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M1 Finance Review
M1 Finance provides a balance of robo investor and part broker. It allows you to customize “pies” to suit your investment preferences. The platform has a low $100 minimum deposit and there are no trading or portfolio management fees. This makes it a great option for novice investors or traders looking for a more budget friendly option.
- No trading fees
- Choose from 80 portfolios
- You can choose individual stocks
- Low $100 minimum deposit
- Not suitable for active traders
- A fee applies if you’re inactive for 90 days
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What is M1 Finance?
M1 Finance is an online platform that is part broker and part investment manager. Unlike many platforms, M1 finance allows for both robo and self managed investments.
This makes it a great option for investors who want the ability to pick individual stocks but otherwise want to be largely hands off.
How Does M1 Finance Work?
M1 Finance has a robo investment element that provides portfolio templates called pies. These are based on Modern Portfolio Theory. While most robo investors use MPT algorithms, with M1 Finance there are no questions to determine your tolerance to risk.
You can invest your money in the prebuilt templates or customize the pies to suit your preferences. You can specify the types of investments you want to use and even specific stocks. M1 Finance will then allocate and rebalance your account automatically to maintain your investments.
Is M1 Finance Safe?
M1 Finance is a member of the Securities and Investor Protection Corporation. The SIPC insures accounts up to $250,000 in cash and up to $500,000 in total. So, even if M1 Finance fails, your assets are protected.
How Much Does M1 Finance Cost?
M1 Finance does not charge trading fees or portfolio management fees. However, there are regulatory fees and possible service fees.
You can sign up for a Plus account with a flat fee of $125 per year. This provides a discount on interest rates should you borrow through M1 Borrow and a second daily trading window.
Portfolio with stock only will not incur management fees, while portfolios containing ETFs have a fee of 0.06% to 0.20%.
How to Invest with M1 Finance?
Step 1- Create Your Account
You can start by downloading the M1 Finance app. The app will then guide you through creating an account and setting up your pies. You will also need to provide a valid email address and your full name.
Step 2- Open Your Brokerage Account
Once you have an account, you can then open your brokerage account. This is where you can decide on the types of investment accounts you would like to open. You can also open multiple accounts to provide for retirement or an individual brokerage account.
In this step you will need to provide answers to questions about your investment experience. M1 Finance is also required to report investment activities to the IRS and verify investor identities. So, you will also need to provide your social security number and your address.
Step 3- Link Your Bank Account
You can now link your bank account to start funding your M1 account. There is a minimum deposit of $100 to start investing. As you already built your pies in step one, your money will be invested automatically across your portfolio according to your target allocations.
M1 Finance Key Takeaways
Account Minimum Investment
There is a $100 minimum investment, or $500 for retirement accounts.
M1 Finance has account pies in a number of categories including:
- General: This offers a diversified portfolio according to your risk tolerance.
- Retirement: Allowing you to invest for a target retirement date.
- Responsible: Provides options for socially responsible investing.
- Income: Builds investments according to income returns and dividends.
- Hedge Fund Followers: This mimics the investment strategies from successful investors and hedge funds.
- Just Stocks and Bonds: This offers a diversified portfolio with two ETFs and a focus on stocks and bonds.
The basis of investment with M1 Finance is the pie. The pie is the tool that you use to manage your portfolio. Each pie has a collection of up to 100 slices. Each of the slices represent an investment. It could be an ETF or stock.
The platform has over 60 pie templates, but you can also customize a pie, adding stocks or ETFs traded on the New York Stock Exchange.
This is a checking account integrated into the app. This FDIC insured account has two tiers, basic, or plus. The basic account is completely free and included with all accounts. This allows you to receive paychecks, pay with a debit card or pay bills.
M1 Borrow is a unique feature that allows you to open up a line of credit with a low interest rate. This type of borrowing was typically only available to the ultra wealthy. However, M1 has made this option less expensive and easier to access.
To qualify, you must have a taxable brokerage account with a minimum account balance of $10,000. M1 Finance does not run a credit check, so your credit score does not matter. Your portfolio will act as collateral for your credit.
You can borrow as much as 35% of your account equity balance. However, there may be additional restrictions according to your portfolio concentration or the risk of securities.
The borrowing APR is 3.5%, but M1 Plus members can borrow at 2%.
What makes M1 Borrow interesting is there is no payment schedule. You can pay back as and when you like, providing you cover the interest on your outstanding balance each month.
M1 Plus is the premium tier service. It costs $125 per year. But, it provides some great benefits including 1% cash back on all your debit purchases, a tungsten metal debit card, and a 1.5% APY checking account. You will also receive a reimbursement for up to four ATM fees each month. There is a 0.25% discount on the M1 Borrow rates.
M1 Finance Bonus Offers
M1 Finance currently offers bonuses to new customers. If you transfer your account within 60 days of opening up your M1 Finance account, you can receive cash.
- Transfer $20,000 to $100,000- $100 bonus
- 100,001 to $250,000- $250 bonus
- $250,001 to $500,000- $500 bonus
- $500,001 to $1 million- $1,000 bonus
- Transfer over $1 million- $2,500 bonus.
M1 Finance is also offering M1 Plus for $25 for the first year. You have seven days from verifying your identity to sign up and receive this promotional price.
How to Withdraw Money from M1 Finance?
You can withdraw money from your M1 Finance account to your linked bank account. The process takes two to three business days and there is no fee.
What are the M1 Finance Pros & Cons?
- No Trading Fees: There are no asset management or trading fees.
- Flexible Portfolios: You can choose from over 80 portfolios or customize them to suit your preferences.
- Clear Dashboard: The app dashboard allows you to see your current portfolio composition.
- Choose Individual Stocks: You can also add to your pie with any individual stocks or ETFs traded on the New York Stock Exchange.
- No Online Chat: There is no online chat capability should you run into any issues You have to either email or phone to access support.
- Lack of Financial Advisors: M1 Finance does not employ financial advisors for personal advice.
- No External Account Consolidation: You cannot consolidate your external accounts for financial planning.
- Inactivity Fees Apply: If you have an account balance of less than $20 and there is no trading activity on your account for 90 days, a fee applies.
Is M1 Finance Worth it?
As with all investment platforms, M1 Finance will not be the best option for everyone. However, if you want to invest in individual ETFs or stocks, M1 is one of the cheapest options around.
M1 Finance offers some excellent benefits including no fees and the ability to borrow at just 3.5%. Or you can upgrade to an M1 Plus account to access a lower borrowing rate and even more benefits.
This platform is a great option if you are interested in automated deposits, fractional shares, one touch rebalances and free trading.
M1 Finance Alternatives
M1 Finance vs Betterment
Betterment is a different type of investment tool. It offers better facilities for goal setting. There are easy to follow steps for setting different goals and you can monitor each one separately. You can set up various goals with different target dates.
Your asset allocation shows a ring in shades of green and blue. If you start to fall behind on one of your goals, Betterment will prompt you to catch up.
Where M1 Finance has the edge is that you can borrow against your portfolio, which can be a crucial feature for more risk tolerant investors.
M1 Finance vs Robinhood
Both M1 Finance and Robinhood offer commission free trading. But Robinhood has a $0 minimum balance requirement.
Robinhood is a platform that is more suitable for beginners, as M1 Finance offers features geared towards long term investors. Additionally, Robinhood does not offer retirement accounts.
M1 Finance vs Public
Like M1 Finance and Robinhood, Public offers fee free trading with no commission. This platform provides self direct trading, but there are no pre selected investments or investment advice. This makes it far more challenging to use when compared to M1 Finance.
M1 Finance FAQ
How Much Does M1 Finance Cost?
M1 Finance does not charge portfolio management or trading fees. However, you can upgrade to M1 Plus for a flat fee of $125. This offers additional account benefits including 1% cash back on your debit card purchases.
Is M1 Finance a Good Investment?
M1 Finance is a good option for those who want to pick and choose stocks, before sitting back and allowing automatic management. There are minimal fees and charges, with the option of current account facilities, borrowing and more.
Is M1 Finance Good for Beginners?
M1 Finance is a good option for novice investors. You can use pre selected investment pies that have been created to emulate successful strategies. Once you develop your confidence, you can customize your pies to suit your requirements.