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Acorns is a Robo-advisor with some neat features that made the concept of micro-investing quite popular. They focus on ease and convenience and are a choice for somebody looking for a set it and forget it investing approach. At the end of the day, you are investing in a reasonably simple ETF portfolio that you could purchase yourself without paying fees but that will require additional work from you. Investing in Acorns is like buying a lazy portfolios but on autopilot. So what if we were to just buy a lazy portfolio instead? How do Acorns’ portfolios compare, how do they perform and are they worth it? Approach: I will reconstruct all Acorns portfolios and run backtests on them to see their historical performance, return distribution by asset, the income they produced, fees, and industry exposure. Then I will compare them to each other as well as other easy-to-set-up portfolios. I will then attempt to analyze if the portfolio is a good purchase at this particular time by looking at its core holdings, assessing key metrics, and analyst reports. Acorns disclose their portfolio composition, which makes my job a lot easier as I don’t have to reengineer what exact ETFs a robs-advisor might be using. Acorns Aggressive Portfolio Composition Acorns aggressive portfolio is a 100% stock portfolio. The majority is in large-company U.S stocks. Weight Ticker Ticker Info 55% VOO 10% IJH 5% IJR 30% IXUS Acorns Aggressive Portfolio Performance, Risk & Fees Key Performance Stats Note that this comparison is looking at a heavily stock-weighted portfolio during the longest bull run in U.S history, so the results are expected to be quite good. The portfolio has generated a CAGR of over 13% which is not bad but lower than SPY’s 16%. Volatility is almost identical since there aren’t any low-volatility assets that can reduce the overall portfolio’s volatility, so it is expected that portfolio volatility matches broader stock market volatility. Acorns Aggressive Portfolio vs. S&P 500 ETF - SPY Below is the return on a hypothetical $10,000 investment in the portfolio compared to the same investment in S&P 500 ETF SPY. Being an all-stocks portfolio, it almost perfectly mimics the overall stock market. However, the returns are lower due to additional portfolio exposure to small-cap, mid-cap, and international stocks that haven’t performed up to the same level as the overall U.S stock market over the last ten years. Note that this might not be the case going forward. As the U.S stock market reaches its all-time highs, having exposure to other stock types might play out well. Overall, it is a much more diversified portfolio than simply buying SPY. Return Breakdown by year Acorns Aggressive Portfolio Income & Yield Portfolio generates income through dividends, here is the breakdown of income and the yield you would have received from a hypothetical $10,000 investment . Note: The annual income is calculated from the difference between monthly total returns and split-adjusted monthly price changes and thus includes both dividends and capital gains distributions. ETF Fees ETFs, comes with a management fee called Management Expense Ratio. These fees are not Acorns fees and are part of your potential return. For example, if the portfolio has ETF fees average out to 0.10% and the portfolio gains 1% in value over the year, your yearly return will be 0.9%. Acorns Aggressive portfolio is quite inexpensive with only 0.05% MER. Thus when the portfolio returned 15% in 2020, as an example, after fees, the return is 14.95%. Return Contribution by ETF Each ETF will contribute differently to the overall portfolio. This will depend on individual ETF’s performance and how much weight it has. No surprise that VOO is the biggest contributor to the overall return. Not only does it have the highest weight but it was also the best performer over the last ten years. Risk Contribution by ETF Similar to the returns, different ETFs contribute differently to the overall risk. For Acorns aggressive portfolio, risk distribution is fairly in line with weight distribution. There isn’t an overly aggressive outlying ETF that disproportionally contributes to the overall risk. Sector Exposure S&P500 ETFs like VOO are heavily weighted towards technology stocks, because at the moment they are the biggest S&P companies. These include, Apple, Microsoft, Amazon, Facebook etc. Therefore, it is expected that the biggest exposure would be to the Technology sector with 20%. When the technology sector starts to underperform and come down from its potentially unsustainable all-time high, Acorns Aggressive portfolio will suffer. However, thankfully, portfolio is not crazy overweight in one sector and overall is well diversified amongst various industries. Over 10% are in consumer cyclical, financial services, healthcare, and industrials. Is Acorns Aggressive portfolio a good buy today? To answer if the portfolio is a good buy or not, we answer a few fundamental questions about each ETF holding. Have the funds been flowing to these ETFs? Here is the three year assets under management change of each ETF compared to the median change in assets of the same class. Ticker AUM % Growth 3Y Asset Class Median VOO 86% 70% IJH 34% 70% IJR 60% 70% IXUS 198% 37% Overall, yes, these ETFs grew more in assets compared to peers both due to performance growth as well as more funds flowing in. Top Holdings & Analyst Ratings VOO Analyst Grade: A+ Positives: Higher than peers 1Y, 3Y and 5Y return. Expenses lower than peers Dividend growth rate in line with peers. Lower annualized volatility than peers High daily trading volume provides liquidity Negatives Short interest higher than peers. Top Ten holdings analyst ratings At the time of writing analyst’s consensus on top technology stocks is either Bullish or Very Bullish with the exception of Tesla. IJH Analyst Grade: B Positives: Expenses lower than peers Top 10 holdings represent a low percentage of the overall portfolio 20 years of consecutive dividend payments 10Y dividend growth rate higher than peers High daily trading volume provides liquidity Negatives 5Y Return lower than U.S equities asset class High annualized volatility Lower AUM growth than peers Top Ten holdings analyst ratings Top holdings represent just over 6% in IJH. Overall the outlook for top holdings is bullish at the moment but they represent an insignificant percentage that warrants more analysis. IJR Analyst Grade: B Positives: Expenses lower than peers Top 10 holdings represent a low percentage of the overall portfolio 10Y dividend growth rate higher than peers High daily trading volume provides liquidity Negatives 3Y Return lower than U.S equities asset class High annualized volatility Lower AUM growth than peers Top Ten holdings analyst ratings Top holdings represent just over 6% in IJR. Overall the outlook for top holdings is bullish at the moment but they represent an insignificant percentage that warrants more analysis. IXUS Analyst Grade: A- Positives: Expenses lower than peers 3Y and 5Y returns higher than International Equities asset class Low annualized volatility Higher capital inflow than peers Negatives 3Y Dividend growth rate lower than peers Top Ten holdings analyst ratings Note that IXUS holds stocks on the exchanges other than NYSE so the tickers and analyst ratings can differ from NYSE equivalents. Top holdings represent just over 9%. Overall the outlook for top holdings is bullish. Acorns Moderately Aggressive Portfolio Acorns Moderately Aggressive portfolio is basically their Aggressive portfolio with the addition of bonds. Weight in stocks is reduced in favour of U.S bonds. Things to keep in mind: Moderately Aggressive portfolios should, in theory, have a lower return than Aggressive portfolios but also lower volatility and more stable income. Acorns Moderately Aggressive Portfolio Performance, Risk & Fees Key Performance Stats [wpdatatable id=20] As expected, the portfolio has achieved moderately lower growth compared to the S&P 500 but also with lower annualized volatility. Acorns Moderate Aggressive Portfolio vs. S&P 500 ETF - SPY Below is the return on a hypothetical $10,000 investment in the portfolio compared to the same investment in S&P 500 ETF SPY. Return Breakdown by year Acorns Aggressive Portfolio Income & Yield The portfolio generates income through dividends; here is the breakdown of income and the yield you would have received from a hypothetical $10,000 investment. Note: The annual income is calculated from the difference between monthly total returns and split adjusted monthly price changes and thus includes both dividends and capital gains distributions. ETF Fees ETFs come with a management fee called Management Expense Ratio. These fees are not Acorns fees and are part of your potential return. For example, if the portfolio has ETF fees average out to 0.10% and the portfolio gains 1% in value over the year, your yearly return will be 0.9%. Acorns Moderately Aggressive portfolio fees are as low as the Aggressive portfolio, despite having more ETFs. Both portfolios are exceptionally cheap, which is a great benefit to investors. Return Contribution by ETF Each ETF will contribute differently to the overall portfolio. This will depend on individual ETF’s performance and how much weight it has. Similar to the Aggressive portfolio, VOO is the biggest contributor, while bond ETFs are expected to lower volatility and add stability to the portfolio. Risk Contribution by ETF Similar to the returns, different ETFs contribute differently to the overall risk. Added bond ETFs contribute less than 0.5% to the overall portfolio risk profile and shift the majority of risk towards VOO and other stock ETFs. Sector Exposure S&P500 ETFs like VOO are heavily weighted towards technology stocks, because at the moment they are the biggest S&P companies. These include, Apple, Microsoft, Amazon, Facebook etc. The exposure is not much different from the Aggressive Portfolio so it is still a well-diversified portfolio. The highest exposure is to the technology sector but not by too much. Is Acorns Moderately Aggressive portfolio a good buy today? To answer if the portfolio is a good buy or not, we answer a few fundamental questions about each ETF holding. Have the funds been flowing to these ETFs? Here is the three year assets under management change of each ETF compared to the median change in assets of the same class. Ticker AUM % Growth 3Y Asset Median VOO 86% 70% IJH 34% 70% IJR 60% 70% IXUS 198% 37% ISTB 169% 131% AGG 61% 131% Bond ETFs with the exception of AGG, experienced higher capital inflows than peers. Top Holdings & Analyst Ratings We have already analyzed VOO, IJR, IJH and IXUS when you looked at the Aggressive Portfolio you can jump to that analysis HERE. In addition to stock ETFs, let’s look at bond ETFs. ISTB Analyst Grade: B Positives: Expenses lower than peers Fixed income growth higher than peers over 5Y period (CAGR) Low volatility Negatives High turnover AGG Analyst Grade: C+ Positives: Expenses lower than peers Negatives High turnover 5Y Return lower than peers Volatility higher than peers High turnover compared to peers Acorns Moderate & Moderately Conservative Portfolio Acorns Moderate and Moderately Conservative portfolios don’t change the asset mix from the Aggressive and Moderately Aggressive portfolio. The weights do change however. Also, Moderately conservative portfolio drops Small Company Stocks ETF (IJR) entirely. The logic here is straightforward. The more conservative you are the less stocks you will have and more bonds. ETFs remain the same so I won’t dive into details on each ETF. If you are looking for that information, you can scroll up to Aggressive & Moderately Aggressive portfolio analysis. Acorns Moderate & Moderately Conservative Portfolio Performance and Risk Key Performance Stats [wpdatatable id=21] Results are as expected. We are trading performance for volatility. Overall, this is a great approach. Acorns makes it very easy to understand the performance and risk expectations with their portfolio design. Acorns Conservative Portfolio Lastly Acorns offers the Conservative portfolio that offers maximum protection and capital preservation with a 100% bond portfolio. What are my expectations from a portfolio like this? It must beat inflation, generate steady fixed income and have extremely low fees. Let’s explore how Conservative portfolio has performed in the past. Acorns Conservative Portfolio Performance, Risk & Fees Key Performance Stats [wpdatatable id=22] Backtesting this particular portfolio is hard to do as the data only goes back to 2018. We can gage the performance of this portfolio by looking its income stream over the two years and volatility. Acorns Conservative Portfolio Returns Below is the return on a hypothetical $10,000 investment in the portfolio. There won’t be much over such a short period of time. Any gains will come from income. Acorns Conservative Portfolio Income & Yield Portfolio generates income through dividends, here is the breakdown of income and the yield you would have received from a hypothetical $10,000 investment . Note: The annual income is calculated from the difference between monthly total returns and split adjusted monthly price changes and thus includes both dividends and capital gains distributions. ETF Fees ETFs comes with a management fee called Management Expense Ratio. These fees are not Acorns fees and are part of your potential return. For example, if the portfolio has ETF fees average out to 0.10% and the portfolio gains 1% in value over the year, your yearly return will be 0.9%. Is Acorns Conservative portfolio a good buy today? Without sufficient data to backtest the portfolio it is hard to estimate how it will perform in the future. Over the last few years the portfolio did not generate sufficient returns to justify it’s relative high fees compared to other Acorns portfolios. Most ETFs in the conservative portfolio have experienced significant outflows over the last three years. This can be in part explained by the outperformance of stocks that attracted more and more capital. Although the volatility of this portfolio is particularly low we must remember that bonds are not risk-free. In the rising interest rate environment as we can very well expect in the future, bond prices fall. Future, of course, can tell a completely different story and I would do more research before committing. Should I buy these portfolios through Acorns or with my own broker? Acorns does charge a monthly fee for their service. That said, they are extremely affordable with Personal plan being $3 a month. With my broker I can buy this portfolio for free, why pay? If you were to set up any of these portfolios on your own with any of the modern brokers, they would cost you $0. So what do you get with Acorns that you won't with your broker? Purchase Automation Everything is linked and automated. Unlike with your own broker where you will have to perform buy orders, Acorns will do everything for you. Rebalancing Automation Acorns will automatically buy & sell ETFs in your portfolio to achieve desired weight allocation. That is something you won’t have to worry about. Is it worth $3/month? Yes, definitely if you are somebody looking for a complete hands-free investment service. If you are interested in going with Acorns, visit their site Acorns.com Happy Investing!

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