M1 Finance Review: Is It Safe?
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.
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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. 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.
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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?
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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.
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."
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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 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.
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.
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M1 Finance | Betterment | |
|---|---|---|
Get 1 Month 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 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.
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M1 Finance | Acorns | |
|---|---|---|
$5 Referral 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 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.
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M1 Finance | Wealthfront | |
|---|---|---|
Automate Your Investments - | ||
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 | ||
| | |
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 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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