Technological advances and automation are changing the face of investing and making investment opportunities accessible to anyone with an internet connection.
That’s great news for some, but with so many investing platforms available at investor’s fingertips, it can make picking the right one a challenge. How do you get the best investment account and portfolio for you?
Knowing that competition is steep, brokerage firms are starting to offer tons of bells and whistles to investors at low or no cost to attract them and lure them away from other investment services.
M1 Finance is one of these online brokerage companies. They aim to earn investors’ business back and have done so by innovating the process and making themselves a free one-stop-shop for financial success.
Having said that, every company can have some downsides and you need to know all the pros and cons of investing with an M1 Finance account.
Let’s dive into our M1 Finance review and you can decide if they’re your first step or your next stop in your investment journey.
What Is M1 Finance?
M1 Finance is an online brokerage firm that carries no commissions and is fully automated to help investors build wealth through diversification and asset allocation. In other words, M1 Finance is an investor’s right hand!
M1 is unique for a variety of reasons, the least of which is their automated investing strategy to keep their investors on target and fractional shares to make the most out of your money.
M1 offers both no-cost or low cost options for accounts that should be considered if you’re interested in automated investment platforms. You can even add them to your personal finance routine with your own M1 Finance bank account and debit card.
How Does M1 Finance Work?
M1 is primarily an automated investment platform that allows investors to have as little or as much control over their portfolio as they feel comfortable with.
M1 Finance offers a desktop interface and mobile applications available for both iOS and Android users for investors who want to invest on the go.
Don’t forget to check for any offers for signing up- M1 and others sometimes give incentives like free stocks or cashback for starting your account!
After opening an account, investors are encouraged to start organizing their “pies”- better known as portfolios. The pie is a great way to look at it, because each individual section is a separate part of your portfolio, creating new opportunities for your wealth.
Pies are made up of stocks and exchange-traded funds (ETFs), and each piece is called a slice. Investors can select from pre-designed expert pies, with risk tolerance and goals already selected, or they have the option to fully customize their pies for their own goals.
Before you start investing, you’ll answer questions about your risk tolerance and investment goals to give a good picture of what you want when investing. This way, they can give you investment options like bonds if you’re less risky and some stocks if you’re feeling lucky.
Whatever your investment strategy, they give you the chance to tailor your general investing details, and then they can take care of portfolio management from there.
You can also customize your pies to align with your personal goals, like being socially responsible with your investment portfolio, besides just having responsible investing.
It is important to note that M1 Finance does allow investors to buy fractional shares, which can be a huge pro versus another brokerage firm. This is very appealing for those who cannot purchase every stock at full price but still wants in on the action.
In the custom pie option, the investor gets to take the wheel and decide what percentage of their portfolio or weight they would like to have in each slice of their pie.
The next step in the process of your pie is what really sets the M1 platform apart from its competitors like Robinhood.
The M1 platform is not just about which investments you pick, but also about how much of each investment you pick. One of the fundamentals of investment is proper asset balancing and while some investors get it right, diversification in the market is not static.
When organizing pies, investors select what weight or percentage of their pie they would like that particular slice to hold. As all of the investments or slices in the pie increase or decrease during market fluctuations, the pie can become out of alignment with the original goals.
M1 dynamically rebalances the slices automatically for investors so that their portfolio remains in balance regardless of what each slice is doing. That means there is zippo minimum investment effort on your part because M1 invest keeps everything counterbalanced.
There are many other positive motives to picking MI as your brokerage firm! With all their great program capabilities, you’d think there may be some extra costs for such convenience- but there isn’t!
Opening your account has no costs and trades are commission-free. The only M1 Finance fees that you need to know about are regulatory fees, and those are inescapable! No matter what platform you use, the regulatory fees are there- but unlike MI, other firms may add on other fees in addition.
M1 Finance has 2 trading windows when you can get your portfolio switched up- when your trading window is depends on which M1 account option you have. The morning window is free for everyone and trades occur at 9:30 am EST for the day. The afternoon trade window is at 3 pm EST and is reserved for M1 Plus investment members.
This leads us to the next portion- what sorts of accounts can you have, and what looks best for you?
M1 Finance Features
Investors interested in using M1 Finance to meet their goals have several account options. Depending on your goals, you could have any number of accounts at your disposal and M1 will keep things automated and easy.
M1 offers :
- Individual Taxable Accounts
- Joint Taxable Accounts
- Traditional IRAs
- Roth IRAs
- SEP IRAs
- Custodial Accounts
Here’s some food for thought about some account details:
M1 does require anyone using their platform to have a taxable account or brokerage account before they are allowed to open an IRA or tax-advantaged account. Be sure to get this secured and get started on your retirement account if you want to start investing in your future.
Each investor can have up to 5 different accounts on their individual dashboard. In fact, M1 Finance encourages users to have different accounts for different goals.
Taxable investment accounts carry a $100 account minimum and a $500 account minimum for a retirement account.
Retirement accounts through M1 Finance are less expensive than some other investing platforms, though a problem for you may be that the platform doesn’t recognize any 401(k) accounts you have with your employers. Each account offers investment options of its own, and you can still invest in fractional shares, get automotive reinvestment, and all the other good benefits M1 Finance entails.
M1 Basic Vs. Plus
You have two investment options for M1 Finance- the Basic plan or Plus plan. Just like your phone, your YouTube, or other subscriptions, you have the option to upgrade for a fee to get a few helpful features. Both Basic and Plus memberships have no minimum investment cost
M1 Basic is free and includes everything you need at a beginner level, including what you’ll read about next in more detail.
But to take full advantage of all that M1 Finance has to offer, users are encouraged to sign up for M1 Plus. It includes extra features such as margin lending discounts, custodial accounts, transfer perks, and checking account extras.
M1 Plus carries an annual fee of $125, and depending on your goals it may be worth it to you to upgrade and reap the benefits. The extra trading window these members get in the afternoon may sway for you to start investing with M1 Plus. Your portfolio could change a lot more on any given day, and your stock or ETF plans could have a little more flexibility this way.
M1 Finance is not just a brokerage account, they also offer banking services as M1 Spend. Their idea is that investors can see their entire financial plans all in one place in their spend account- ease of access for your personal finance and investment portfolio.
The M1 Spend bank account comes with a debit card, direct deposit, and transfers all for free. Another benefit of upgrading to M1 Finance Plus- users additional perks like earning up to 1% APY on checking balances and 1% cash back on select debit card purchases.
Investors looking to get more out of their money could consider M1 Borrow a major draw to the M1 Finance platform. It’s a recent addition that users can take advantage of to up their investing game.
M1 Finance allows investors an open portfolio line of credit that is easy to access- just 3 mouse clicks and your funds are ready to go. There is no application and no payment schedule. Investors can borrow up to 35% of their assets under M1 Finance management at a margin rate as low as 2%.
If you were looking for more bonuses for the Plus membership, look no further. M1 Smart Transfers is an automated system available for M1 Plus members.
You can set threshold-based rules for your accounts and M1 Finance will do the transfers for you. In other words, M1 will make sure that your checking account has enough money in it to cover the expenses you tell them, and excess will go into your investment accounts.
Or, perhaps your checking account triggers a low balance warning and M1 will automatically use M1 Borrow to replenish your account and make sure your funds don’t hit zero.
We love money hacks in general, so it’s exciting that M1 offers this option to make sure your investments are optimized and your dollars are earning you more! This is a huge win when investing in individual stocks to get as much as you can out of every $1.
A fractional share means you can purchase part of a stock if you can’t afford to buy the whole stock. For example: if we sold stock that’s $100 a pop, but you only had $75 to invest, you could buy a fractional share of our stock.
Fractional shares ensure that you don’t miss out on a stock you want and make it so you can invest every bit of money you have in your account.
Invest with M1 Finance
Opening an account with M1 Finance is easy but not instantaneous. They require typical account opening information: proof of identity, social security number, and contact information.
Once that information is submitted, the team at M1 Finance will send you an email within 1 business day confirming your account or asking for further information.
Once you have your account registered, you then log in and answer questions about your risk tolerance and goals for your investment- the details for your pie investing to be successful. It takes time, and some people may see that as a barrier to getting their money into some pie slices quickly.
Another piece of setup can be your personal finance information, if you’re interested in M1 Borrow or Spend- it could be an option you can use to your advantage.
Who Is M1 Finance For?
M1 Finance has options and perks that will appeal to both new and mature investors alike that are looking to grow their passive income.
M1 Finance portfolio building can be labor-intensive for investors who wish to fully customize their pies at first. Then the model graduates to “set and forget” as soon as investors tell M1 to keep their pies balanced and aligned with their goals.
M1 only allows investors to choose from stocks and ETFs, so more experienced investors might find the lack of mutual funds, cryptocurrencies, or options disappointing.
Despite the continual portfolio rebalancing, M1 is not designed for day-trading. Investors looking to take a more active management role in their portfolios would probably prefer a platform like Robinhood.
While M1 Finance does not have investment fees, they do have requirements for some accounts. There are minimum balance requirements in their taxable ($100) and tax-advantaged accounts ($500), unlike some competitors.
Betterment, for example, has a required minimum balance of only $10 per account.
In sum, M1 Finance is probably best suited for those investors who don’t mind doing a bit of research on their own and who don’t want to tend to their portfolio as part of their daily routine. It isn’t ideal for active traders who move and change up investing more often but for those who want to set and forget.
M1 Finance Pros and Cons
- No cost for M1 Basic or Low cost for M1 Plus
- Commission-free trading
- No management fees
- Automated investing
- Over 80+ professional managed portfolio options
- Fully customizable portfolios
- Or choose an M1 designed portfolio
- Several types of investment accounts available
- Streamlined mobile app as well as desktop access
- Investing in fractional shares
- No cryptocurrency access
- Account setups are not instantaneous
- Only stocks and ETFs
- No employed advisors
- Lack of customer support
- No tax loss harvesting
M1 Finance Review FAQ
Is M1 Finance legit?
Yes indeed, M1 Finance is legit. Just like any investment in general, there are a few things to consider before picking M1 as your investment homestay.
First, M1 Finance is a brokerage company, it is not an investment advisory firm. They offer pre-designed expert pies for you to choose from, but there isn’t an investment advisor on call to chat with about your goals and figure out where you want to be with your portfolio.
You are responsible for the decisions you make in your portfolio, the expert pies are designed as only guides. It is SIPC insured, but that does not protect you against bad investments, it protects you against mismanagement of funds.
Is M1 Finance really free?
There are no commissions or fees to use M1 Finance for investing. Additionally, M1 Finance does not carry any fees on assets under management either.
M1 Finance does charge outgoing transfer fees and inactivity fees per account.
M1 Plus can be a bigger draw with its extras, but it isn’t a necessary purchase to enjoy the M1 Finance experience. The prominent gains would be the two trading windows and guaranteed low rates on M1 Borrow.
Which is better, Robinhood or M1 Finance?
So, M1 Finance vs Robinhood. Both M1 and Robinhood offer no commission investing but M1 allows you to invest with little investor management whereas Robinhood is for hands-on investors.
We’ve taken a look at Robinhood, but we can’t say that we are too impressed with them.
That being said, Robinhood can be good for beginner investors or active traders, especially if they have an interest in trading and cryptocurrency. This investing platform can be a great way to enter the online trading world and get used to individual stocks and having a portfolio.
M1 Finance is more for people who want to invest long-term and is all about building your portfolio and getting it ready to coast.
How does M1 Finance vs Betterment compare?
Choosing between M1 Finance and Betterment depends on the type of investor that you want to be, as they are similar in many ways.
If you are a newer investor, Betterment might be the better platform for you to use since they have human advisors to guide your investing. Investing with M1 Finance may be better for more experienced investors who are looking to set up their portfolio and let M1 handle the rest.
Another big bonus that Betterment has is tax loss harvesting, meaning you “harvest” the capital loss on your tax return when they sell a security suffering a loss that impacts your portfolio.
Final Thoughts On M1 Finance Review
Diversification and asset allocation are two of the pillars of successful investing for you to have a good portfolio and investment account.
The fact that M1 Finance offers both at no cost to the user is something worth writing home about and something that sets them apart from their competition.
Investors who want their portfolios to stay in alignment with their goals, without having to constantly monitor their investments, will find M1 Finance’s offerings particularly attractive. Their automation is the greatest advantage mentioned again and again among other reviews, even Insider talked about how it even came at no cost to you.
The lack of customer support is slightly alarming for a company that wishes to cater to new investors, but they do have an extensive collection of videos to be used as a guide.
M1 Finance could be a great tool for new investors, but they definitely need to make sure they are comfortable investing with no hand-holding.
You can open your FREE M1 Finance account and get started now.