When it comes to investing, two popular platforms that consistently stand out are Acorns and M1 Finance. Both are tailored to different kinds of investors, offering unique features that can help individuals manage their portfolios. While both platforms provide options for automated investing, there are key differences in their approaches, which can make one more appealing than the other depending on your investment needs and goals. In this article, we’ll take a deep dive into both platforms, comparing their features, fees, ease of use, and more, to help you decide which might be a better fit for you.
1. Overview of Acorns
Acorns is an investment app designed with the goal of making investing as easy and accessible as possible, especially for beginners. Launched in 2012, Acorns has gained widespread popularity for its approach to micro-investing. The platform rounds up your everyday purchases to the nearest dollar and invests the spare change in a diversified portfolio of exchange-traded funds (ETFs). Acorns is ideal for users who may not have a lot of capital to start investing but want to grow their wealth over time with minimal effort.
Key Features of Acorns
- Round-Ups: Acorns’ signature feature is the ability to automatically round up your purchases to the next dollar and invest the spare change.
- Auto-Invest: Acorns offers a completely automated approach to investing, making it ideal for those who do not have the time or knowledge to actively manage their portfolio.
- Portfolio Options: Acorns offers five pre-built, diversified portfolios based on your risk tolerance, ranging from conservative to aggressive.
- Retirement Accounts: Acorns also allows users to invest in individual retirement accounts (IRAs) alongside general investment accounts.
- Found Money: Acorns has partnerships with over 350 brands that contribute a small percentage of your purchase back into your account when you shop with them.
2. Overview of M1 Finance
M1 Finance, founded in 2015, is another investment platform that offers unique features aimed at simplifying the investment process while providing more control to users than Acorns. Unlike Acorns, which uses a round-up system, M1 Finance offers a customizable approach to portfolio management. It allows users to create a tailored portfolio using both individual stocks and ETFs, giving them more flexibility in building a diversified investment strategy.
Key Features of M1 Finance
- Customizable Portfolios: With M1 Finance, users can create their own portfolio from a wide selection of individual stocks and ETFs, or they can choose from expert-designed portfolios known as “pies.”
- Fractional Shares: M1 Finance allows users to buy fractional shares, meaning you can invest in expensive stocks like Amazon or Tesla without having to buy a whole share.
- Automated Rebalancing: M1 Finance automatically rebalances your portfolio to maintain your desired asset allocation, ensuring that your investment strategy stays on track.
- M1 Spend and Borrow: M1 Finance offers an integrated checking account and debit card (M1 Spend) along with the option to borrow money against your portfolio (M1 Borrow).
- No Management Fees: M1 Finance is well known for its transparent fee structure, charging no management fees for its basic services.
3. Comparing Acorns and M1 Finance
Ease of Use
When it comes to user-friendliness, both Acorns and M1 Finance offer intuitive platforms, but they cater to slightly different user preferences.
- Acorns: The simplicity of Acorns is one of its most appealing features. Users can sign up in a matter of minutes, and the app will handle the rest. The round-up system is fully automated, meaning users don’t need to do anything beyond linking their bank account and credit/debit cards. Acorns is ideal for those who want a passive investing experience with little to no decision-making.
- M1 Finance: M1 Finance is also easy to use, but it requires a bit more involvement from the user. While the platform offers customizable portfolios (pies), this means users will need to actively decide which stocks and ETFs to invest in, or they can select from pre-made pies. Although the interface is clean and easy to navigate, M1 Finance may be more suited for those who want to take a hands-on approach to their investments.
Investment Options and Customization
- Acorns: Acorns offers limited customization options. While users can choose between five different portfolios based on risk tolerance, they cannot select individual stocks or customize their portfolios beyond the preset options. This lack of customization makes Acorns ideal for those who prefer a hands-off, simple investing experience.
- M1 Finance: M1 Finance shines when it comes to customization. Users can create portfolios from a wide range of stocks and ETFs or choose pre-built pies tailored to different investment goals. Additionally, M1 Finance’s fractional share feature allows users to build portfolios that suit their preferences and investment strategy, no matter how much capital they have to start with.
Fees and Pricing
- Acorns: Acorns charges a monthly fee based on the plan you select. The basic plan costs $3 per month, while the Premium plan, which includes features like a retirement account and access to more detailed financial advice, costs $5 per month. Acorns does not charge trading fees, but it may incur management fees for the underlying ETFs in your portfolio, typically ranging from 0.03% to 0.25%.
- M1 Finance: One of the most appealing aspects of M1 Finance is its fee structure. M1 Finance charges no management fees for its basic services, making it an attractive choice for cost-conscious investors. However, M1 Finance does charge fees for certain premium services, such as access to premium features like M1 Borrow (for margin borrowing) or M1 Plus (which costs $125 per year). Additionally, users will pay fees for the ETFs they invest in, which vary depending on the specific funds selected.
Account Types
- Acorns: Acorns offers taxable brokerage accounts, IRAs, and custodial accounts for minors. However, its range of account types is somewhat limited compared to other platforms.
- M1 Finance: M1 Finance offers a wider variety of account types, including taxable brokerage accounts, IRAs, trust accounts, and even the M1 Spend checking account. This makes M1 Finance more versatile for users looking to manage different types of financial accounts in one place.
Automatic Investing and Rebalancing
- Acorns: One of Acorns’ key features is its complete automation. After setting up the app and linking your accounts, Acorns will automatically invest your spare change through its round-up feature, and it will also automatically rebalance your portfolio to match your chosen risk profile. This makes Acorns the perfect option for investors looking for a truly passive investing experience.
- M1 Finance: M1 Finance also offers automation, but with a bit more flexibility. Users can automate their investments by setting up recurring deposits, and the platform will automatically invest in their selected portfolio. Additionally, M1 Finance offers automatic rebalancing to maintain the target allocation of stocks and ETFs in your portfolio.
4. Pros and Cons of Acorns and M1 Finance
Pros of Acorns
- Easy to Use: Acorns is perfect for beginners who want to start investing with minimal effort.
- Automated Investment: The round-up system makes investing almost effortless, and the automated rebalancing ensures your portfolio stays in line with your risk tolerance.
- Ideal for Micro-Investing: Acorns is a great way for users to invest small amounts of money without even thinking about it.
Cons of Acorns
- Limited Customization: The lack of options to choose individual stocks means that more experienced investors may not find Acorns ideal for their needs.
- Monthly Fees: The monthly subscription fee may be a turnoff for those just getting started, especially when compared to free platforms.
Pros of M1 Finance
- Customization: The ability to create personalized portfolios with individual stocks and ETFs is a huge advantage for experienced investors.
- No Management Fees: M1 Finance’s lack of management fees makes it an affordable option for users who want to build their portfolios without paying extra fees.
- Wide Range of Account Types: The ability to open taxable, retirement, and checking accounts all in one place makes M1 Finance a one-stop shop for managing finances.
Cons of M1 Finance
- More Complex: Unlike Acorns, M1 Finance requires users to take a more active role in selecting investments and managing their portfolios.
- Premium Features Require a Fee: Certain features, such as M1 Borrow and M1 Plus, come with additional costs.
5. Which Platform Is Right for You?
Both Acorns and M1 Finance are excellent choices, but the right platform for you will depend on your investment style and preferences.
- Acorns: If you’re a beginner or someone who wants a truly passive investing experience, Acorns is a great option. Its automated round-up feature and hands-off approach make it an ideal choice for those who want to invest without thinking about it.
- M1 Finance: If you want more control over your investments and are looking for a customizable platform that allows you to build your own portfolio with individual stocks and ETFs, M1 Finance is the better choice. It’s also a great option if you plan to open different types of accounts in one place.
Conclusion
Both Acorns and M1 Finance offer unique advantages, depending on your financial goals and investment preferences. If simplicity and automation are your priorities, Acorns might be the right choice for you. On the other hand, if you want greater control over your investment strategy and prefer customization, M1 Finance offers a more flexible solution. Understanding your investment needs will be key to making the right decision between these two popular platforms.
