Acorns Investment Portfolio Review

Recently, I did a review of the Acorns app. If you are not already familiar with the Acorns savings and investing app, you should read that for an introduction how to use Acorns first. It also covers questions like Is Acorns safe, What are Acorns fees, and If Acorns is legit.

Are Acorns Investments Good Portfolios?

The idea of the Acorns automatic money savings app is that it rounds up all of your transactions and automatically invests that money for you. There are some nuances about how Acorns works you should understand first. Money is only transferred once the minimum round-up amount is $5, and it only happens once per day, unless you use the Acorns debit card or Acorns checking account.

Before we get too in-depth here, it is important to remember a few things. First, when you get started with Acorns, we are talking about a very small amount of money. That means that as far as real dollar amounts go, the difference in percentages won’t be big. For example, if you have $100 in your Acorns account the difference between 10 percent and 8 percent (whether up or down) is just $2. In other words, this not something to wring your hands over, especially in the beginning.

However, you can make lump sum, or recurring, investments with Acorns now, which may make your investment balance bigger faster.

acorns investment performance

Where Does Acorns Invest Money?

Of course, the whole point is for your automatic savings to add up and grow over time, so it is necessary to understand where Acorns is investing our money. So, let’s take a look.

Acorns has five different investment portfolios that it uses and automatically re-balances for all users. This is a typical robo-advisor setup.

The Acorns app helps you pick which Acorns investing portfolio to use based on your age and various risk tolerance questions, or you can pick for yourself. The five portfolio types are very traditional, even if what is in them is not.

The five types of Acorns investment portfolios are Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive.

The Acorn portfolios have changed a bit from the beginning, but are still pretty typical as far as the stock to bond ratio is concerned.

  • Aggressive Portfolio – 100% sSocks
  • Moderately Aggressive Portfolio – 80% Stocks / 20% Bonds
  • Moderate Portfolio – 60% Stocks / 40% Bonds
  • Moderately Conservative – 40% Stocks / 60% Bonds
  • Conservative 100% Bonds

What Investment Does Acorns Use

All the Acorns investments are index-based Exchange Traded Funds, or ETFs. All ETFs are regular, publicly traded ETFs from either iShares or Vanguard. They are not specific to Acorns. In other words, you can look up the prospectus, history, and ticker symbol on any finance website or tool you like.

The Acorns investing ETFs are (Name, Ticker Symbol, Discussion):

  • Vanguard 500 Index Fund ETFVOO – The bread and butter of stock investing, this is an index-based ETF that attempts to replicate the SP500 index by investing in large U.S. companies.
  • Vanguard Small-Cap ETF – VB – This is the small-cap stock ETF for Acorns. It invests in small U.S. companies. Specifically, it is designed to track the CRSP US Small Cap Index.
  • Vanguard FTSE Developed Markets Index Fund ETF – VEA – This one of the international components of the portfolio.
  • Vanguard REIT ETF – VNQ – This fund invests in Real Estate Investment Trusts, or REITs, and is designed to track the MSCI US REIT Index. A REIT is a way to invest in the real estate market through stocks. So, assuming everything goes according to plan, REITs would go up when real estate is going up, and vice versa.
  • iShares 1-3 Year Treasury Bond ETF – SHY – This is the low-risk investment in the line-up. Nothing lowers your risk like short-term U.S. Treasuries. There is probably a way to take the riskiest investment in the world, combine it with short-term Treasuries and come up with a Moderately Conservative portfolio. This fund is essentially one-step riskier than a money market fund.
  • iShares iBoxx $ Investment Grade Index ETF – LQD – This ETF is part of the “bonds” part of the Acorns investment portfolios. These are investment-grade bonds (not junk bonds) and is designed to track the BofA Merrill Lynch US Corporate Index.
  • iShares Core S&P Mid-Cap – IJH
  • iShares Core S&P Small-Cap – IJR
  • iShares Core MSCI Total International Stock – IXUS
  • iShares Core 1-5 Year USD Bond – ISTB
  • iShares Core U.S. Aggregate Bond – AGG

So are Acorns investment strategies good?

Acorns Investments Performance?

As I've written multiple times before, when it comes to investing, what matters far more than investment selection is the amount of money you invest, and how long you keep it invested. That is true here as well.

Remember, compound interest takes a long time to work its magic. The good news is that the whole point of the Acorns app is to keep you investing steadily over time. That is going to be a far bigger component of your long-term investing success, than how your individual Acorn investments are tweaked.

That being said, the Acorns investment strategies are solid, if somewhat unusual. The good news is that because all Acorns portfolios use publicly traded ETFs, it is relatively easy to watch Acorns portfolio performance.

First, this is all index investing. That means these investments are cheap. Acorns investing fees won't be eating into your returns (except for the monthly Acorns subscription fees), and you don't have to worry about "beating the market" since the point of index-based funds and ETFs is not to beat the market, but rather to BE the market. If the market is up 7 percent, so are you (more or less). This is good.

Second, the diversification in the Acorns portfolios is good, but not traditional. Again, while we are only talking about hundreds or a few thousands of dollars, it really isn't material, but if you ever did end up with a lot of money in your Acorns investment account, you would want to ensure that you compensate, if necessary, in other areas of your portfolio.

Acorns Investing Portfolios Review

Typically, a financial advisor or financial planner would divide up your money in stocks and bonds to achieve a portfolio that matches your risk tolerance. At most major brokerages or investment firms, that would entail mutual funds or ETFs just like with Acorns. The difference is in two major areas, and one minor one.

Most diversified portfolios include some exposure to international stocks, and so does Acorns. Acorns includes emerging markets, that is economies that are still developing. That means your Acorns portfolio includes investments outside of Europe, Japan, or Australia. This isn't necessarily good or bad, but since emerging markets are more volatile this choice means dialing back the international exposure quite a bit for the more conservative portfolio choices.

The inclusion of a REITs part of the portfolio is non-traditional as well, at least one this big. The Aggressive portfolio, for example, includes 30 percent invested in REITs. The theory is that real estate is a non-correlated asset to the stock market and therefore might do well when stocks are declining (or vice versa). The catch here is that REITs are still stocks, and stocks, even real estate stocks, don't fully decouple from the correlation of the markets. If there is one area that gives me pause about how good the Acorns portfolios are, it is the large allocation to REITs.

Here is my point. Below, you'll see the annual performance of the specific REIT ETF that Acorns invests in. While the size of the moves are different, there is a lot in common with the ups and downs of the stock market. Part of that is because good economy is good economy (and in 2008 vice versa).

acorns-investments-reits

The next image is a similar chart to the above for an S&P 500 ETF. In this case, this is for the SPY S&P 500 ETF. This is for example purposes because the actual Vanguard SP500 ETF used by Acorns is not old enough to have the years before 2011 included. So, there are some differences but a lot of the overall direction and magnitude are in the same ballpark.

acorns investments sp500

Here is what we are looking at. The REITs are indeed different, but often move in the same direction, with the very notable exception of 2007 when real estate was falling apart, but the stock market hadn't figured that out yet. Obviously, there is some value in including REITs in a diversified portfolio, but the 30 percent number seems an odd way to push for more aggressive returns. Let me be clear, this is not wrong or bad, just not traditional.

There is now a mid-cap investing option. Mid-cap stocks often end up being the best performers over a 10 year period, partly because they are bigger enough than small-caps to not have such volatile swings (especially in down markets) but smaller enough than large-caps to have plenty of room to grow and innovate.

The typical financial advisor will send you home with a portfolio that has a mid-cap option (maybe even split into mid-cap growth and mid-cap value) and with a smaller amount allocated to REITs. In some ways, this difference in portfolios offers even more diversification for your overall assets.

Are Acorns Investments Good?

In the end, the Acorns investments are solid portfolios. Acorns investment performance will be about as good as any mutual fund portfolio your financial advisor would come up with. They are built using low-cost ETFs which is important both for you the investors, and for the company. For you, the anchor of higher fees isn't weighing down your returns. For Acorns, the ability to get into and out of ETFs cheaply is important to its low-cost, no minimums fee structure.

Finally, Acorns automatically rebalances your portfolio for you. This is huge, and maybe more important to your long-term success than getting the particular investments or percentages just right. The reality is that if you look at a chart of which asset class performed best each year, you'll see that it varies greatly. Sometimes, small cap stocks are the big winners, and then the big losers in the next year or two. If you don't rebalance your portfolio, you end up just riding the wave up and down. However, with rebalancing, you pull money out at the top, and put it in at the bottom. This is how to buy low and sell high without ever knowing anything about stocks, and like everything with Acorns, it's automatic.

Acorns rebalances your funds by taking your incoming contributions and investing them where you are low. More importantly, it will actually transfer funds between investments quarterly if things get more than 5 percent out of balance. That means that Acorns will be selling after that 30 percent run up to lock in some gains.

If you like the idea of automatically investing over the long-term to build up a nice portfolio, then these Acorns portfolios are going to be just fine for achieving that.

19 thoughts on “Acorns Investment Portfolio Review”

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  4. It looks like this article was written about 5 years ago, and it appears it needs to be completely revised to update it to the current status of Acorns. Skimming the article I see no mention of the regular and ROTH Ira’s available at Acorns. Their Aggressive portfolio contains 10% bonds?
    Really? The current Acorns Aggressive portfolio has no bonds, and didn’t have any in mid 2018!

    My first college English professor used to tell us “believe only half of what you see and hear, and nothing that you read”. In other words do your due diligence and verify anything you find on the internet.

    1. Hows Aspergers treating you?

      In either case, if you wish to find something up to date change your search parameters for a year, and for the specific product you’re searching for. Acorns investment 2019 would have got you what you wanted, and Acorns later is the other product you’re talking about.

      Whoosh

  5. Acorns does have a “INTL LARGE COMPANY STOCKS” option as part of a portfolio. I chose the “Aggressive” option, they put 20% of my investments into the Vanguard VEA EFT. This may new since you published this article, so I wanted to mention this if others are interested.

    While I think the rounding up of credit/debit card purchases is a gimmick that I’m not interested in using, I liked that it is simple and easy to use, the fee is a modest $1 a month, and I could start off with small amounts. I wanted to make a modest initial investment, and then have a small set amount transferred from my checking account each month. I would rather be able to track the exact amounts of my purchases on my card statements, without having the amounts rounded up.

    Some other online reviewers say Acorn’s fee is higher than alternatives, but the only cheaper ones I could find were ones that required large (at least for my budget) investments to get cheaper fees. Criticisms of the fee might be valid if people only use the rounding up option for deposits and do not use their card frequently, since the $12 fee will probably consume what little dividend earnings they accumulate. Even if a person can’t afford to deposit more than this, I think the $12 per year is probably still a good deal, because Acorns gets them involved and learning about investments until they can afford to invest more. For someone without any investment experience or education in finance, it is worth $1 a month to learn first hand about how to invest using indexed funds.

    While Acorns does not fit the needs of every investor (any more than a single size of shoe would), I was looking for something that would pay more than the pitance my bank savings account pays. I wanted something where I could put some money where it would at least keep up with inflation over the next 5 years or so. After seeing Acorns mentioned elsewhere, I searched for more information about them and found your article. You reassured me it wasn’t a rip off and explained what Acorns was and wasn’t, so I decided to give it a try. It was super easy to set up what I wanted.

    Thank you for your article,
    Greg

  6. You should probably mention they have a shopping portal called “Found Money” in your article, where you can get cashback at retailers.

  7. Anthony J Downey

    Amazing article! It seems that acorn has left the investor and the broker quite distant which is alarming and leaves quite a bit of trust on a person managing your portfolio. I find this ok if i can actually trust the broker because sometimes your anxiety gets in the way of sound investments a broker can see and you can not.The amount of information on how they invest is very little this may be to simplify things and broaden there audience and attract more consumers. I wish acorn the best of luck and even without any stock returns and paying the fee I would most likely be spending money that I didnt squirrel away. Even in one day I amass 5-10$ a day which comes to around 2,100 $ a year which i would not think of and waste . Im planning on taking this money and rolling it over into a CD @ 1% compound interest for 4 years and continuing adding my acorn funds to a CD which then can roll over into a 401k.

    1. Robert Casagranda

      Why a CD you can find banks that will give you 1%. Goldman Sachs does a 1.25% just leaving it savings. You’d be better off just putting it in a 401k or a Roth IRA right now. I max out my Roth IRA every year and just use Acorns as a second option.

    2. The Acorns website says clearly that the funds are deposited into a short list of Vanguard Indexed funds, and the percentage allocated to each depends upon the 5 options for the degree of risk you select, ranging from Conservation, to Moderate, to Aggressive. They are not managed portfolios where you rely upon the whims of an fund manager at predicting the future and try to outsmart other traders. The link below to the Acorns site provides the list of index funds in which your investment will be used to purchase shares.

      https://www.acorns.com/support/what-is-a-prospectus/

  8. yehudah gordon

    thank you for your informative article
    question overall what rating would you give their portfolios

  9. Former_Acorns_User

    I made roughly $60 in profit from dividends in 9 months with ended balance of $2000 (total amount of my contributions + dividends) when I decided to withdraw all my money. I thought it’s not worth it for me. And they always show you your balance instead of dividends grow, so you think that you’re doing really great, but in reality it’s just your contributed money. They don’t show you the dividends chart, you can see that in documents.

  10. I agree with Thomas Chamberlain above. To learn the most about Acorns, it is best to go somewhere other than Acorns to do it.

  11. Thomas Chamberlain

    Excellent article. I’ve learnt more from reading this one article than reading through pages and pages of acorns magazine.

  12. Very great read. I own my online company and I have been sitting here watching game of thrones *I know right ha* thinking to myself I want to open an savings account to save up my change on all my purchases for the company. Which day to day is a lot sometimes. Then I remembered that acorn app. I was like sweet, then though wait better look into this. So looked around on google and found your first article and then found this one. Very good on explaining how they move my money around in the market and how they operate. I have taken a lot of knowledge from this and do recommend anyone interested in the acorns app read.
    Thank you very much.

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