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Updated on Monday, October 7, 2019
M1 Finance is an online investing platform that combines robo-advisor functionality with certain features more typically found on conventional broker platforms. This makes M1 Finance a somewhat unique product: It offers curated investment portfolios for different goals and risk tolerances, together with the ability to build your own investment portfolios.
No matter which way you choose to compile your investments, M1 Finance lands squarely in the robo-advisor camp, as it manages them for you automatically and handles all the necessary rebalancing. M1 offers taxable, trust and retirement accounts, and users can open up to five accounts under one login. Best of all, M1 charges no annual management fees.
How does M1 Finance work?
M1 Finance refers to investment portfolios as “pies,” and the different stocks and ETFs added to each portfolio “pie” as “slices,” which you may find either charming or goofy. When you sign up with M1 and choose your first pie — one designed by M1, one with “slices” you’ve selected yourself, or a mix of the two — the platform shows you how it would have performed over the last 10 years (this is called a “backtest” in the professional investing world).
After establishing a portfolio “pie,” you complete a quick series of questions about yourself, including income, net worth, liquidity, and investment time horizon. M1 then asks you to link up a bank account to fund your investments. Once linked, you can fund your first pie, and may choose more portfolio pies.
If you decide to build your own portfolio pies, you can choose from more than 4,000 individual stocks and more than 1,900 ETFs. Each pie can hold up to 100 slices. M1 requires a minimum balance of just $100, and charges no fees to manage your portfolios. M1 makes its money from interest on cash deposits, interest on margin loans, and through the annual fee on their optional M1 Plus membership, among other things.
For users who want the platform to choose investments for them, M1 Finance offers curated pies, from target retirement portfolios (sorted by conservative to aggressive) to socially responsible investing portfolios. There’s even a “Cannabis Pie” that offers exposure to publicly traded cannabis producing, manufacturing and distributing companies.
Who should consider M1 Finance
M1 Finance has features that would appeal to both journeymen and more experienced investors. The latter will like the build-your-own portfolio option, while all users will appreciate curated portfolios based on things like your target retirement date or your desired mix of stocks and bonds. If you feel comfortable choosing your investment approach, you can set up automatic investments that will fund your account over time.
For true beginners, the M1 platform might be a little too DIY. Although you can choose from the site’s pre-selected investment mixes, there are no recommendations based on your time horizon or other measures — you’re on your own to select one. If you need help, there are no advisors available, as with some other robo-advisors — you must submit a support request via contact form.
M1 Finance fees and features
|Stock trading fees|
|Amount minimum to open account|
|Account fees (annual, transfer, inactivity)|
|Mobile app||iOS, Android|
|Customer support||Phone, Email|
Strengths of M1 Finance
- No fees: M1 charges no fees to manage your portfolio, and requires only $100 to start investing, after which you can invest in increments of $10. There is, however, an inactivity fee if you have less than $20 in your account and there’s no activity for 90 or more days, and the site charges to close accounts: $100 for outgoing transfers, for instance, and $100 to terminate each IRA.
- Customizable portfolios: Unlike some robo-advisors that lock you into their investment selections based on your risk tolerance, M1 Finance gives you a lot of leeway. You can select your own stocks and funds you’d like to go into your investment pie, or you can go with one of the site’s professionally curated pies, such as “Moderately Aggressive” or “Responsible Investing.” You can also choose a combination of the two approaches, filling part of your pie with your picks and part of your pie with theirs.
- Fractional shares: M1 allows investors to buy fractional shares of stocks and funds, so every dollar you point toward your portfolio will be used when you purchase investments.
- Rebalancing: Using a method it calls Dynamic Rebalancing, M1 will rebalance your portfolio as you deposit and withdraw cash, and the site will reinvest your dividends once your cash balance reaches $10, or whatever threshold you’ve chosen.
- Additional features: With M1 Borrow, users with accounts with a balance of at least $10,000 can borrow up to 35% of their portfolio at 4.25%. M1 Spend allows users to keep cash in a checking account, and if you sign up for M1 Plus for $125 a year (currently on special for $100), you’ll earn 1.5% APY on your cash.
Drawbacks of M1 Finance
- Too much freedom: Unlike most robo-advisors, which typically recommend pre-baked investment portfolios for you based on your answers to questions about goals and risk tolerance, M1 lets you invest in whatever you want. This could be bad news if someone loads up their portfolio with stocks without doing any research, or might be overwhelming for an investor who wants more hand-holding.
- Not much guidance: The site’s setup includes questions like, “What is your liquid net worth?” without any explanation for beginners about what that might mean. The site also asks users to rate their risk tolerance — low, medium, high — without any accompanying details. Many other robo-advisors provide greater amounts of background detail on the investing process, and offer more advice for novice investors.
- Not for day traders: M1 makes trades just once every day, during the “trading window,” at 9 am Central Time. If you’re looking to capitalize on daily stock price fluctuations, this may not be your ideal platform.
- No tax-loss harvesting: Although M1 uses a tax minimization strategy to reduce the taxes you owe when you sell securities, there is no tax loss harvesting offered. When you request a withdrawal from your account, an algorithm sells securities in the order of: losses that offset future gains, lots that result in long-term gains, and then lots that result in short-term gains.
Is M1 Finance safe?
M1 Finance has all of the typical protections in place. It is a registered broker/dealer with the Financial Industry Regulatory Authority (FINRA), a member of the Securities Investor Protection Corporation (SIPC) and carry SIPC insurance that protects against the loss of cash and securities held by a customer up to $500,000. They also have supplemental SIPC insurance, and M1 Spend and M1 Plus accounts are FDIC insured up to $250,000.
M1 has also taken measures to protect personal information. Your data is never stored on any device, and all information is encrypted in transit and at rest. The connection to your bank is managed via an electronic key — M1 doesn’t store your bank credentials.
M1 Finance offers features that will appeal to both experienced and beginner investors, from highly customizable portfolios to pre-set investment mixes that users can set on auto-pilot. Although there’s not much guidance on the site, users can open an IRA, choose a target date retirement mix, set up automatic investments and they’re set — or they can fill a portfolio with 100 individual stocks and ETFs of their choosing. With no management or trading fees, users are paying just the expenses on the investments themselves, and you can invest as little as $10 at a time. Compared to other robo-advisors charging higher fees and offering fewer investment options, there’s a lot to like here.