M1 Finance Review: Is It Safe?
M1 Finance provides a hybrid robo-investing service with the ability to choose your own investments. Is it right for you? Read on for the pros and cons.
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Commission Free Stock Trading | |||
Overall Score | 4.5 | ||
Annual Fee | 5.0 | ||
Minimum Deposit | 5.0 | ||
Customer Service | 3.5 | ||
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.
If you want to be hands-off, but still with a say in your investments, M1 Finance may perfectly bridge the gap between robo and DIY investing.
It stands out from other robo-advisors by letting your create and customize your own portfolio. Then the automated service will manage your account.
And what's more? It's free to use. There are no commission or management fees.
Does its service live up to what it promises? Keep reading to find out.
- Who M1 Finance Is Best For
- How M1 Finance Works
- How to Get Started
- Platform and App
- Fees
- Why Invest With M1 Finance
- Downsides
- Is M1 Finance Safe?
- How M1 Compares
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Who M1 Finance Best For
- DIY investors. M1 gives you the best of both worlds. You can customize your portfolio and invest in any stocks and ETFs you wish, and M1 will manage it for you.
- Semi-experienced investors. M1 will not provide portfolio advice or recommendations. It's best if you have an idea of what you want to invest in.
- Long-term investors. It's not for day traders or frequent traders, as M1 only trades once a day.
- Robo- and self-directed investing hybrid
- $100 to start investing ($500 for retirement accounts)
- No commission or management fees
- Buy fractional shares
- SIPC Insured
Commission Free Stock Trading
M1 Finance allows investors the choice of ETFs and stocks. M1 charges no management fees or commission.
How M1 Finance Works
M1 Finance builds what they call "Pies." Each Pie consists of up to 100 "slices" (or investments). Each slice is a stock ETF, or even another Pie.
In a nutshell, this is how M1's Pie investing works:
1. Creating your pie
You choose the "slices" and the percentage of that investment. So for example, if you want 10% of your investment to be in Apple, that will be 10% of your Pie.
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| screenshot from m1finance.com |
You have a few options when creating your pie:
- Create your own by choosing your own investments
- Use one of M1's 80+ preset Expert Pies
- Customize a preset template by deleting or adding slices
- General Investing: Portfolio is based on your risk tolerance
- Plan for Retirement: Portfolio will adjust to your goals as you age
- Responsible Investing: Socially responsible portfolio
- Income Earners: More focused on dividends and income returns
- Hedge Fund Followers: Mimics the investment strategies of reputable hedge funds
- Industries & Sectors: Choose a specific industry
- Stocks & Bonds: Just two ETFs; focuses on stocks and bonds
- Other Strategies: Additional investment strategies.
You can create multiple pies for different goals.
2. Funding your account
When you add money to your account, M1 Finance will automatically buy shares of your investments according to the percentages you set.
So with the above example, if you add $1,000, $100 (10%) of it will go towards purchasing Apple stocks.
You can set up automatic contributions. M1 will withdraw the funds from your linked bank account and invest accordingly. You can basically set it and forget it if you wish.
3. Modifying your Pie
You can make changes to your Pie at any time you wish. If you want to sell an investment, just remove a slice. And if you want to buy a new stock, just add a new slice.
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| screenshot from m1finance.com |
M1 also automatically rebalances on your command. Overtime, your pie may shift from the original allocation. M1 will buy and sell accordingly to bring it back to the percentages you set.
How to Get Started
Getting started with M1 is different than with other robo-advisors. You won't see the typical questionnaire about your risk tolerance, goals, net worth, and income.
The process of creating a M1 account is:
- Create account. Set up account with your personal information (name, address, birthdate, and Social Security number) and email address.
- Create Pie. From there, you go through a quick tutorial and you are ready to create your Pie.
- Select account type. You can select from an individual taxable account, joint, IRAs (Traditional, Roth, or SEP), and Trust.
- Fund account. You'll need to link a bank account to fund your account.
- Let M1 do the work. Once the funds are transferred, M1 will buy the investments for you according to your Pie.
Commission Free Stock Trading
M1 Finance allows investors the choice of ETFs and stocks. M1 charges no management fees or commission.
M1 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 very user-friendly. You'll see a summary of your portfolio including its value, gain or loss, and return.
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| screenshot from m1finance.com |
If you want to edit your Pie, simply press the "edit" button. You'll be taken to a page where you can change the target percentages and add or delete slices. M1 Finance will automatically readjust as you do so.
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| screenshot from m1finance.com |
To add a new investment, just click on the "add" button. This will take you to the "Research" tab where you can search for any stock on the major U.S. stock exchanges.
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| screenshot from m1finance.com |
To get more information about a certain stock, just click on it to find the stock's performance data, price history, and more.
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| screenshot from m1finance.com |
Overall, the platform is very easy to navigate and creating the pies is intuitive. The mobile app is an excellent companion and works pretty much the same way.
Fees
While M1 is pretty close to being free to use. M1 charges:
- No account opening fees
- No trade fees
- No management fees
- No deposit or withdrawal fees to/from your linked bank
There are some services that may cost you. For example, they will charge you for an account statement or wire transfer. M1 is transparent with their fees, as you can see here.
And there is an inactivity fee of $20 for accounts with less than $20 an no activity for 90 days.
Keep in mind, though, you will still pay the ETF expense ratios, which M1 has no control over.
M1 Finance makes money a few ways:
- By interest earned from M1 Borrow, which allows users to borrow against their portfolio value at a low interest rate.
- By lending shares to short sellers and earning a small profit from this.
- By interest earned from the uninvested cash in your account (instead of giving the interest to you).
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Reasons We Like M1 Finance
- No commission or management fees. You can trade stocks and ETFs for free. This makes M1 less costly than many other robo-advisors.
- Only $100 to start. You can open an account with nothing, but you'll need $100 to start investing. This low minimum is great for young or beginner investors without a lot of capital.
Retirement accounts require at least $500.
- Stocks and ETFs. You can invest in any stock and more than 1,900 ETFs. Anything you can buy on the major U.S. stock exchanges is fair game.
- Fractional shares. This means every dollar can be invested, avoiding "cash drag".
What is a fractional share?. This means you can just buy a small piece of a share instead of waiting to have enough money for the full share. For example, if a share is $100 and you have $20, you can buy 1/5th of a share.
- Set up recurring deposits. You can set your M1 account up to regularly take money from your linked bank account and invest it.
- Tax-efficient investing. This 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.
- Rebalance with a click. If your target has drifted, just click on a button and M1 will automatically rebalance. You can rebalance just a Pie or your entire portfolio.
- Customized portfolio. Make changes to your portfolio as you see fit. You can buy or sell investments whenever you want.
- Automatically reinvest dividends. Once your dividends reach $10, M1 will reinvest them for you.
- Test before using. You can try out the M1 platform by registering with just an email and password. You can create a portfolio and test the system before committing and linking a bank.
- M1 Borrow. You can instantly borrow up to 35% of your account balance at a low interest rate.
Downsides
- Not for beginners. M1 is best for semi-experienced investors who want a say in their investments. If you want a system that will do all the work for you, other robo-advisors may be a better choice.
- No human financial advisors. While you can ask customer service reps about your account, they are not licensed financial advisors who can offer investment advice.
- Can only trade once per day. M1 only trades once a day at 9am CT everyday the New York Stock Exchange is open. This is how M1 keeps the platform free for investors. M1 is not for active day traders.
- No mutual funds. Only stocks and ETFs available.
- No tax loss harvesting. While M1 does tax-efficient trading, it doesn't offer tax loss harvesting, which is a standard feature for many robo-advisors.
Is M1 Finance Safe?
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M1 Finance is a registered broker/dealer with FINRA and a member of SIPC. You can have peace of mind that your assets and information are secure with M1.
- SIPC Insured. If M1 goes out of business, your securities are protected up to $500,000 per account. SIPC does NOT protect you from losing money through investing. M1's clearing firm has supplemental insurance to over beyond the SIPC limits.
- Military-grade encryption. All data transferred and stored within M1's system is protected with 4096-bit encryption.
- Extra login security M1 uses two-factor authentication and fingerprint ID/face ID login to keep your account secure.
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.
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M1 Finance | Betterment | |
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Get up to 1 Year Managed Free - | ||
Benefits and Features | ||
| Annual Fee | 0.25% for accounts under $100,000; 0.40% for accounts $100,000+ | |
| Minimum Deposit | ||
| Phone Support | ||
| Live Chat Support | ||
| Email Support | ||
| Human Advisors | ||
| Robo Advisor |  | |
| Assets Under Management | ||
| Tax Loss Harvesting | ||
| Goal Tracker | ||
| Automatic Deposits | ||
| Online Platform | ||
| iPhone App | ||
| Android App | ||
| Fractional Shares | ||
| Taxable Accounts | ||
| 401k Plans | ||
| IRA Accounts | ||
| Roth IRA Accounts | ||
| SEP IRA Accounts | ||
| Trust Accounts | ||
| 529 Plans | ||
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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.
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M1 Finance | Robinhood | |
|---|---|---|
Invite Friends, Get Free Stocks - | ||
Benefits and Features | ||
| Stock Trading | ||
| Minimum Deposit | ||
| Banking | ||
| Mobile App | ||
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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 07/20/2019. | ||
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.
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M1 Finance | Acorns | |
|---|---|---|
$5 Sign-Up Bonus - | ||
Benefits and Features | ||
| Stock Trading | Part of service fee. Free for college students for 4 years. No add-on trading fees. | |
| Annual Fee | Free for college students; $1/mo for Acorns; $2/mo for Acorns + Acorns Later; $3/mo for Acorns + Acorns Later + Acorns Spend | |
| Minimum Deposit | ||
| Phone Support | ||
| Live Chat Support | ||
| Email Support | ||
| Human Advisors | ||
| Assets Under Management | ||
| Tax Loss Harvesting | ||
| Goal Tracker | ||
| Automatic Deposits | ||
| Online Platform | ||
| iPhone App | ||
| Android App | ||
| 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 | ||
| Fractional Shares | ||
| Taxable Accounts | ||
| 401k Plans | ||
| IRA Accounts | ||
| Roth IRA Accounts | ||
| SEP IRA Accounts | ||
| Trust Accounts | ||
| 529 Plans | ||
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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 07/11/2019. | ||
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.
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M1 Finance | Wealthfront | |
|---|---|---|
First $5,000 Managed Free - | ||
Benefits and Features | ||
| Annual Fee | ||
| Minimum Deposit | ||
| Phone Support | ||
| Live Chat Support | ||
| Email Support | ||
| Human Advisors | ||
| Robo Advisor | | |
| Assets Under Management | ||
| Tax Loss Harvesting | ||
| Goal Tracker | ||
| Automatic Deposits | ||
| Online Platform | ||
| iPhone App | ||
| Android App | ||
| Fractional Shares | ||
| Taxable Accounts | ||
| 401k Plans | ||
| IRA Accounts | ||
| Roth IRA Accounts | ||
| SEP IRA Accounts | ||
| Trust Accounts | ||
| 529 Plans | ||
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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 also wants to be hands-off. You get to choose your own investments but don't have to handle the tedious tasks, such as performing manual trades and rebalancing. It's also amazing that there are no trade or management fees.
However, it could be overwhelming for the beginner. If you're not sure about making your own choices or you really just want the software to do the job for you, a different robo-advisor may be the better option for you.
Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy 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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