Stash vs Acorns (2020): Which Microsavings Service has Better Returns?

Stash vs Acorns: Comparison

Both Stash and Acorns are designed to effortlessly turn small amounts of money into larger investments. In this Stash vs Acorns comparison, we show you which has better fees, services, investment options, and more.

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Stash and Acorns both typify the maxim that necessity invariably becomes the mother of invention. One of capitalism’s foundational cornerstones is creating surplus-value by addressing the unmet needs of an underserved market, and it drives these apps market strategy.

These needs are mostly challenges faced by investors who don’t have the slightest idea or sufficient means on how to invest.

Until recently, most of these lacked any reprieve from their predicament: according to research from Cerulli Associates, 71% of Americans (U.S. households with less than $100,000 to invest) don’t have enough savings to be worth the while of most financial advisers.

Fortunately, Brandon Krieg, Stash’s CEO, says that they are focused on changing this dynamic: “Stash is on a mission to empower a new generation of investors, giving everyone access to financial opportunity.”

Both Stash and Acorns are part of a wave of companies attempting to lower the barriers to entry that have excluded these groups of investors for so long. But is Acorns or Stash better?

They are both startups that target these first-time investors and have been busy carving out a niche for themselves in the competitive, crowded world of Fintech. These micro-investing platforms allow you to start investing with a little amount of money, compared with more traditional brokerages.

“We’re driven by the belief that anyone can grow wealth,” says Noah Kerner, Acorns CEO. The company ostensibly commissioned its 2017 Money Matters Report to get a better understanding of the public’s investing habits.

In a nutshell, Stash and Acorns are both competing for novice investors who want to start and grow an investment portfolio but lack the expertise or time to do so.

But somewhere afterward, their business models begin to diverge.

How far?

Well, this article is intended to delve into these differences — to compare and contrast their features so that the consumer will be capable of making an informed decision on which of these two is better suited for them.

Brief Stash Review

Stash Invest Homepage Screenshot
Stash investors can start with as little as $5.

Stash Invest Summary

  • Account Minimum: None required but you need $5 to start investing
  • Fees: Depending on account, between $1 to $9 monthly
  • Ideal for: New, especially young investors lacking substantial resources.
  • Automatic rebalancing: Not applicable
  • Tax-loss harvesting: Not applicable

Operating Philosophy

If there is a word association that would encapsulate what Stash embodies, then it would be that Stash is the app that seeks to unify your spending, savings, and investing all under the same umbrella.

Stash is relatively recent, launched in 2015 with the quest of providing an all-digital offering of financial services to a younger demographic to assist them to spend judiciously, save prudently, and invest wisely.

While all these three financial goals are in the mix, it appears to be geared more towards savings and spending than investing.

Stash Invest Performance

Stash comes integrated with a social compass. It not only provides people with a platform to invest small amounts but also gives them the opportunity to invest in something they also believe in.

As a result, people who believe that their portfolio should be an extension — or at least reflection who they are, are provided with the chance to invest accordingly.

While it isn’t a robo-advisor, Stash gives you more control than most of these digital investment apps. Stash strives to provide a more personalized investing approach.

Stash Invest Investment Choices
With Stash, you can chose to invest in either stocks, exchange-traded funds, or bonds.

Unlike other micro-investing apps and even robo-advisors that select investments for their customers, Stash ensures you have a mix of low-cost securities — which are primarily ETFs, based upon your investor profile characteristics.

For the sake of their customers’ convenience, Stash organizes the 30 offerings it provides under the following headings:

  • I Believe: under this banner are socially responsible organizations such as those involved with clean energy, and support the rights of the LGBT community, and so on.
  • I Want: this provides goal-based directives with regard to stock, enabling the investor to choose from goal categorizes such as moderate, aggressive, a more conservative mix, or just those that pay regular dividends.
  • I Like: this is simpler fare, providing investors with tech, retail and social media stocks.

The risk level of each fund is displayed once it is clicked upon, along with the companies that it is comprised of, its underlying security (most likely an ETF), and its ticker symbol.

On the screen below the option clicked, you can view more information regarding the fund such as its dividend yield, most recent share price, and expense ratio. There is even a link strategically placed to route a user to the fund’s website.

Stash comes with an in-built educational platform that guides and teaches you how to invest as you go along it.

The designers at Stash invested considerable thought and effort in its aesthetics, making the app’s design one of its strongest features. Its user interface is easy to use and intuitive to understand, astutely displaying the necessary information when it makes the most sense.

However, if you happen to be one of those old-school folks who like to work from a bigger screen, preferably from a desktop because you find mobile apps constraining, then you are likely to be frustrated by the lack of a web option.

Just as its usage is smooth and thoughtful, its sign-up process is also as seamless. You just need to provide the normal identifying information you would anticipate from a financial institution. These include details that would help to determine your risk tolerance level and the portfolio appropriate for you.

Apart from the thoughtful design, another thing that sets Stash apart from its peers is that it probably gives you more choice than any other investing app.

Stash has provided Stock-Back transactions, which is a recent innovation that allows their customers to earn ETFs or the shares of stock just by simply making purchases with their Stash debit card.

Stash Fees Explained

Stash Invest Plans
Stash Invest fees depend on the type of account selected: beginner, stash+, or growth.

Stash lets you invest as little as $5 in portfolios chosen based on your goals, income, values, and even companies that you admire. It initially used to charge a flat 0.25% called a wrap fee annually for its advisory services, in addition to a minimum $1 for taxable accounts and $2 for retirement.

However, Stash changed all these in 2019 when it moved to a tiered structure. The first of these is the Beginner which provides a $1 per month taxable account.

This is followed by a $3 per month Growth retirement account. At the final tier is an account that encapsulates all the previous ones, in addition to providing custodial accounts such as Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts. This account is called Stash+, and you’ll get it for $9. When it comes to Stash vs Acorns fees, both platforms offer similar fees for their most basic package, but Stash fees are higher for the more advanced plans.

Although Stash doesn’t charge you any add-on fees for trades, you’ll, however, incur ETF fees after each purchase made. These are fees outside Stash’s direct service, and it is imperative that an investor should be cognizant of these extra fees.

Since some of these securities come with high expense ratios, they could be quite the bummer for unsuspecting investors by incurring hidden costs. This is because most of these costs aren’t well disclosed to new investors to begin with, likely confusing them as to why they are experiencing the additional cost bloat.

Account Setup

Since the beginner investor is the center of gravity around which Stash orbit’s, its setup process equally reflects this simplicity. When a prospective investor creates a Stash account, the Stash Coach app is there to navigate them through the on-boarding process. It poses a series of questions to the prospective investor in order to collect personal details along with other pertinent information.

Stash Coach Page Screenshot
The Stash Coach app helps investors with initial set-up.

Along the way, it uses other relevant information to build an investor profile that presents the choice of risk tolerance among the following: conservative, moderate, and aggressive. Other supplementary information underpinning the profile creation process are details like income, net worth, life status, and so on.

Prior to setting up a debit account (via Green Dot Bank), the customer will have to create a taxable investment account.

However, before committing yourself with creating an account, Stash allows you to play with some tools so you can get a feel for how the app works. These tools are mainly in the category of evaluating the impact of increased funding on a portfolio assumed to grow, say about 5% a year. As mention, the objective of these tools is just to provide the prospective investor with a cursory look at the how Stash works before they make a commitment.

Even before providing your contact email, Stash still gives you the privilege of viewing its investment offerings in more granular detail. The app also gathers all kinds of links and information that are useful on a secondary landing page dedicated to each of the listed offerings.

During the account setup process, you can choose from six specific themes that include titles such as Companies with a conscience, and Emerging international up and comers. Beware though, because Stash neglects to inform you that pursuing this type of mandatory thematic filtering actually limits your subsequent investment choices.

However, this doesn’t necessarily place you in a straight-jacket because you can reject Stash’s “curated suitable investment” list if you so desire and select other alternatives. However, the app may respond to give you reasons why the alternatives you selected might not be optimal compared to the proposed list.

Individual, retirement, and custodial accounts are supported by Stash, but the app remains silent on joint accounts, so it is safe to assume this isn’t currently being offered.

Are you a fan of investing from your smartphone? Check out our top stock trading apps.

Goal Setting

To enable customers to plot their goals and objectives, Stash provides them with the Stash Coach app which in turn directs them through the Stash Learn Portal. This portal provides a wide assortment of “how-to articles,” and a general array of broad-based educational tools.

StashLearn Article Page
Stash Learn offers a number of educational resources.

Stash provides investment advice through the Stash Coach app.

Based on its disclosures, Stash’s investment advice is supplied based primarily on the following principles:

  • Passive investing
  • Diversification
  • Fixed-income assets hedge portfolios
  • Providing investment advice, albeit one adjusted for personal beliefs and to overcome emotional bias
  • Providing equities as an asset class

Stash Pros and Cons

Pros

  • Incorporates automatic savings and investment tools
  • Stock-Back transactions come with debit cards
  • Top-notch educational resources
  • Convenient low account minimums

Cons

  • It doesn’t provide any tax-loss harvesting or automatic rebalancing
  • Stash debit account doesn’t earn you any interest
  • No dividend reinvestment is available

Interested in a Stash account? Get started here.

Brief Acorns Overview

Acorns Homepage Screenshot
Through Acorns, investors can grow their ‘spare change’ into something more valuable.

Acorns Summary

  • Account Minimum: None
  • Fees: Between $1 to $3 monthly,  depending on account
  • Ideal for: Investors who struggle to save but want to do so passively such as college students and young adults without a retirement account
  • Automatic Rebalancing: Free on all accounts
  • Tax-loss Harvesting: Not applicable
  • Promotion: None currently available

Operating Philosophy

Unlike Stash, Acorns is a bona fide robo-advisor. Its business model is based on the old-fashioned concept of saving spare change; but instead of doing it crudely in a jar, Acorns takes these infinitesimal amounts from everyday purchases and turns them into an investment portfolio.

Acorns operating philosophy is akin to its name: since mighty oaks start as small acorns, the moral it conveys is that it is wise not to neglect the seemingly inconsequential, because even a vibrant investment culture can be built from little things.

With the Acorns symbolism, it is equally poetic that it was started by a father and son entrepreneurial team in Australia in 2014.

Acorns helps you invest by rounding up your debit and credit card purchases to the nearest dollar, subsequently investing these in on behalf of the customer in a portfolio consisting of low-cost exchange-traded funds (EFTs).

Acorns Performance

Acorns offers access to its services from either its website or app; its app has also won numerous awards based on its attractive design.

Acorns doesn’t invest your money randomly or on a whim, but does so based on your portfolio settings. Depending on the ETF market that the stock resides, the investment can take up to three days to clear.

One of the most distinctive features of Acorns’ is Round-Ups. While it is tempting to scoff at the negligible amount rounded up per transaction because it doesn’t initially look like a lot, these eventually add up over time. And because it can be implemented automatically, there is no fear of forgetfulness in transfering the money.

Acorns’ cashback program is called Found Money. Acorns’ users who shop through the Acorns’ platform get a percentage of the money spent at partners’ stores instead of receiving a percentage of the purchase back. After 30 days of making a purchase, Acorns will deposit Found Money funds into your account.

Acorns FoundMoney Program
Acorns’ Found Money program features cashback perks.

Acorns investment strategy involves uses ETFs pulled from seven investment classes, namely: domestic stock, government and corporate bonds, international and large company stock, small company stock, real estate, emerging markets. Your asset allocation, which signifies how much you are invested in each security is a factor of your risk tolerance and profile.

Acorns supports a plethora of accounts and features such as personal savings, both traditional and Roth IRA, SEP-IRA, and 401(k) rollover.

Acorns Fees

Acorns differs from most robo-advisors because unlike them, it doesn’t charge fees based on how much you have in your account balance, but just demands a flat management fee. However, if you have at least a $1million to invest, then Acorns might offer you a different management fee.

Acorns tailors its account to its user demographics in several ways. There isn’t any minimum account required but you’ll need at least $5 before you can start investing.

Screenshot of Acorns Pricing
Acorns fees depend on the account type selected: Invest, Invest Later, or Invest Spend.

Acorns Core

Acorns Core just costs $1 per month, which makes sense since Acorns is targeting people just starting out like college students. Acorns Core is a run-of-the-mill taxable investment account that is accompanied by a cash-back-for-your-portfolio feature. This feature allows you to spend money with Found Money, which is an Acorns partners program.

College students who prove they have a valid .edu address don’t have to pay for using Acorns Core, for a 4-year duration.

Acorns Later

Acorns Later will cost you $2, and this extra expense will net you either a Roth or traditional individual retirement account. Note that this is a tax-deductible IRA plan.

In essence, this tier is actually Acorns Core + Acorns Later as the previous account is subsumed with the current.

Acorns Spend

Now for the bank-breaking sum of $3, you’ll get the most expensive plan, which happens to be Acorns Spend. This plan includes a Visa debit card that is connected to the Acorns automatic investing services. You accrue zero fees on this account.

Just like the previous case, this plan is essentially Acorns Core + Acorns Later + Acorns Spend.

Account Setup

It gathers a user’s personal information in addition to other income and lifestyle details in order to set up your financial goals and gauge your risk tolerance.

In setting up an account, the user has to connect with one or more debit and/or credit cards to their Acorns account.

Subsequently, Acorns will round each purchase made on these cards to the next dollar and save to the customers Acorns account. For instance, if you buy coffee for $3.25, then spend $8.75 for lunch, and splurge $30.02 for a sweater; at the end of these purchases, Acorns will dutifully round up all of these transactions and eventually credit $1.98 to the customer at the end of the day.

Not sure where to start with a broker? Review our best stock brokers for beginners.

The customer has a choice of Acorns’ portfolio from which the change will eventually be invested into. These choices represent five investment portfolios, each a variation of the standard advisor-speak for the group of investor categories often ranging from conservative to the aggressive.

Example of Moderately Aggressive Acorns Portfolio
With Acorns, you’ll be able to choose between five investment portfolios.

As a rule of thumb, the longer your time horizon, and the higher your risk tolerance, then the more aggressive your investments in higher-risk assets that possess higher growth potential will likely be.

Specifically for Acorns, there are the five prebuilt portfolios, namely: conservative, moderately conservative, moderate, moderately aggressive or aggressive.

Users have the liberty of selecting how they want their fund deposits to operate; with the more typical automatic deposit, or the can otherwise choose daily, weekly, and monthly deposits.

While Acorns is a robo-advisor, it offers fewer ETF options than its counterparts.

Also some of its peers such as Wealthfront and Betterment, for instance, provide more robust explanations of their investment strategies. In this regard, Acorns somewhat unspoken message to their investors is “don’t concern yourselves with the pesky details, let us worry about the technicalities.”

In their defense, this makes it easier for Acorns to target young people new to investing; however, others might want more transparency in how “the bacon is prepared.”

Acorns has several other demerits as a robo-advisor. Its services are entirely digital, which is quite constraining if you are an investor who hopes to do more than just invest in the seven offered ETFs or in other types of funds. Moreover, several other robo-advisors provide a more versatile range of account types such as 529 college savings plans.

Therefore, if you are a serious investor who wants to interact and rub minds with a real person with sophisticated investment savvy, then it is best you go looking somewhere else. In this regard, if you have more than $25,000 in assets that you are willing to invest, it perhaps behooves you to get a human advisor instead.

Acorns Pros and Cons

Pros

  • Implements automatic rebalancing
  • Provides fractional shares
  • Robust educational content
  • No minimums required
  • Cash back available from select retailers

Cons

  • It doesn’t support joint savings or 529 college savings.
  • Lacks human advisor complement to support for its robo-advisor features
  • Lacks direct indexing and tax loss harvesting like most robo-advisors
  • Investment options are limited

Join Acorns here.

Stash vs Acorns Overview

Stash and Acorns, like most robo-advisors and even micro-investing platforms, are guided by the operating philosophy of the Modern Portfolio Theory (MPT).

MPT revolves around the concept of investing in a diversified portfolio, preferably spanning several asset classes. The object of this diversification is to lower the risk exposure of the investor while maximizing their returns.

Incidentally, the father of MPT, Harry Markowitz just so happens to be an advisor for Acorns.

Unlike many other robo-advisors, Acorns conveniently charges a flat fee for its services, so you aren’t thrown for a loop on the cost that using the service is going to incur each month.

Great, right?

Unfortunately, it is only when your account balance is large enough that you begin to reap the benefits of Acorns’ flat management fee. This is because Acorns fixed account fee actually translates into a high percentage of your assets if you don’t have substantial money in your account; in that case, the fixed monthly fee no longer looks like a good deal.

A short explanation is in order: assume you are a small-time investor with about $500 in your Acorns Core account. Spending a paltry dollar a month sounds awesome, right?

Unfortunately, things aren’t always what they appear to be. This is because the $1 fee translates to paying 0.2% every month.

For 12 months, this basically means that you’ll end up paying 2.4% of your assets under management (AUM). For a better perspective, other robo-advisors normally charge an annual rate of 0.50% or less! As you can see, you are widely overpaying to use Acorns if you have a small amount like $500 in AUM.

You’ll pay even more if you opted to use one of the Acorns’ more costly plans. However, percentage-wise, if you have much more in your account, then Acorns’ fee converts into a relatively low payment. An account balance of $5,000 means that you’ll only be coughing up an annual fee down to about 0.24%, which is competitively close to what is charged by other robo-advisors.

While this a significant improvement, you’ll still need about $10,000 with a retirement account like Acorns Later before you can approach the commensurate 0.25% that other robo-advisors charge.

While Stash, like Acorns, lacks a human advisor, this omission is more forgivable on the part of Stash because it isn’t a robo-advisor. And typically, robo-advisors provide this option for its higher-tiered investors. However, Stash somewhat ameliorates its lack of a human advisor by providing Stash Coach.

Stash Coach is a digital helper that goes about its business assisting Stash investors in the manner of a game; they gain points after attaining higher levels of completed investment and subsequently earn more complicated learning challenges.

While this gaming investment type learning might appeal to the younger generation who most likely grew up playing video games, the same cannot be said for the older ones who might frankly be put off by it.

The presence of Stash Coach notwithstanding, Stash basically leaves portfolio management up to the client.

In other words, clients are left to their own devices. With weak methodology disclosures, the most significant drawback to this strategy is that new investors may think that Stash is keeping a watchful eye on their investment positions. Instead, they are therefore likely to lose money, causing these disheartened clients to wonder why one time of security or investment was selected instead of the other.

Stash vs Acorns Summary

There are several advantages of an investment app, but one is most notable: because of the streamlined mobile interface, it makes the investing process as simple as possible, especially in this era where most people are adept at using smartphones.

Investment apps such as Stash and Acorns facilitate the vision of providing new investors with an easier path to investing by removing the obstacles of complexity and cost.

Therefore, if you have found it difficult to save, or have been confused with investing in general, then Acorns and Stash were designed with you in mind. But is Acorns or Stash better?

Although they have similar objectives, they pursue them with different strategies. The choice is up to you to decide which of these methods would help you more effectively meet your investment objectives.

About Author

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim is also the co-founder of Protective Technologies Capital (protechcap.com).