June 9, 2018

M1 Finance Review: Is It Safe?

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If a robo-advisor feels too rigid for you because you are stuck with their chosen portfolios, M1 Finance is out to change your mind. Combining the benefits of automation with the ability to choose your own investments, M1 Finance might be onto something.

Overall Score

4.5

Annual Fee

5.0

Minimum Deposit

5.0

Customer Service

3.5
5-point scale (the higher, the better)

Pros and Cons

  • Choose your own investments
  • Can invest in individual stocks
  • No account fees
  • Not beginner friendly
  • No human advisors
  • Can only trade once a day

Bottom Line

No-fee robo-advisor that allows you to choose your own investments. Good for investors who want a say.

Does its service live up to what it promises? Keep reading to find out.

Digital investing is all the rage today. A quick search online and you'll likely find more robo-advisor choices than you can handle. They combine the benefits of a brokerage with an automated investment manager, making it easy for even beginners to start investing.

So how does M1 Finance stand apart from the rest?

M1 Finance allows investors the choice of ETFs and stocks. Anything you can buy on the New York Stock Exchange is fair game. This differs from many other robo-advisors that restrict you to a few select ETFs, which could be a nice change for the investor who wants to have a say in their investments.

How Does It Work?

M1 Finance builds what they call "pies." You choose the "slices" (investments) and an allocation for that investment to create the desired balance. If you are a beginner or have no desire to choose your own allocations, you can choose from their "preset pies," otherwise known as "expert pies."

You have a few options when creating your pie:

  • Create your own by choosing your own investments
  • Use one of the preset templates
  • Tweak a preset template to your liking

Where the robo-advisor piece comes in is the automated investing they offer. You can set up weekly, monthly, or any other designated time frame contributions. The robo-advisor automatically withdraws the funds from your linked bank account and invests the funds accordingly. You can basically set it and forget it if you wish.

M1 also automatically rebalances your portfolio for you as needed. In other words, they sell assets that are doing well ("sell high") and buy assets that are underperforming ("buy low"). You don't have to put in orders or tell an advisor to pull the trigger–M1 does it for you, which is the beauty of a robo-advisor.

Who Is M1 Finance Best For?

© Chris Potter (CC BY 2.0) via Flickr

M1 Finance is best for the investor who wants automated investing but wants a say–in other words, an investor who wants the best of both worlds. As we stated above, you can have the "set it and forget it" attitude, but still have the benefit of having choices.

It's a good choice for investors who keep investments for the long-term. It's not the best choice for day traders or even frequent traders, as M1 doesn't conduct trades as often as you would think.

Getting Started: Getting started with M1 is different than any other robo-advisor. You won't see the typical questionnaire that many robo-advisors ask with questions regarding your risk tolerance, net worth, and income.

Instead, you'll provide your personal information (name, address, birthdate, and Social Security number) along with your email address. From there, you go through a quick tutorial and you are ready to "pick your pies."

The Platform and App

M1 Finance is strictly an online program. You can access the platform via your PC or the mobile app. It's available for both iOS and Android devices.

The platform itself is user-friendly and yet very simple. You'll see a summary of your portfolio including its value, gain or loss, and return. You can also view the pies you set up as well as discover new investments by clicking on the "Discover" tab. The "Markets" tab gives you brief overviews of what's happening in the market to help you make investment decisions.

Reasons We Like M1 Finance

  • You won't pay any commission or management fees. This benefit is almost hard to believe. M1 doesn't charge any commission fees or annual management fees. You can trade stocks and ETFs for free. This makes M1 less costly than many other robo-advisors. Keep in mind, though, you will still pay the ETF expense ratios, which M1 has no control over.

  • You only need $100 to open an account. If you want to open a retirement account, you will need at least $500. After the initial deposit requirement is met, you can deposit as much or as little as you want.

  • You can invest in individual stocks, not just ETFs. Many robo-advisors only offer their chosen ETFs as investment options. M1 gives you the option to invest in many other investments, including stocks, which opens up the possibilities for your portfolio.

  • You can buy fractional shares. You don't have to worry about "cash drag" as you wait to have enough money to buy a full share of a specific investment. M1 allows you to buy a fractional share that is equal to the amount of money you have. If a share is $100 and you have $20, you can buy 1/5th of a share.

  • You can choose from more than 1,900 ETFs. Even though you can invest in many other investments, the selection of ETFs offered by M1 is impressive. You can search for themes based on your likes or beliefs or you can search for individual ETFs that you already know you want.

  • You can set up recurring deposits. If you really want to take a hands-off approach to investing, you can set your M1 account up to regularly take money from your linked bank account and invest it. This is a great way to keep growing your investments.

  • M1 Finance offers tax-efficient investing. While it's not the same as tax-loss harvesting, tax-efficient investing helps minimize your tax liability. When you request to withdraw funds, the algorithm sells securities in a particular order of priority. Losses are sold first in an effort to offset future gains. They then sell lots with long-term gains and finally lots with short-term gains. This is in an effort to help you minimize your tax liabilities on your investments.

  • You can rebalance your portfolio at any time. If you feel your portfolio is skewing in a way you don't like, you can rebalance your portfolio by telling the robo-advisor to do so. It's just a button to click and you can have your portfolio automatically balanced.

  • You can easily add or remove investments. The M1 platform makes it easy for you to make changes to your custom portfolio as you see fit. If you feel the need to buy or sell an investment, you can. Of course, it's best if you let the robo-advisor do its job, but it's nice to have the option.

  • Your dividends are automatically reinvested once they reach $10. The only cash that will ever sit idle in your account is dividends. This is only because you need to accumulate at least $10 in dividends in order for M1 to reinvest it for you.

Are there any fees? While M1 is pretty close to "free," there are some services that may cost you. For example, they will charge you for an account statement or wire transfer. They are fairly transparent with their fees, though, as you can see here.

Reasons You May Want to Look Elsewhere

  • It's not an easy system for beginners. While it's nice to have a say in your investments and even have the option to buy or sell at will, it does have its downside for beginners. If you want a system that will walk you through your investments or just handle them for you, other robo-advisors on the market may be a better choice.

  • There are no human financial advisors at your disposal. Some robo-advisors offer the benefit of a live advisor for investment advice, but M1 is not one of them. While you do have access to customer service reps via phone or email, they are not licensed financial advisors offering investment advice.

  • You can't make frequent trades. M1 only trades once per day. This is how they keep the platform free for investors. They do what is called batch trades. If you are a frequent trader who needs trades to happen instantly to capitalize on a change in the market, M1 wouldn't be the right choice.

How It Compares

M1 vs Betterment
Betterment is often the robo-advisor of choice for beginners. You don't need a minimum investment and they charge a 0.25% annual fee based on assets under management. You do have the option of talking to a live advisor and everything is automated, which gives beginners fewer options to choose from and can be a way to avoid getting overwhelmed.

 

M1 Finance

Betterment

 

Benefits and Features

Annual Fee
None
0.25% for accounts under $100,000; 0.40% for accounts $100,000+
Minimum Deposit
$100
$0
Phone Support
Yes - normal business hours
Yes
Live Chat Support
No
No
Email Support
Yes
Yes
Human Advisors
No
Yes
Assets Under Management
$100 Millon
$10 Billion
Tax Loss Harvesting
Offers tax-efficient investing
Yes
Goal Tracker
No
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Fractional Shares
Yes
Yes
Taxable Accounts
Yes
Yes
401k Plans
No
Yes
IRA Accounts
Yes
Yes
Roth IRA Accounts
Yes
Yes
SEP IRA Accounts
Yes
Yes
Trust Accounts
Yes
Yes
529 Plans
No
No

M1 Finance: Pricing information from published website as of 06/14/2018

Betterment: Pricing information from published website as of 04/04/2018

M1 vs Robinhood
At face value, both M1 and Robinhood look very similar. Neither company charges commissions and you can trade ETFs and stocks with both companies. Where Robinhood stands out is their frequency of trades–they don't do batch trades. In other words, if you execute your own trade, it's executed shortly after you order it.

 

M1 Finance

Robinhood

 

Benefits and Features

Stock Trading 
$0
Minimum Deposit
$100
$0
Banking 
No
Mobile App 
Yes

Blank fields may indicate the information is not available, not applicable, or not known to CreditDonkey. Please visit the product website for details.

M1 Finance: Pricing information from published website as of 06/14/2018

Robinhood: Pricing information from published websites as of 4/24/2018

M1 vs Acorns
The concept of M1 is to choose your own investments, so it's not great for beginners. Acorns is geared towards young novices who have trouble saving. It automatically invests your spare change and puts them into diversified portfolios, so it's great for beginners who want to invest without thinking. M1 has no account fees, while Acorns does have a fee for non-college students.

 Acorns
 Visit Site
 

M1 Finance

Acorns

SPECIAL OFFER
Try Acorns Today! - Learn More

 

Benefits and Features

Stock Trading Part of service fee: Free for college students for 4 years, $1/month for accounts under $5,000, and 0.25%/year over $5,000. No add-on trading fees.
Annual Fee
None
Free for college students for 4 years, $1/month for accounts under $5,000, and .25% per year over $5,000
Minimum Deposit
$100
$0 for basic Digital account; $50,000 for Premium account
Phone Support
Yes - normal business hours
Yes
Live Chat Support
No
No
Email Support
Yes
Yes
Human Advisors
No
No
Assets Under Management
$100 Millon
$528 Million
Tax Loss Harvesting
Offers tax-efficient investing
No
Goal Tracker
No
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Banking Acorns Spend checking account comes with a debit card and has no minimum balance requirement, no overdraft fees, and unlimited free or fee-reimbursed ATMs nationwide. $3/mo for Acorns + Acorns Later + Acorns Spend.
Mobile App 
Yes
Fractional Shares
Yes
Yes
Taxable Accounts
Yes
Yes
401k Plans
No
No
IRA Accounts
Yes
No
Roth IRA Accounts
Yes
No
SEP IRA Accounts
Yes
No
Trust Accounts
Yes
No
529 Plans
No
No
 Visit Site

Try Acorns Today!

Blank fields may indicate the information is not available, not applicable, or not known to CreditDonkey. Please visit the product website for details.

M1 Finance: Pricing information from published website as of 06/14/2018

Acorns: Pricing information from published website as of 04/04/2018

M1 vs Wealthfront
Wealthfront is another robo-advisor fit for beginners. They do charge 0.25% of your assets under management per year, but they don't have a required minimum deposit. Where Wealthfront falls behind M1, though, is when it comes to fractional shares, as they don't allow it. Wealthfront does offer a college 529 savings plan, which can be beneficial for parents saving for college.

 

M1 Finance

Wealthfront

 

Benefits and Features

Annual Fee
None
0.25%
Minimum Deposit
$100
$500
Phone Support
Yes - normal business hours
Yes
Live Chat Support
No
No
Email Support
Yes
Yes
Human Advisors
No
No
Assets Under Management
$100 Millon
$10+ Billion
Tax Loss Harvesting
Offers tax-efficient investing
Yes
Goal Tracker
No
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Fractional Shares
Yes
No
Taxable Accounts
Yes
Yes
401k Plans
No
No
IRA Accounts
Yes
Yes
Roth IRA Accounts
Yes
Yes
SEP IRA Accounts
Yes
Yes
Trust Accounts
Yes
Yes
529 Plans
No
Yes

M1 Finance: Pricing information from published website as of 06/14/2018

Wealthfront: Pricing information from published website as of 04/04/2018

Bottom Line

M1 Finance is best for the DIY investor who wants the chance to be hands-off when needed. Their no-commission fee structure is hard to pass up, but unless you have an idea about how to invest, it could be overwhelming for the beginner.

As you shop for a robo-advisor, put M1 in your shopping basket, but make sure to weigh your other options as well. If you aren't going to make your own choices or you really just want the software to do the job for you, choosing a different robo-advisor may be the better option for you.

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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