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Are Investment Apps Worth It?

Updated: Apr 9, 2021


Today is a quick post on wether or not investment apps are worth it. We care comparing the Acorns app to other widely available platforms including standard brokerage accounts, RobinHood, and WeBull. For our purposes, the latter platforms are identified as simply "Brokerage" accounts and the Acorns app is identified as Acorns. Investment thesis and strategies is beyond the scope of this blog, but hopefully this can point you in the most efficient way to manage your money. There's no download for this post, just read and enjoy!

The Difference in Accounts

The reason for grouping the accounts as Acorns and Brokerage is due to the recent shift in many brokerage accounts, be it TD Ameritrade, Fidelity, RobinHood, etc. Almost all brokerage houses have eliminated their commissions on options, stock, and ETF trades. Commissions used to be expensive, anywhere from $4 to $9 for each trade, and significantly ate into returns. Now, without commission fees, investors don't pay any fees when buying individual stocks, but do have to pay small fees if they are invested in an index fund. This differs from Acorns approach, as Acorns charges monthly fees of $1, $3, and $5. The different plans come with various features, the most basic plan just being the brokerage account, with the most expensive plan including services similar to that of a full bank/brokerage institution. Using the average Acorns plan, the $3 monthly fee totals $36 annually. After p


How do the fees stack up? Typical portfolio managers charge small fees for easy-to-manage index funds, such as the S&P, which we used for this example. State Street, a large ETF portfolio manager, charges an annual fee 0.09% to manage the S&P 500 index fund. This means that if you hold $100 worth of the State Street S&P 500 index ETF, State Street would charge you 9 cents for the year. State Street ETFs (along with Vanguard and other large money managers) are offered by almost every brokerage house and trading app. While the brokerages and trading apps don't charge investors fees, the fees charged by the ETF portfolio manager will be deducted from your account value on a specified basis (usually annually).

Acorns Account Math

For our purposes, we assumed that no matter how you invested, you received a 7% annual return, which is in line with the S&P 500's historical average return. To calculate the account value for Acorns, we subtracted $3 every month at the time the monthly account deposit was made. Per Business Insider, the average Acorns user deposits $30/month (, which makes the net deposit $27. We used a period of two years, 24 months. For calculation's sake, we're assuming that your current Acorns value is $0. The brokerage account math was simpler, as we just used the same values for the variables above, except without subtracting $3 monthly to account for the fee. The brokerage account fee of 0.09% was deducted from the brokerage account balance annual

Acorns Variables

PV = $0

Rate = 7%

N Periods = 24

Payment ($30-$3) = $27

Brokerage Variables

PV = $0

Rate = 7%

N Periods = 24

Payment = $30

The Results

The below table shows how each account balance grows overtime, with the "Raw Value" column represented as what the account value could have been with zero fees (no Acorns fee and no brokerage fee).

While the Brokerage Value in month 24 is slightly less than that of the Raw Value, the Acorns Value trails significantly, about $80 (or three months worth of savings). The charts below show how Brokerage Value tracks with the Raw Value, so much so that the line for the Brokerage Value is not visible.

Both the table and the charts show that the Acorns fees eat into the account value at a hefty rate, so much so that in order for the $36 annual fee to be as cost-effective as the 0.09% annual fee, you would have to have an account balance of $40,000 ($36 is equivalent to 0.09% of $40,000). For reference, the cheapest Acorns option of $12 per month is cost effective as the 0.09% annual fee if you have $13,333 in your account and the $5 per month fee requires an account balance of $66,667 in order to be as cost-effective as the 0.09% annual fee of a fund manager.


While Acorns is a great tool that automatically saves money for you, it is ultimately not worth the cost. The most cost-effective way to manage your money would be to automatically deposit your money into your brokerage account on a monthly basis and investing in a cheap index fund. That way the direct deposit will handle the deposit for you and the portfolio managers will handle your index fund ETF, no further thinking required.


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