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M1 Finance Review: The Perfect Roboadvisor App?

John Parker - June 29, 2020

m1 finance reivew

These days, Investing is more accessible than its ever been before. Aspiring investors have dozens of convenient options, but robo-advisors are quickly becoming an increasingly popular avenue for beginners. These computerized financial managers use advanced software to manage your funds automatically. The system automatically oversees your portfolio, so maintaining your investments is incredibly easy. Best of all, computers work for cheap, so robo-advisors tend to have low fees. Today, our M1 Finance review takes a close look at one of the most popular platforms for robo-investing.  

M1 Finance is a relatively new platform that combines hands-off investing with a more traditional format. The company has made some waves in the financial world for its convenience and low costs. The app is especially popular with Millenial users. However, is M1 Finance all it’s cracked up to be? Keep reading, and we’ll breakdown this platform from top to bottom.

m1 finance review

What Is M1 Finance?

M1 Finance is a robo-advisory firm that offers users more flexible investing options. CEO Brian Barnes founded M1 Finance in 2015 after noticing the financial field had a lack of innovation. Traditional investment formats were becoming obsolete, so Barnes wanted to create a platform where users could invest easily and affordably using the latest technology.  

Barnes’s vision led to M1 Finance’s focus on automated investing. The platform can automatically create an appropriate investment portfolio based on user response to a handful of simple questions. It picks investments according to user goals and risk preferences. Plus, M1 automatically rebalances your portfolio allocations in the event your asset ratios shift. Best of all, M1 offers more portfolio customization potions than competing robo-advisor firms. 

Ultimately, M1 Finance focuses on passive investing. Once you pick your investments and risk profile, the ‘robot’ manages your portfolio. The portfolio doesn’t need human oversight, but you can adjust your investments at your discretion. This user-friendly approach makes M1 Finance a perfect platform for a variety of investors. It’s especially well-suited for beginners, but it’s an excellent fit for anyone interested in automated investing.

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M1 Finance Features

M1 Finance offers a robust selection of features. Here are some of the headlines:

Account Types

M1 Finance offers brokerage accounts and tax-advantaged retirement accounts, including:

  • Standard taxable accounts
  • Joint taxable accounts
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • SEP IRA
  • Trusts

M1 Accounts have no minimum balance restrictions, and its management fees are 0%. That’s not to imply the service is free, but we’ll talk more about that later.

Portfolio Rebalancing

M1 automatically buy and sell assets to maintain that ratio as the market shifts over time. Automatic portfolio rebalancing is one fo the featured benefits of robo-advisor services.

Customizable Investments

You can choose individual investments with M1, giving you the power to build a custom portfolio if you’re inclined. Most robo-advisors don’t allow users to choose their positions, so it’s one of M1’s most noteworthy benefits. Experienced investors will appreciate the added control. 

Fractional Shares

Some stocks are expensive, but fractional share trading gives investors the ability to buy even the priciest companies. For example, you can buy $100 worth of AMZN instead of shelling out over $2,000 to buy one share. If you have a smaller balance, making such a large purchase would over-expose your portfolio to Amazon. However, M1 Allows traders to buy what they need through fractional share trading.

Dividend Reinvestment

M1 can automatically reinvest dividends from your investments. If you activate this feature, M1 will reinvest any dividends over $10. 

M1 Borrow

With M1 Borrow, you can take our a margin loan of up to 35% of your balance. However, you must have more than $10,000 in your account to qualify. M1 Borrow charges an annual percentage rate of 4.25% on loans. Margin trading is very high-risk, so beginners should exercise caution before using this feature. However, experienced traders will like that they can access additional funds if they need it. 

M1 Spend

M1 Spend is the platform’s cash management account. It’s a checking account that’s linked to your M1 account. Users receive a debit card so they can easily access their funds, and there are no account minimums or debit card fees.

M1 Plus Account

The M1 Plus Account is a premium subscription service that offers additional benefits and features. Subscribers can access extended trading hours and receive 1% APR interest on their checking funds. They also get 1% cashback on M1 debit card purchases. M1 Plus costs $100 for the first year and $125 for each subsequent year. 

m1 finance reviews

 

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How Does M1 Work?

M1 Finance’s built its portfolio offerings around “pies.” Each pie represents a pre-built investment portfolio, with ‘slices’ representing individual assets. Slices can correspond to stock, ETFs, or even other entire pies. The platform does not currently support bonds or mutual fund investing. 

Users can choose between 60 to 70 pre-built pies. M1 constructed its pies according to Harry Markowitz’s Modern Portfolio Theory (MPT), so there is proven science behind each option. Once you select your pie, you can then add whatever stocks or ETFs that you want. However, you can only choose exchange-listed assets, so you’re limited to the New York Stock Exchange and Nasdaq stocks. 

Here are a few examples of the kinds of pies offered by M1 Finance (source)

  • General investing
  • Planning for Retirement
  • Responsible Investing
  • Income Earners
  • Hedge Fund Followers
  • Industries & Sectors
  • Just Stock & Bonds

As you can see, there is a wide range of pies to choose from that cover many goals. You can also customize each pie, so you’re not locked into a portfolio structure. 

One caveat worth noting is M1’s unusual trading procedure. The firm only executes trades orders once per day during a single trading window (source). It sounds inconvenient, but this structure helps support M1’s super-low account fees. However, the delay makes it hard to execute short-term trades accurately. 

What Fees Does M1 Finance Have?

M1 doesn’t have any notable account fees, but they have to make money somehow. The firm primarily generates revenues through service fees associated with particular types of transactions. For example, M1 charges fees to convert IRA accounts, and it also earns subscription revenue from M1 Plus accounts. It also collects interest from margin loans. 

You should also take into account ETF fees. Each ETF has an expense ratio, and this number indicates the fund manager’s fee. ETFs have varying expense ratios, but most of the ones featured on M1 are surprisingly low.  

m1 finance reviewed
M1 Finance Review: Examples of M1’s investing “pies”.

Is My Money Secure With M1 Finance?

Yes, M1 Finance takes security seriously, and your funds will be safe with them. The firm is a registered FINRA broker, and its accounts have SIPC coverage. M1 uses 4069-bit encryption to store your data, and you can activate 2-factor authentication for even greater security. 

The SIPC protects up to $500,000 in investments and $250,000 for cash. This protection doesn’t extend to personal losses incurred through speculative investing. M1 Finance also has supplemental insurance to cover funds above the SIPC limits. (source)

M1 Finance Review: Advantages

M1 Finance offers a variety of high-value benefits, but these are the most notable:

Customizable Portfolios:

M1 Finance distinguishes itself by giving you full control over your investments. You can select a pre-built pie and modify it, or you can build one entirely from scratch. You have a lot of flexibility, but that also means you have little guidance. 

No Fees on Basic Accounts:

M1 Finance has no account or management fees. There are no fees for deposits/withdrawals, and they don’t charge trading fees or commission. The M1 Plus account has a $125/yr ($100 for the first year) subscription. 

No Minimum Deposits:

You can open an account with as little as $1. However, you have to have $100 in your account before you can start investing. 

Fractional Share Investing:

Fractional share investing opens up several investment possibilities and allows you to create a diversified portfolio easier. 

Extra Services:

The M1 Spend and M1 Borrow features are great recent additions that expand M1 Finance’s line of products and service. M1 Finance plans to add more traditional banking features soon. 

Full Protection and Insurance:

SIDC insures balances up to $500,000, but M1 Finance also has supplemental plans to cover any amounts that exceed SIDC limits. 

Final Verdict: Is M1 Finance Right for Me?

M1 Finance is an easy-to-use service with low fees and a wide selection of features. Beginners enjoy the structured portfolios for their ease of use, and experienced investors like the added control. 

If you know your way around the market, M1 Finance is a great platform. The flexible portfolios with fractional share investing and the extra bank services will appeal to savvy investors. All and all, It’s one of the best robo-advisor apps on the market. If you’re interested in automated investing, you should give M1 finance a close look.

That’s it for our M1 Finance review. Click here to open an account with M1 and start your building your nest egg today! 

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John Parker is a finance writer and journalist based in the Outer Banks, NC. He worked in finance for several years before branching out into his writing career. He is The Stock Dork's chief review writer and works with several other online publications.

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