M1 Finance Review: Is It Right for You

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M1 Finance is a popular investment platform that allows users to create a diversified investment portfolio with just a few clicks. It's a great option for those who want to invest in the stock market but don't have the time or knowledge to do it on their own.

M1 Finance uses a unique approach called "pies" to help users create a diversified portfolio. A pie is essentially a group of stocks that work together to achieve a specific investment goal. Users can create multiple pies to invest in different areas of the market.

One of the biggest advantages of M1 Finance is its low fees. It charges no management fees, and users only pay a small commission when buying or selling stocks. This can save investors a significant amount of money over time.

What Is M1 Finance?

M1 Finance is a low-cost investing platform that allows you to set up your ideal portfolio and automate contributions to it.

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Their platform has gained significant traction, with over 1 million users and over $8 billion in assets on their platform.

M1 Finance was founded in 2012 by Brian Barnes, who aimed to make investing simple and cost-effective for investors.

The company has been available to investors since 2015, and as of this writing, they have over 500,000 accounts and over $2 billion dollars in assets under management.

M1 Finance is a hybrid between a robo-advisor and traditional financial advisor, allowing you to create customized portfolios while automating the process of investing.

Features and Services

M1 Finance offers a variety of account services, including seamless cash movement and the option to schedule auto deposits into your portfolio on a monthly, weekly, or bi-weekly basis. You can also place individual trade orders, which allows for more flexibility.

M1 Finance has a minimum investment requirement of $100 for brokerage accounts, $500 for IRA accounts, and $5,000 for trust accounts. The platform also offers a free checking account, called M1 Spend, and 1 ATM fee reimbursed per month.

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The platform offers a range of features, including automatic rebalancing, reporting features, and tax management for withdrawals. However, it does not offer tax-loss harvesting or external account syncing/consolidation.

M1 Finance allows investors to borrow against their investments with an M1 Margin Loan, with an interest rate of 6.25% and a minimum account balance of $2,000. The platform also offers a credit card option, the Owner's Rewards Card, which earns up to 10% cash back for spending tied to companies invested in through the platform.

Here are some key features of M1 Finance's portfolio management:

M1 Finance also offers a unique feature called Custom Pies, which allows investors to create their own custom investment allocation and then automatically invest and rebalance into it. This feature is particularly useful for investors who want to tailor their portfolio to their individual needs and goals.

The platform offers low-cost services, including fractional share investing, which allows investors to buy and sell partial shares of a stock. This feature is useful for investors who want to diversify their portfolio without having to purchase a full share of a stock.

M1 Finance's low price includes fractional shares, which means that investors can invest in particular stocks in part of their portfolio and in index fund ETFs in the other part. This feature is particularly useful for investors who want to diversify their portfolio and take advantage of tax benefits.

Investment Options

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M1 Finance offers a wide range of investment options to suit different goals and risk tolerance levels. You can choose from over 80 pre-built Model Portfolio Pies that align with various strategies, including passive investing, mimicking hedge funds, and socially conscious options.

Each pie has various slices, which are the underlying investments that make up the pie. You can choose from a variety of expert pies created by M1 in categories such as General Investing, Plan for Retirement, Income Earners, and more.

You can also create a completely customized pie without using any of the pre-built models. For example, you can create a stock-only portfolio by investing in dividend paying stocks, as I did with my sample portfolio.

Choose Your Pie

M1 Finance offers a unique approach to investing with their "Pie Investing" method. You can choose from over 60 pre-built portfolios, each based on the Modern Portfolio Theory, which is the foundation of successful investing.

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These pre-built portfolios are grouped into categories, such as General Investing, Plan for Retirement, and Income Earners. Each category has multiple pies to choose from, giving you a wide range of investment options.

For example, in the General Investing category, you can choose from pies like "Moderate Growth" or "Conservative Allocation". Each pie has a detailed breakdown of the underlying investments, allowing you to see exactly what you're investing in.

You can also create your own customized pie from scratch, without using any of the pre-built models. This gives you complete control over your investment portfolio and allows you to tailor it to your specific goals and risk tolerance.

Here are some examples of the pre-built portfolios available on M1 Finance:

  • General Investing: Moderate Growth, Conservative Allocation, Aggressive Growth
  • Plan for Retirement: Retirement Income, Retirement Growth
  • Income Earners: Dividend Investing, Income Generation

With M1 Finance, you have the flexibility to choose from a wide range of investment options and create a portfolio that's tailored to your needs.

Margin Loan

M1 Finance offers a unique feature called M1 Borrow, which allows you to invest in what you want and access a portfolio line of credit at one of the lowest interest rates on the market.

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You can borrow up to 50% of your account's equity balance, making it a flexible option for those who want to invest in specific assets.

The interest rate for standard accounts is 6.25%, which is relatively low compared to other brokers.

There's no set payment schedule, so you can pay back the loan as you see fit, realizing interest every month on your outstanding balance.

To qualify, you must have a taxable M1 brokerage account with an account balance of $2,000 or more, and IRAs do not qualify.

Owner's Rewards Card

The Owner's Rewards Card is a great option for earning cash back, offering a flat 1.5% cash back on all purchases.

This card is issued by M1 Finance, a company that also offers investment services. The cash back earned with this card can be automatically reinvested into your M1 Invest portfolio.

You can earn higher cash back rates at certain popular brands, up to 10% at some retailers. The card has no annual fee, making it a low-maintenance option for earning rewards.

Note that the cash back cannot be paid out to certain types of accounts, such as IRAs or trust accounts. This is something to keep in mind if you have specific financial goals in mind.

Is It Safe?

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M1 Finance takes the safety and security of your money very seriously. The company uses military-grade 4096-bit encryption on its sites to protect your information.

This level of encryption is considered top-notch and is used by many financial institutions to safeguard sensitive data. You can rest assured that your personal and financial information is secure.

Two-factor authentication (2FA) is also available for account logins, adding an extra layer of protection to prevent unauthorized access. This means you'll need to provide a second form of verification, such as a code sent to your phone, in addition to your password.

M1 Finance also offers SIPC insurance for investments, which protects your assets up to $500,000. Additionally, cash accounts are FDIC-insured up to $250,000, providing peace of mind in case of any unforeseen circumstances.

Here's a quick rundown of M1 Finance's safety features:

  • Military-grade 4096-bit encryption
  • Two-factor authentication (2FA)
  • SIPC insurance for investments (up to $500,000)
  • FDIC insurance for cash accounts (up to $250,000)

Fees and Charges

M1 Finance is a fee-free service, with no annual management fee, trading fees, or rebalancing fees. This is a unique aspect of the platform that puts more dollars to work on your behalf.

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However, there are some fees to be aware of. For accounts less than $10,000, there's a $3 monthly fee, which is waived if you meet certain requirements. These requirements include having an account balance of $10,000 or more for at least one day during the billing cycle, or having an active M1 Personal Loan.

The fee is also waived for new users during a 90-day grace period after joining M1. After this period, the $3 monthly fee will be charged. There are also some miscellaneous fees, such as a $50 inactivity fee if you don't log into your account for 90 days and a $25 fee for wire transfers.

Here's a summary of the fees:

M1 Finance also charges a $100 minimum account size to invest with a taxable account and a $500 minimum account size to invest for retirement (IRA / Roth IRA) accounts.

Fees & Charges

M1 Finance is a fee-free service, which is a huge draw for investors. However, there are some fees to be aware of.

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There is a $3 monthly fee for accounts less than $10,000 without an active M1 Personal Loan. This fee is waived if your M1 Invest or Earn account balance equals or exceeds $10,000 for at least one day during the billing cycle.

You'll also be charged a $100 fee for IRA termination and outgoing transfers. Additionally, there's a $50 inactivity fee if you don't log into your account for 90 days.

ETFs purchased through the platform have their own fee, which is paid directly to the fund manager, not M1. This is standard industry practice.

Here are some fees to be aware of:

M1 Finance makes money through interest on cash balances, interest on margin accounts, fees for other services they offer, and lending securities they hold.

Who Is Not a Fit?

If you're an active trader, M1 Finance isn't for you. You can only place trades once a day, which isn't a viable option for frequent traders.

Investing in mutual funds isn't possible with M1 Finance either.

Portfolio Management

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M1 Finance's portfolio management system is designed to help you maintain a well-balanced portfolio with minimal effort.

Automatic rebalancing is a key feature, which ensures that your portfolio stays aligned with your target allocation even as new funds are deposited. This is achieved by allocating new dollars to the underweight parts of your portfolio.

You can also force a manual rebalancing of your entire portfolio with just a click, which quickly brings your portfolio back into alignment with a single transaction.

M1 Finance offers two daily trading windows for members with an account balance over $25,000, or a selected window for those below this threshold.

Fractional shares are available, allowing you to be fully invested without holding cash in your portfolio.

Tax management for withdrawals is also available, which helps minimize taxes owed.

However, it's worth noting that tax-loss harvesting is not available, which may limit tax optimization in your account.

Here are the key portfolio management features offered by M1 Finance:

Getting Started

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To get started with M1 Finance, you need to do 4 simple things: create a free account, build your portfolio, create a brokerage account, and fund your account.

Creating a free account is the first step, and it's as easy as signing up for any other online service. You'll be prompted to begin M1's onboarding flow, where you'll learn how the platform works and answer some general questions regarding your investment experience.

You'll be asked to select an account to get started, and M1 supports various types of accounts, including brokerage, traditional IRA, Roth IRA, SEP IRA, custodial, and trust accounts. You can also open a non-investment account like the high-yield cash account or a personal loan account.

The minimum to open an investment account is $100 ($500 for IRAs), and once your portfolio has been finalized, your account selected, and banking information added, you're ready to start investing.

Here are the types of accounts you can open with M1 Finance:

  • Individual accounts
  • Joint accounts
  • IRAs (Traditional, Roth, SEP)
  • Cash Account
  • Trust accounts
  • Custodial accounts

To fund your account, you'll need to transfer at least $100, although you can make an initial deposit right away. After you set up a transfer for your opening investment, you're free to choose the amount you want to invest on an ongoing basis.

Mobile App

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M1 Finance has well-reviewed mobile apps available for both iOS and Android. You can download the app from the App Store for iOS devices or the Play Store for Android devices.

The app is full-featured and allows you to do a number of things, including creating custom portfolios, setting up automatic investments, and re-balancing your portfolio.

Alternatives and Comparison

If you're not sold on M1 Finance, there are some great alternatives out there.

Some of these alternatives have no minimum investment requirements, which is a big plus if you're just starting out.

M1 Finance is also compared favorably to other investment options, with a top rating and zero commissions.

One of the key differences between M1 Finance and its alternatives is the minimum investment requirement, with some options requiring as little as $0 and others requiring a minimum of $100.

Here's a quick comparison of M1 Finance with some of its alternatives:

Alternatives and Comparison

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If you're not a fan of M1 Finance, don't worry, there are some great alternatives out there.

Some of the best alternatives to M1 Finance are listed below.

M1 Finance is one of our top picks for places to invest, but it's not the only option. It's an honorable mention in our Best Places To Invest list.

Here's a quick comparison of M1 Finance with some of its alternatives:

M1 Finance has a $0 commission, which is a great perk.

Drawbacks

M1 Finance isn't perfect, and some features may not meet everyone's needs. Trades are placed once per day at 9am Central Time, which can be an issue for day traders.

One notable drawback is the lack of a bigger trading window for non-M1 Plus members. M1 Plus members do get a PM trading window, but it's not available to everyone.

Another limitation is the absence of cash holdings within the platform. If you want to build up a cash holding and invest when the market drops, you'll need to put the money into the free checking account M1 provides or keep it in a savings account and transfer it to M1 when you want it invested.

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M1 Finance also doesn't offer mutual funds, which might be a deal-breaker for some investors. On the other hand, you can invest in over 2,000 exchange-traded funds as well as individual stocks.

Another feature that might be missing for some users is dividend reinvestment. While M1 offers free dividend reinvestment, they are not automatically reinvested until you have a cash balance of $10.

Lastly, M1 Finance doesn't offer tax loss harvesting for investors. Instead, it uses a tax minimization strategy on all investor accounts.

Here's a quick rundown of the drawbacks:

The Ultimate Review

M1 Finance is nearly perfect as an investment platform for long-term investors, earning a 9/10 rating.

For smaller accounts, M1 Finance is a great option, even if it's your only investment platform. It's also a great starting point for new investors.

The platform is unique and powerful, offering a software that can weight your securities in fixed percentages. This feature is incredibly powerful and sets M1 Finance apart from other investment platforms.

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M1 Finance is free, easy, and gives you 100% control over your investments. This is a major advantage over other investment platforms.

If you have more wealth and want to invest in options or illiquid securities, or if you want premium research, it's best to pair M1 Finance with an account at another brokerage.

Frequently Asked Questions

Is M1 Finance a real bank?

No, M1 Finance is not a bank, but rather a financial services company that offers investment and cash management products. M1 Finance is a non-bank entity that allows users to invest in securities through its platform.

Virgil Wuckert

Senior Writer

Virgil Wuckert is a seasoned writer with a keen eye for detail and a passion for storytelling. With a background in insurance and construction, he brings a unique perspective to his writing, tackling complex topics with clarity and precision. His articles have covered a range of categories, including insurance adjuster and roof damage assessment, where he has demonstrated his ability to break down complex concepts into accessible language.

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