There are two types of investors in the stock market:
- The trader: Get in and out as quickly as possible to make a quick profit. This type of investor will have money in the market for weeks or months at the most.
- The long term investor: Build your wealth by holding shares for years, draw dividends to boost your investment, and cash out when the time is right.
M1 Finance is the perfect platform for long term investors. It is 100% commission free, there is no monthly charge for the service, and no withdrawal fees when you want to take profits.
Simply put, M1 Finance is a free online brokerage and investment manager in one, unlike most free investment apps, they allow you to self manage your portfolio or you can employ robo-investing which will manage your investment. They are the perfect choice for investors that don’t want a largely hands on experience. You can pick the companies you want to invest in, then deposit money, the robots behind the scene will do the rest.
- Zero management fees, zero commission, and zero withdrawal fees. This is one of the few 100% free online brokerage accounts.
- You can invest in fractional shares, so you no longer need thousands of dollars to invest in Amazon.
- Automatic DRIP, so any dividends you receive will be automatically spread across your portfolio at your chosen allocations if you wish.
- Goal based investing to provide beginner investors with a hand-off approach.
- Roth IRA’s and other retirement investment accounts are available and are fully automated.
- There are flexible investment options including 80 ‘expert’ portfolios you can copy.
- M1 Finance is only available in the USA. For worldwide alternatives click here.
- You cannot invest in mutual funds through M1 Finance.
- There is no tax-loss harvesting, which is a feature offered by other robo-advisors such as Betterment.
- There are limited investment options.
- There is a minimum account balance of $500 for retirement accounts.
- There is no online chat capability, so the customer service is only email or phone.
About M1 Finance
M1 Finance is a Chicago based online financial service company. It is best known for its online brokerage accounts and its robo-advisor style of investing products. They are registered with the Securities and Exchange Commission as a broker-dealer and are also a member of the Securities Investor Protection Corporation (SIPC) & the Financial Industry Regulatory Authority (FINRA).
Founded in 2015 by Brian Barnes offering services such as investing, asset management, and lending. In 2016 they introduced the ability to automate monthly deposits and maintain a preset portfolio allocation to make funds easy to withdraw.
Another good thing about M1 Finance is that they are available on a web-based platform, and an iOS or Android application which you can download below.
M1 Finance Overview
Starting an account with M1 Finance is very simple. You need to set up your account online, they will ask for your personal information including your tax reference number then you are free to fund your account and get started. Financial institutions are required to gather this information as part of the USA Patriot Act.
When you first begin using M1 Finance you will notice the entire tool is geared towards the idea of ‘Pie Investing’. Pies serve as a basis for users investment, and demonstrate the distribution of assets and holdings. These pies make up various categories of investments intended to offer the ideal balance for your portfolio. You can have as many pies in one account as you want.
After signing up, the app will ask about your risk tolerance and suggest pies based on your answers. Some examples that might be available are the following:
The platform has a selection of dozens of prebuilt pies for you to choose. You can personalise each one by making adjustments. Or you can go it alone and build your own pie.
Once you’ve built your pie, or select a prebuilt one, you just need to choose which account you want to open. As long as you are a US resident with a domestic address you can select from several IRA brokerage accounts.
Once you are up and running you will get to take advantage of the features such as:
- Automated reinvestment of dividends.
- Automated rebalancing of your account inline with your chosen allocations.
- Invest in fractional shares, so if you wanted to buy a $100 stock, but only had $20, you would be able to $20 worth of a share from that stock.
- Have an in depth view of you investment and how it is performing.
- Full online support from other investors and M1 Finance analysts.
Here is a snapshot of the view on M1 Finance when you open the mobile app.
It is a clean styled app with an easy to navigate interface. Most traders I’ve spoken to about M1 Finance say they are for beginners, but I think this is wrong. M1 Finance is for people of all levels, just because it is easy to use does not mean it is only for beginners.
Is M1 Finance Safe
M1 Finance is regulated by the SIPC and protected by the FINRA. Meaning they will not run away with your cash. Also your investments are covered with excess if you were to lose your money. But this does not protect you from any losses you make while trading.
The website and apps security uses a 4096-bit encryption for data transfer, and you can set up two-factor authentication on your mobile device for logging into your account. This is the highest data security available and is a requirement for all financial institutions that transfer money or sensitive information.
M1 Finance is not only regulated by the legal system, but it is one of the most trusted online brokerages in America, and the social praise the company gets is testament to their safe practices.
M1 Finance’s Popularity
As I’ve mentioned before M1 Finance is one of the most popular online brokerages in the US. Unfortunately it is not available outside the USA so we have no other data to go on.
The app store rating is 4.6 out of 5, other influencers such as Ryan Scribner, Nate O’Brian, and Marko from WhiteBoard Finance all use M1 Finance for their personal investments, and broadcast the platform extensively on their YouTube channels.
The only thing that keeps M1 Finance from being a 5 star brokerage is the customer service. The only support you have is via phone or email. There are no online chats or question boxes. The website does have a very detailed FAQs page available where you can find the answer to almost any major query, but as we all know, the one answer we need is normally never on the FAQ’s.
M1 Finance’s Extra features
Dynamic and automatic rebalancing
As your portfolio grows you will experience something called ‘market shift’. This is when your allocations shift because different companies share prices move at different rates, meaning your initial allocations will be out by a couple of percent. M1 Finance will automatically correct and rebalance your portfolio.
If you have a pie that is made up of 4 stocks, each with an allocation of 25%, but after 2 weeks, your allocations look more like:
- Company A: 23%
- Company B: 28%
- Company C: 29%
- Company D: 21%
You can click a ‘Rebalance’ button in the app, and the account will begin rebalancing your investment to fit your original allocation.
Another way M1 Finance can rebalance your portfolio is if you deposit more money into your account. If you invest another $100 into your account, M1 Finance will automatically invest it, and will spread the amounts so your allocation is corrected. So it will invest more of your deposit into Company A and less in Company B, so they both rebalance back to a 25% allocation. This is called a Dividend ReInvestment Plan (DRIP).
FIrst things first, you should never invest money that you do not have. If you can’t afford your investing you shouldn’t be doing it.
But if you have at least $10,000 in your account, you can borrow 35% of your portfolio and payback on your schedule. It’s a form of low-cost lending that allows you to fast track your goals, but if you lose the money, you will be personally liable for the payments.
M1 Finance offers a digital checking account that integrates with your investments and portfolio line of credit. You will get a debit car which is free to use, and you are also reimbursed once per month on ATM fees.
They also offer an M1 Spend Plus. This comes with a 1.5% APY and a 1% cash back on all debit purchases. With Spend Plus you will also have access to a 0.25% discount on M1 Borrow rates.
M1 Finance builds portfolios in the style of pies as mentioned before. You set allocations of your investments from 1% to 100% depending on how many assets you hold.
You can have as many different pies as you want all invested from the same account. Each pie will record it’s own gains and profits, as well as feed into your overall account balance to show a full breakdown of investments.
As a beginner I would not recommend having more than 2 pies to start, but I currently have 11. The most common practice is to create industry pies (built up of companies in the same industry), or to have different vehicle pies so one is for ETFs, one for dividend stocks, and one for growth stocks or appreciation stocks.
If you follow our unique link to setup an M1 Finance account, the minimum $500 initial deposit will be reduced to $100. Just a little thanks from us for using our website.
If you are a US resident there is not a better option than M1 Finance. It comes with 95% of the features that traditional brokers have but it’s 100% free.
M1 Finance is perfect for people at the start of their investing careers and those who are seasoned veterans. The platform offers so much. The only other free brokerage account that offers a similar service is Trading 212, which is available worldwide.
The only people I think M1 Finance is not right for are the active traders, looking to day trade or engage in short term investments. There are easier options you can check out like Trading 212 or Webull, with these two brokers you can open both invest accounts and CFD/day trading account. The platform M1 Finance has created is suited to long term investors or people saving for retirement.