Nowadays, personal finance tools are more accessible and cheaper than ever. This is all thanks to companies like M1 Finance, focused on revolutionizing the way people manage their finances. The following M1 Finance review will examine the pros and cons of the platform, as well as the factors that helped it become the industry leader it is today.
M1 Finance is a leading FinTech company that offers a complete range of financial services, aimed at satisfying the basic needs of individuals. Independently from age, profile, goals - their investment app was developed to make things easier for you and is considered as one of the best investment apps.
The M1 Finance guide deep-dives into the company’s business model by focusing on different aspects such as offered services, primary investment strategy, cost structure, usability and many others.
The goal of this M1 Finance review is to help investors find out whether the firm’s services are suitable for their needs and understand how to get the most out of the platform. Now let's see if M1 Finance shines when it comes to personal finance.
What is M1 Finance?
M1 Finance was founded a few years ago with the main goal to become a leader in the robo-advising niche. However, with the course of time, the company started expanding its services.
Today, M1 Finance is an all-in-one personal money management tool that provides its users with everything needed to run their finances successfully. The goal of the company is to provide its users one complete, easy-to-manage app for their money.
M1 Finance’s philosophy is based on three main pillars – borrow, invest and spend. All this results into plenty of options for users to take advantage of:
- borrowing to pay for major purchases and refinance debt, through
- building wealth with automated investing, to
- automatic cashbacks, low-cost credit lines and
- free-of-charge investing.
The most accurate description of M1 Finance is a hybrid investment management tool, combining the best of the robo-advisory and the traditional investment brokerage worlds.
Unlike most of the other companies in the niche, M1 Finance allows its users to invest individually or choose a robo-directed investment methodology. This makes it basically a universal solution for all types of investors.
From beginners, who are willing to taste the waters and make their first steps on the financial markets, to experienced investors. You can trade commission-free but also pick the assets in your portfolio independently. M1 Finance allows its users to invest in stocks and ETFs without having to pay any fees and commissions.
The platform employs an interesting way of building a portfolio, based on pies. Users are able to create their own custom pies by choosing the preferred instruments that will provide them with exposure to a certain industry or meet their personal goals.
M1 Finance provides its clients with access to advanced investment features. Such as automatic rebalancing, recurring investments, dividend reinvestment, cash control, etc.
M1 Finance Investment Strategy
Like most of the other solutions on the market, M1 Finance’s investment philosophy is based on the Modern Portfolio Theory (MPT). What sets the company apart from its competitors, however, is the fact that it combines different elements of traditional online brokerage and robo-investing tools in one complete solution.
This further enhances the platform’s functionalities which grants users more freedom. Unlike most of the other solutions on the market, M1 Finance operates in a slightly different way. M1 Finance provides investors with the option to choose passive or active investing, depending on their preferences and expertise.
The investment methodology is based on pies, as each portfolio represents a separate pie. Once the investor chooses self-directed or automated investing, he can then further manage the instruments that are included in the portfolio.
The user can also tailor the desired percentage allocations within the pie. The pre-defined allocation will be maintained by the platform in case of passive investing.
No matter if you add or withdraw funds additional funds from your account unless it is instructed otherwise. When it comes to investing, the thing that makes M1 Finance stand out from its competitors is the fact that it provides users with the opportunity to build a custom portfolio.
Not only from ETFs but from stocks as well (the limitation here is that stocks must be selected from the NYSE, NASDAQ or BATS). This, alongside the fact that investors can create as many pies as they want, provides a great horizon of investment opportunities.
For example – you can have one conservative pie for saving, one more aggressive for returns and one balanced for steady long-term growth. For more information on how to create your first portfolio, check the explanatory videos for the web and mobile versions of the platform.
For those, who are not experienced enough to handle the process by themselves or want to take advantage of pre-defined solutions - M1 Finance grants access to more than 80 portfolios, built by industry experts.
The good thing with M1 Finance is that there are plenty of pre-determined templates that drastically simplify investing. You can choose from pies that represent conservative investment philosophies, hedge fund strategies, individual sectors, etc.
The platform clearly does not set any boundaries as investors can even combine both scenarios, thus building the most suitable investment strategy based on their expectations and goals.
In order to get a further understanding of the platform’s flexibility here is an example. Each separate pie can contain up to 100 slices with each slice representing a certain ETF or a stock. The interesting thing here, however, is the fact that each slice can be a separate pie as well.
This basically means that investors have unmeasured opportunities.
M1 Finance is a very flexible platform, thanks to its user-centered business model that brings investors an easier, but also much more advanced investment solution:
- You are not obliged to fill an in-depth risk-profile questionnaire – the procedure is straightforward and can be handled in a few minutes
- You can take control of your investments and select the assets you want to include in your portfolio
- You are not limited only in ETFs. With M1 Finance, you can take advantage of stocks as well
- The portfolio constituents can be changed and adjusted at any given moment (more information on how to edit a portfolio is available here)
- You can create different portfolios depending on your goals.
M1 Finance takes advantage of fractional shares investing which allows users to invest with smaller capital, while at the same time achieve better portfolio performance and advanced diversification.
Another great feature of M1 Finance is the fact that money can be deposited all the time. If the user does not have the time to track and manage his portfolio, he can set a schedule for automated investing.
M1 Finance Fee Structure
Now, what about the M1 Finance fees? The best thing here is the fact that it is free-of-charge for individual investors. You won’t be charged any commissions on your trading activity, nor any deposit, withdraw, account maintenance or management fees.
Or, as the company says, “you’ll never pay for regular investing activities”. This is basically all you have to know about the fee structure regarding the investment services on the platform.
However, if you need additional account operations, you will have to pay a certain fee. When it comes to the requirements, things stay as follows:
- Minimum initial investment: $0
- Capital required to start investing (regular accounts): $100
- Capital required to start investing (IRA accounts): $500
It is good to know that cash and securities up to $500,000 deposited in M1 Finance are covered by SIPC. This means that your funds are insured against broker failure.
Who is M1 Finance Best For
The wide variety of features and the flexibility of M1 Finance makes it suitable for both types of investors. Those, who prefer to have their funds managed by a robo-advisor, as well as those who want more direct control over their portfolio.
M1 Finance is a great option also for those who are making their first steps in the investing world. If you do not have any actively-managed portfolios, then consider starting with M1 Finance.
Apart from being able to take advantage of ready-made pie templates, you can also learn on-the-go. You are able to study why different instruments are included, alongside their performance, history and industry specifics.
With the course of time, as you get familiar with the platform and the logic behind the structure of different investment portfolios, you will be able to experiment with pie modification or even start building your own from scratch.
Thanks to the platform’s feature to automatically maintain the desired investment allocation, M1 Finance is often considered a suitable choice for investors who want to provide basic initial instructions and then leave all control to the robo-advisor.
Of course, users can intercept and tailor the portfolio or just brush some things up whenever they feel they need to. With that said, M1 Finance is not necessary the universal go-to solution on the market for every individual. There are alternatives like Personal Capital.
For example, day traders and those who employ more complex strategies may not find the platform suitable enough. But this is completely understandable as it is a free-of-charge solution, focused mostly on passive and long-term investing.
So basically, the platform is all about giving investors options, either self-driven investing or automatic one, M1 Finance means freedom of choice. The good balance between entirely automated and personally-managed, fully-customizable portfolios makes the platform one of the best choices in the industry.
How to Create an Account with M1 Finance?
Starting with M1 Finance is easy and very similar to the procedures that you have to go through with other robo-advisors. First of all, you will have to set-up an account.
You can choose from the following types of accounts:
- Individual and joint brokerage
- Trust (both – revocable and irrevocable)
- Traditional, Roth and SEP-IRA
- Brokerage for corporations and partnerships
M1 Finance’s users can also transfer their existing retirement plans into an IRA account as well. After you have chosen your type of account, you will have to give the platform some basic instructions about your portfolio preferences.
At this stage you are not required to transfer any funds to your account – you can experiment with portfolio allocations and pie construction without even putting a penny into the platform. Based on your initial instructions, M1 Finance will suggest portfolio templates that are suitable for your profile and preferences.
You can opt to choose one of the suggested pies and modify it, as well as start from scratch and construct your portfolio entirely from scratch. When you are ready with the pie, it is time to choose an account type. U.S. residents with a valid domestic address can take advantage of a number of IRAs, as well as brokerage accounts.
Before you finish your account set up, you will be required to provide some personal information like your birth date, social security number, income, assets, etc. After you are done with all this, you can then fund your account by linking your bank account. In order to start investing, you will need to deposit at least $100.
M1 Finance Alternatives
M1 Finance stacks pretty well, when compared to other leading companies in the robo-advising industry:
|M1 Finance||Wealthfront||Betterment||Personal Capital|
M1 Finance stands out not only due to its advanced no-fee investing features. The firm offers the benefit of getting a $10 reward each time you refer a friend. Another good advantage of the platform is the “Borrow” feature. M1 Finance allows you to borrow up to 35% of the value of your portfolio.
There are no credit checks and refusals – if you claim it, you have it. There are also no strict requirements on the payback – you can do it on your own schedule. The interest rate as of now stands at 4.25%. The borrowed funds can be used for whatever purpose it is.
The bottom line here is that in order to take advantage of M1 Borrow, you need to have a taxable account with at least $10 000 in it. However, M1 Finance falls behind in the regard of offering tax-loss harvesting features which most of the other robo-advisors nowadays do.
M1 Finance Review Summary
For its brief history, M1 Finance has established itself as one of the best and most complete investment management tools on the market.
Thanks to all advantages, such as
- zero fees
- user-friendly platform
- low account minimum requirements
- fractional shares investing
- flexibility to choose what to include in your portfolio, as well as
- construct your own from scratch and many more.
M1 Finance is one of the most popular automated investment solutions in the recent years. When it comes to automation – there is no easier and more flexible solution than M1’s freedom to have your portfolio rebalanced on a periodical basis, without the need of your strict control.
|Management Fee||No tax-loss harvesting|
|Passive- and active-investing features||Not suitable for active traders|
|Offers both – stocks and ETFs|
|Low account minimum requirement|
|Can borrow against your account at reasonable rates|
|Great flexibility as you can diversify a single pie with up to 100 slices|
M1 Finance stands for free automated investing and smart money management. They enable you to personalize your finances and to borrow, spend, and invest in one single platform.
About the Author
Alexander is an investor, trader, and founder of daytradingz.com. After devoting many years to educating himself on powerful day trading techniques and effective investment styles, he started trading and investing more actively. In the past 20 years, he has executed thousands of trades. In 2015, he began writing articles about trading, investing, and personal finance. He is very passionate about sharing his knowledge and strives for success in himself and others. Alexander has been featured on Benzinga, Rockstar Finance, and ESI Money.