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What is Acorns?
- No self directed trading – Acorns has 5 pre-developed portfolios to choose from based on risk tolerance
- Subscription based fee model of $1, $3, or $5 a month depending on the plan tier you choose
- Round-up automated savings features to help you increase your investments
- Offers college students 4 years of free investing by signing up with a .edu email address and listing “student” as employment
Who is Acorns best suited for?
Acorns is best suited for college students who:
- Are looking for help to develop better savings habits
- Prefer hands-off investing
- Want to start investing with small sums of money
What is SoFi?
SoFi, short for Social Finance, was originally established in 2011 as a lending institution and has since expanded its services to include robo advising. SoFi stands out compared to its competitors with the following features:
- No management or commission fees*
- Provides options for both active and automated investing
- Hosts crypto currency trading
Who is SoFi best suited for?
- May still be learning the ropes
- Want to dabble with individual stocks and crypto currency
- Are looking to start investing with small sums of money
|*Fees||ETF expense fees range from 0.29-0.59%. Additional crypto currency fee of 1.25% per trade||Monthly subscription fee of $1, $3 or $5 per month depending on the plan you’re enrolled in|
*free for college students for 4 years
Where SoFi and Acorns differ
SoFi charges $0 in management fees and $0 in commission. However, you will be assessed management fees if you invest in any of SoFi’s ETFs. Those fees range from 0.29%-0.59%. Additionally, if you opt to invest in any crypto currency, you’ll be charged an additional fee of 1.25% per crypto trade.
An example of what those fees look like:
If you invested $1000 in an ETF with a management fee of 0.29%, you’d be assessed a total fee of $2.29.
If you traded $2000 worth of cryptocurrency, you’d be assessed a fee of $25.
The national average ETF expense ratio (i.e. the cost to investing in an ETF) hovers around 0.44%, therefore SoFi’s rates are competitive.
One of the ways in which Acorns stands out from its competitors is in the way they assess fees. Acorns utilizes a tiered subscription model where users pay $1, $3, or $5 per month depending on the plan they choose. It’s also important to note that for portfolios worth over $1 million dollars, the monthly fee rises to $100 a month.
While this fee model is transparent – meaning you know exactly what you’ll be charged each month, it comes with strings attached.
If you have a relatively small portfolio, those monthly fees can really eat into your savings. For example, if you’re on the Lite $1/month plan and you have $1000 invested with Acorns, it means you’re paying 1.2% annually in fees. That’s significantly higher than the national average. However, if your portfolio totals $10,000 and you’re on the Lite $1/month plan, then your annual fees are only 0.12%. That’s significantly lower than both SoFi and the national average.
A big perk is that Acorns also offers college students free investing for 4 years when they sign up with a .edu email address and indicate “student” as their employment status.
Flexibility and control
SoFi portfolio options
SoFi offers a few different methods for you to invest.
If you’re after a fully automated portfolio, you can let SoFi do the heavy lifting for you. After filling out a questionnaire, SoFi will create an automated investment portfolio for you by accounting for your risk tolerance, goals, and investment timeline.
If you want the opportunity to choose between a few different ETFs, SoFi offers users 5 to choose from:
Lastly, if you want to take on a more active approach, you have the ability to purchase individual stocks or fractional shares. However, not all publicly traded companies are available on SoFi – so you’ll be limited to what they have available on the platform.
Acorns portfolio options
Acorns does not allow for any self-directed trading. Users simply choose one of five pre-set portfolios: conservative, moderately conservative, moderate, moderately aggressive, and aggressive. Depending on how confident you feel navigating the stock market, this may be seen as a positive or a negative.
Acorns does not offer their users the opportunity to invest in crypto currencies. However, it is important to note that SoFi charges an additional fee of 1.25% per crypto currency trade.
The bottom line
Where SoFi wins
Outside of the college student demographic, SoFi is likely the better option for beginner investors with small portfolios who are looking for low fees. Additionally, SoFi offers additional opportunities for investors to make individual stock and ETF choices, as well as the option to invest in crypto.
Where SoFi falls short
For beginner investors who want the flexibility to purchase individual securities, there is a relatively short list to choose from on SoFi. Other investment platforms offer similarly low fees but with a greater range of options.
Where Acorns wins
Acorns comes out on top for college students. Since they offer free portfolio management to college students for four years. Acorns is also a better choice for beginner investors who are not comfortable or confident enough to build their own portfolio.
Where Acorns falls short
While the subscription model is very transparent, it can be detrimental to small portfolios. It’s important to understand how even a few dollars a month can eat into your profits if you’re only investing small amounts.
Alternative investment apps to consider
- Low fees
- User friendly apps & websites
- Fractional shares
- Informative content
- Low minimum balance
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