly, monthly, quarterly, etc.
So, even if you can’t afford to purchase a whole share of Amazon, here you can still reap the benefits.
Additionally, fractional shares allow you to immediately reinvest your dividends, which is known as a Dividend Reinvestment Program (DRIP).
So, if your pockets aren’t that deep, you have plenty of options to choose.
However, there is a $2,000 minimum for margin trading (more on that below).
Robinhood: Investment Options
One of the beauties of Robinhood is that the world is your oyster.
If it’s a U.S. stock or an ETF on the NYSE or the Nasdaq, chances are you can buy it on Robinhood.
You can also dabble in buying options and cryptocurrency, which is a real bonus as not all microinvesting platforms offer these features.
A lot of brokerages do not provide the opportunity to trade cryptocurrencies, but Robinhood offers seven tradable cryptocurrencies and nine more you can monitor.
The one bummer we see is Robinhood’s lack of offerings in mutual funds.
Robinhood: Fees
One of the most attractive things about Robinhood is commission-free U.S. stock trades.
Yup, you heard that right.
(Of course, regulatory fees still apply. Not much you can do about that.)
There are still a few “hidden” fees for things like paper statements and wire transfers.
The most notable ones are a hefty $50 fee to trade foreign stocks and a $75 fee to transfer your account to a competing broker.
But assuming you don’t need some of these bells and whistles, Robinhood’s fee schedule is very generous.
No minimums, no account fees, no commissions.
Robinhood: User Interface
Robinhood is tailored specifically towards new investors, and it has a simple interface that all users can interact with.
From the moment you download the app, you can have your first investment in about an hour.
Robinhood’s instant bank verification enables a quick and easy setup.
Robinhood is sleek, organized, and easily accessible from both your phone and computer.
Robinhood: Types of Accounts
Robinhood only offers two kinds of investment accounts, plus a cash management account.
Both investment accounts are taxable accounts.
The basic account is free, but you can upgrade to a Gold account for $5 a month.
The Gold account comes with access to additional market analytics data as well as extended trading hours.
The Gold account also includes access to $1,000 to trade with on margin.
You may use more than that, but you will pay 2.5% interest annually on the balance above $1,000.
Users can try a Gold account free for 30 days.
Although Robinhood is known for its brokerage services, its popularity has caused them to expand to other services.
Now you can use Robinhood’s Cash Management feature, which is an account with a .30% annual interest rate.
This account comes with a Mastercard debit card and has a 75,000 fee-less ATM network.
This account is FDIC and SIPC insured, as Robinhood strives to deliver great end-to-end experiences for their customers.
Robinhood: Other Benefits/Features
Robinhood’s main unique feature is its access to options and cryptocurrency.
These offer shinier (albeit riskier) investment options for those who want to stretch outside the bread-and-butter offerings of stocks, bonds, and ETFs.
Investors can find basic information on these nontraditional assets in the articles in the Learn section of Robinhood.
Articles cover basic fundamentals, such as “What is the stock market?”, as well as more complex concepts, like “What is cryptocurrency?”
In addition to the educational articles on the website, Robinhood also offers Snacks – a 15-minute podcast or short newsletter highlighting the top 3 business news stories of the day.
These are a great way for new investors to keep tabs on what is happening in the market and why it’s important.
If you upgrade to a Gold account, Robinhood provides quite a list of additional features: Level II market analytics data, extended trading hours, larger instant deposits, and a full margin account.
Robinhood: Customer Service
Customer support is not Robinhood’s strongest suit.
Robinhood only offers email and an FAQ page for customer service.
There is no chatbot and no phone number.
This is a common complaint about Robinhood’s service offering.
How Do I Get up to $1,700 in FREE STOCK with Robinhood?
To open a Robinhood account, all you need is your name, address, and email. If you want to fund your account immediately, you will also need your bank account routing and account number.
As its current promotion, Robinhood will immediately give you a FREE STOCK (valued at $5 to $200) when you open a new account if you click on the promo image below. Then, once your account is open, you will be given your unique referral link. You will receive another free stock (again valued at $5 to $200) for each person you refer. The more people you refer, the more you get up to a max of $1,500 a year. Click on this promo below to start your Robinhood account application and get your first stock for free.....
Bonus Tip: Use this link to get a share of stock for free (up to $200 value) when you open and fund your account with at least $10: sign up for Robinhood today, you'll get one share of a stock that is valued between $5 and $500. FURTHERMORE, for each friend that you refer, you will receive ANOTHER free share of a stock valued at up to $200. This is perfectly legit and you WILL get more free shares for every friend or family member you refer.
Why do they give away so much free stock? Because they spend their advertising dollars this way instead of buying TV, radio, print, or online ads! They WANT you to refer friends!
Acorns
Acorns is the perfect app to care of your investment needs without taking up much of your mental real estate.
Acorns currently has $4.7 billion of assets under management (AUM), while Robinhood has $80 billion of assets under management.
The company was founded on the principle of encouraging people who struggle to invest and save, while utilizing incremental and passive investing techniques.
The Story of Acorns
Remember your weird uncle who emptied his pockets and threw all his loose change into a giant water jug when he got home?
Acorns just takes your uncle’s water jug and invests that change in the stock market.
Acorns is different from many other microinvesting apps out there in that it uses the same psychological win that your weird uncle did.
He didn’t have to make any sacrifices or changes to his lifestyle to throw his pennies in the jug at the end of the day…
…but once he got into the habit, he probably never noticed they were missing.
Once you connect Acorns to your debit or credit accounts, it rounds up your purchases to the nearest dollar.
From there, Acorns invests your “loose change” from your purchases.
These Round-Ups allow new investors to clear the mental hurdle of thinking they don’t have enough to invest by making the action passive and invisible.
Investment Tip #78: Acorns Referral Program
Did you know? You can earn free bonus investments just by inviting your friends to join Acorns.
For every referral, Acorns will invest an extra $5 into your and your friends’ accounts. Click Here to get the offer today.
Acorns: Automation
Acorns is a program that allows you to generate automatic savings without thinking about a thing.
You can connect all the debit and credit cards you use to your Acorns account.
Then with every single purchase you make, Acorns will round your purchase up to the nearest dollar.
This round-up program is the flagship product of Acorns, but you can also incorporate recurring investments.
Finally, after all of these automatic investments, you can have them connected to a checking account as well.
This automation makes cash management a mindless process.
Acorns: Account Minimum
There is no minimum amount required to open an Acorns account.
However, to start actually investing the money, the account total must be at least $5.
(The cash sits in the virtual “water jug” until your Round-Ups or contributions reach the five-dollar mark.)
Acorns: Types of Accounts
Account options is one area where Acorns shines.
They offer a personal account called Acorns Personal for $3 a month.
The Personal plan includes Acorns Invest (the taxable investment account), Acorns Later, (the tax-deferred retirement account), and Acorns Banking (the checking account).
This offers the Round-Ups feature, which can be connected to a debit card, credit card, or checking account.
Many microinvesting platforms are looking to grow their product offerings, and Acorns is no exception.
There is an additional tiers to Acorns, which is known as the Family tier.
This upgrade allows you to create a custodial account, which allows you to invest on behalf of your kids.
These are also known as UTMA/UGMA accounts. A big perk of these investment accounts is they have more autonomy than 529 accounts.
The Family plan costs $5 a month.
Acorns: Investment Options
Acorns portfolios are preset mixes based on your risk tolerance, similar to target retirement date funds.
These portfolios are put together by Nobel-prize winning economist Harry Markowitz.
After answering a few questions about your risk tolerance and age, Acorns will recommend a portfolio just for you.
With Acorns, there is no option to select individual stocks, and the portfolios lean very conservative.
Even the moderate portfolio is still 40 percent bonds.
Customization in Acorns is extremely limited.
If you are looking for fancy investing choices like cryptocurrency or options, you will have to look elsewhere as Acorns does not offer them at this time.
Their focus seems to be on beginning investors, not those who are looking to branch out into speculating on riskier assets.
For those looking for a classic, broad, and diversified portfolio, Acorns has got it made.
Acorns: Fees
Like Robinhood, Acorns offers commission-free trades.
But instead of dinging customers with hidden fees, Acorn charges a monthly fee for their services.
There are no other fees unless your account total is greater than $1 million.
At that point, Acorns charges 0.25% per year to manage your Invest account and $100 per $1 million to manage your Later (retirement) account.
Acorns: Other Benefits/Features
Acorns aren’t just this company’s logo.
They actually do plant acorns.
In 2019 alone, Acorns planted 438,000 oak trees to fight climate change and reforest areas affected by fires and floods.
While this isn’t an account feature, it is a testament to the values of the company and a great win for the environment.
Oh, and it’s also a win for customers seeking to align their investing platform with their values.
Another feature unique to Acorns is that they don’t just invest YOUR money.
Acorns has partnered with several well-known companies (Barnes and Noble, Walmart, Air BnB, Groupon, etc.) to create an incentive program.
It’s like eBates or Rakuten giving you money to invest instead of cashback.
You link your debit/credit card to Acorns, then you receive cashback to invest from these Found Money partners when you use it to make transactions.
This is an extra boost to your investments at no additional cost to you.
Acorns: Customer Service
Acorns offers phone and email support for their customers.
(The phone number is buried deep in the gift cards section of the website, but it’s easy enough to find with a simple Google search.)
Robinhood vs. Acorns: Room for Improvement
As you can see, each of these platforms has some strengths, but there are improvements we’d like to see in each one.
Where Robinhood Can Improve
Customer support: Most brokerages offer phone support, but Robinhood does not have a phone number published for users.
The customer support offered to customers is through email and FAQs.
When using Robinhood you must rely on the help center online which is easy to navigate.
Investment types: Robinhood does offer a wide variety of stocks, REITs, and ETFs, but we wouldn’t mind seeing some mutual funds in there, too.
Account types: Robinhood offers two types of accounts: the individual investment account and the cash management account.
Robinhood is missing the foundational retirement accounts like 401(k)s and IRAs.
The ability to buy a customized mix of securities is fantastic, and it would be great to transfer this customization to a retirement account offering.
Where Acorns Can Improve
Fees: Let’s start with the management fees.
There are 2 different fees you could pay for the 2 different types of accounts, and all fees are paid monthly.
A Personal plan has a $3 per month fee, while the Family investment feature for kids is a $5 per month fee.
Although these fees might sound small, they can really add up if your portfolio is on the smaller side.
For example, if you sign up for Acorns Personal, your fee will be $3 per month, or $36 per year. Even if you have a full $10,000 in your Acorns account, that still comes out to a management fee of 0.36% per year, which is above the average fee of 0.25% for most robo-advisors.
While the value you get from an Acorns account is definitely worth a couple dollars a month, it’s a little harder to justify when there are free options like Robinhood available.
Lack of autonomy: While we are excited about the extremely low barrier of $5 to start putting your money to work, we are not as enthused about a pre-set, cookie-cutter approach to portfolios.
But at the same time, the reason why many investors choose to use Acorns is because of its hands-off approach, so it’s up to you to decide how much assistance you want with your investment account.
Acorns is not an account that can grow with your investing skills. If you ever desire to have more control over your investments, you’ll have to seek out a different platform.
You can switch your risk tolerance on Acorns, and the platform will choose a pre-populated portfolio for you with the appropriate level of risk. But that’s not the same thing as having complete control over which securities you’re investing in.
So this hands-off style of investing is only great for people who know they will not want control over their investments.
These are great for very green beginners, but as Acorns customers become more educated investors, they will likely want the ability to customize their portfolios with specific stocks, bonds, and ETFs.
Robinhood vs. Acorns: Which Is Right for You?
The great thing about both of these microinvesting apps is that there is something for everyone.
If you’re a brand new investor that has never saved much and wouldn’t know a mutual fund if it bit off your nose, Acorns is likely your cup of tea.
Acorns uses the psychology behind not noticing small, incremental changes and plays this to your advantage.
This app encourages you to dip your toes into the brand new world of investing without major changes to your lifestyle.
It’s also great for those who favor a self-balancing, conservative portfolio of investments, or those who want to put their investments in a tax-advantaged retirement account.
If you set up the automatic investment features, Acorns will help you invest while taking it off your mind.
Since Acorns will automatically round up your purchases and invest them into a pre-populated portfolio based on your risk tolerance, you can put zero effort into investing and still reap the benefits.
If you’re a little more seasoned in investing and want to play around with individual stocks or options outside your employer’s 401(k), go with Robinhood.
Robinhood is a great investment account due to the simplicity, crypto capabilities, fractional shares, and recurring investments.
Robinhood is the perfect account for people who want to be involved with their investments, but do not want to become high-frequency day traders.
Additionally, access to trading cryptocurrencies is a huge benefit to have connected to your taxable investment account.
Robinhood could be perfect for you if you do not need a connected 401(k), IRA, or custodial account.
Robinhood’s education features make it easy to gain the confidence to branch out even further to options and cryptocurrency.
How Do I Get up to $1,700 in FREE STOCK with Robinhood?
To open a Robinhood account, all you need is your name, address, and email. If you want to fund your account immediately, you will also need your bank account routing and account number.
As its current promotion, Robinhood will immediately give you a FREE STOCK (valued at $5 to $200) when you open a new account if you click on the promo image below. Then, once your account is open, you will be given your unique referral link. You will receive another free stock (again valued at $5 to $200) for each person you refer. The more people you refer, the more you get up to a max of $1,500 a year. Click on this promo below to start your Robinhood account application and get your first stock for free.....
Bonus Tip: Use this link to get a share of stock for free (up to $200 value) when you open and fund your account with at least $10: sign up for Robinhood today, you'll get one share of a stock that is valued between $5 and $500. FURTHERMORE, for each friend that you refer, you will receive ANOTHER free share of a stock valued at up to $200. This is perfectly legit and you WILL get more free shares for every friend or family member you refer.
Why do they give away so much free stock? Because they spend their advertising dollars this way instead of buying TV, radio, print, or online ads! They WANT you to refer friends!
The Real Returns on Microinvesting
While you likely won’t get rich with the small amount invested in any microinvesting apps, the returns may be greater than the 7% you earn on the loose change.
The real win in microinvesting is investing at all. Getting past the barrier of ignorance and fear of investing is a high hurdle to clear – one that has held back a generation of investors.
Until now.
Microinvesting is paving the way for millennials to get the practice, education, and platform they need to invest in the market in a meaningful way – one nickel at a time.
Have you had investing success with Robinhood or Acorns? Tell us about your experience with your favorite microinvesting platform in the comments below.
