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Are you thinking about start investing with M1 Finance?
So, is M1 Finance really good?
Is M1 Finance a better and more suitable investment app for you when you compare it with its alternatives?
Today, I am going to do a very detailed review of M1 Finance and help you answer the questions you have in your mind, so you can make an informed decision.
Is M1 Finance Good?
To find out whether M1 Finance is good or not, you first need to know what constitutes a good investment app or broker.
An investment app is good if it can meet the following criteria:
- It must be safe
- It must have zero to very low fees
- It must have a robust and easy-to-use platform
- It must offer a wide range of investment products
- It must allow fractional shares
- It must make depositing fund and fund withdrawal fast and simple
- It must offer a good selection of Account Types
- It must have good customer support
So, these are the essential things you must consider when you are choosing which investment app to open your investment account with.
If the investment app or broker offers other additional benefits, then it makes it even better!
Now, let’s examine M1 Finance against these criteria.
Is M1 Finance Safe & Legit?
When you look for a broker, the very first question you should ask is, ” Is this broker regulated by SEC (Securities and Exchange Commission)?”
If it’s not, then that’s a big warning sign.
Just like all the drugs have to be approved by FDA before tehy can be sold to the public to ensure its safety and efficacy, brokers have to be registered and overseen by SEC to ensure that investors are protected.
After checking with the official broker check website, it’s confirmed that M1 Finance is an SEC-registered broker-dealer and also a member of FINRA (The Financial Industry Regulatory Authority) and also SIPC (Securities Investor Protection Corporation).
Note: Always verify the broker’s registration status on independent third-party websites.
So, M1 Finance is a legitimate broker.
Is your money safe with M1 Finance?
In the event that M1 Finance goes out of business, what happens to your money?
Although this is unlikely to happen, I like to cover all my bases when it comes to the safety of my money.
What this means is that as long as your total investment with M1 Finance is less than half a million, you are safe.
As M1 Finance offers checking accounts, the money in your checking account may be insured up to $250,000 by FDIC insurance.
So, that’s very reassuring.
Lastly, it’s a technology-first company that utilizes the latest in information security.
Is M1 Finance Really Free?
When it comes to brokerage fees, you always want to go with brokers that charge the lowest fees given everything else is the same.
Because high trading commissions can significantly reduce your investment returns.
Here’s a study done by SEC on how fees and expenses can affect your investment portfolios.
Basically, a 1% increase in fees could reduce your total investment returns by more than 10% over the years.
So, it’s good to choose legit brokers with the least amount of fees.
Now, let’s take a look at M1 Finance fee structure.
When you open a M1 Finance Invest account, it’s free to use all its tools to build a portfolio of stocks and ETFs for FREE.
Wow, for free.
Whenever I hear it’s totally free, I always have my guards up because I think there is always a catch. (yes, I have a bit of trust issue in general)
So, is M1 finance really free?
Yes, it’s completely FREE to buy stocks and ETFs through M1 Finance.
That means M1 Finance does not charge any fees at all for all your transaction.
No, there are no hidden fees that you need to pay:
- No additional trading fees ( i.e. no additional transaction fees to buy and sell securities)
- There are no additional fees for depositing or withdrawing from your account
- They rebalance your portfolio automatically at no additional cost to you
So far, there are over 100,000 people who are using M1 Finance to help them manage a total combined asset of more than $1 billion.
Then, how does it make money?
Besides this FREE M1 Finance Invest account, it also offers M1 Finance Invest Plus which comes with an annual fee of $125 which is effectively about $10 a month.
So, what’s the difference between the free account and the paid one?
Do you really need M1 Finance Invest Plus for your investment needs?
Here’s the comparison table between the two:
Here are only three differences between these two accounts:
- For M1 Finance Invest Plus, you get to earn 1% interest on the money in your M1 Finance Spend checking account and you also get 1% cashback on all the purchases you make using the debit card associated with this checking account.
- If you want to borrow money against your investment portfolio, you enjoy a lower rate.
- For M1 Finance Invest Plus, you have two daily trade windows (morning and afternoon) while you only have a morning trade window for the free account
First of all, what is trade window?
The trade window is the window of time each weekday when M1 makes all trades for user accounts.
M1 is only trading one time or two times per day, depending on whether you are eligible to trade in the second window.
The reason why M1 has only one morning trade window and one after trade window is that it helps keep M1’s management fees low and therefore keep the basic M1 Invest Account free.
Here’s an example of how it works:
Let’ say you only have a morning trade window, all your trades can only be executed by M1 in the morning at the same time together with all other trades from other user accounts.
M1’s trade window begins at 10 am EST every day the NYSE market is open and runs until all orders have been completed.
So you cannot choose the exact timing of your trades.
If you are a day trader that buys and sells shares frequently throughout the day, then this platform is not right for you.
But if you are investing for the long term, then this is a good platform for you because timing of trades is less important.
Does M1 Finance Allow Fractional Shares?
If you are just starting out and don’t have a lot of money to invest, it also allows you to buy fractional shares.
With so many shares trading at such a high price per share, you can achieve portfolio diversification and lower your risk with fractional shares.
So, what does this mean?
Let’s assume there is NO fractional shares allowed.
And you know Google is a great company and want to invest in it.
Let’s look at its share price today – $1280 per share as of my writing.
If you don’t have a lot of money to invest and still want to buy Google shares, what you would have is a very concentrated portfolio with probably just Google shares.
That’s very risky because you don’t want to put all your eggs in one basket even though it’s a great company right now.
Nokia was a great company in the past, but what happened to it?
So, that’s why fractional shares are very good for investors to diversify their portfolio, lower their risk, and stay fully invested.
Does M1 Finance Have Good Customer Support?
M1 Finance’s customer success team is available anytime the US stock market is open, typically Monday – Friday from 9:30am to 4pm EST.
To get in touch with the customer support team, you can either call them at this phone number 312-600-2883 for urgent matters or submit a support request online.
Does M1 Finance A Robust and Easy-To-Use Platform?
M1 Finance has a very robust and easy to use platform.
Its user interface is very clean and neat.
And it’s designed with the end user in mind.
So, you don’t have to worry even if you are not tech-savvy or you are just a beginner.
There’s a web version which you can use with your computer.
Its investing apps are also available on both IOS and Android phones.
They are also easy to use with an excellent rating of 4.6 of 5 stars based on thousands of customers.
Does M1 Finance Offer A Wide Range Of Investment Products?
So, what can you invest in using M1 Finance?
As a robot advisor, it’s very different from its competitors by giving you total control.
With M1 Finance, you can choose your own stocks and funds to build a portfolio completely customized to your unique financial goals and preferences.
M1 Finance lets you use “Pie” to build your investment portfolio.
Here’s how you use M1 Finance to invest.
Step 1: Simply select your investments (i.e. stocks or ETFs) and add them to your “Pie”.
Each holding will represent one “slice.”
Step 2: Set the target weight of each slice.
These percentages correspond to the portion of your overall portfolio.
Just fund your “Pie”, and money automatically flows into your investments to align with your target asset allocation.
Step 3: M1 Finance automatically rebalances your portfolio as you continue to fund your portfolio.
What I like this “Pie” concept is that it lets you easily visualize portfolio performance.
Slices that outperform their target weight will grow, while underperforming slices will shrink.
At any time, you can add, remove, or edit slices.
If you are an active investor who prefers to make your own investment decision, then M1 Finance is right for you.
What if you are a beginner?
Is M1 Finance still good for beginner investors?
Yes, you can choose from professionally designed Pies (aka “Expert Pies”) crafted to meet your goals, align with your risk tolerance, or allow you to easily invest in entire industries.
For example, if you are very conservative, you can choose expert pies with low risk.
Or if you want to invest in the technology industry, you can choose expert pies that are specially designed for that.
Does Fund Deposit and Fund Withdrawal Fast and Simple?
M1 Finance Spend offers an FDIC-insured checking account integrated directly into M1 Finance.
So, what does this mean?
You can open a checking account with M1 Finance and use it for things such as direct deposit, money transfer and purchases with a debit card.
With an M1 Finance checking account, you can make deposits and withdrawal into your M1 Finance Invest account effortlessly and instantly.
You can also set up recurring transfers for your investments.
So, is it worth it to open a checking account with M1 Finance?
Let’s take a look at a comparison with a traditional bank’s checking account.
First of all, there is no annual fee if you have the M1 Finance free account.
There are also no minimum balance requirements for both M1 Finance free and Plus account.
If you have the M1 Finance Plus account, you get 1% interest on all your money in your checking account compared to the comical interest offered by traditional banks and also get 1% cashback on your purchases.
So, when is it a good idea to upgrade your free M1 Finance account to M1 Finance Plus?
It’s only worth paying the annual fee of $125 when you think you will have at least $10,000 in that M1 Finance checking account.
Some people are smart to use in M1 Finance checking accounts for their emergency funds and also direct deposit of their salary because they can access the funds any time they want and still earn 1% interest which is so much better than traditional banks’ checking account.
Of course, there are also other ways to deposit and withdraw money from your M1 Finance account:
- Connect your bank to your M1 Finance account and fund your account directly within M1 Finance platform
- Wire money to your M1 Finance account
Does M1 Finance Offer a good selection of Account Types
M1 Finance offer quite a few account types:
- Individual Brokerage Accounts
- Joint Brokerage Accounts (ideal for couples, parents and their children (over 18 years old) and even adults caring for aging parents)
- Traditional, Roth, & SEP IRAs
- IRA rollovers
- 401k Rollover into IRA
If you are investing for the long term or for retirement, you should always find a broker that offers retirement accounts.
So, you can use it to invest and grow your money tax-deferred. (You don’t pay income tax on the money you have in your IRA or 401k, but you will have to pay when you withdraw it many years later)
Which Is Better, Robinhood or M1 Finance?
Both are commission free and offer fractional shares.
But there is a few key differences between these two:
- M1 allows you to invest in stocks and ETFs with a $100 minimum account balance while Robinhood allows investors to purchase stocks, ETFs, options, and crypto with no minimum account balance
- Robinhood allows you to trade any time throughout the day while M1 offers one or two trade windows a day
- M1 Finance offers automated rebalancing and expert portfolios for you to choose from for free but Robinhood does not have this.
- M1 Finance offers retirements accounts while Robinhood does not offer this
So, who is Robinhood right for?
Robinhood is right for active traders who want to buy and sell stocks frequently during the day.
But if you are an investor who wants to invest for the long term or you are a dividend investor or a passive investor, then M1 Finance is a much better choice for a few reasons:
- It offers retirement accounts
- It offers free automatic dividend reinvesting and automatic portfolio rebalancing
- It offers expert portfolios that you can choose from
- It also offers tax minimization
M1 Finance is a robo-advisor and broker hybrid which offers you the best of both world, especially if you are investing for the long term. It’s also good for investors who are just starting out because it has a very easy to use platform and it’s completely free.