Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It may not have not been reviewed, commissioned or otherwise endorsed by any of our network partners or the Investment company.
Updated on Friday, October 16, 2020
M1 Finance is a hybrid robo-advisor that offers an option for people who’d like to choose their own investments but don’t want to get bogged down in the minutiae of managing an investment account.
The platform offers some relatively affordable upsells, but most of what basic buy-and-hold investors need is free — a price that’s hard to argue with. However, people looking for tax-loss harvesting strategies, deep investment guidance or interaction with human advisors won’t get that with M1 Finance. We’ll help you decide whether this popular investing option is right for you in this M1 Finance review.
|Account minimum||$100, or $500 for retirement accounts|
|Accounts offered||Individual brokerage, joint brokerage, trust accounts, Traditional IRA, Roth IRA, SEP IRA, IRA rollovers and 401(k) rollover into IRAs|
|Access to human advisors||No|
- What is M1 Finance and how does it work?
- M1 Finance investment approach
- M1 Finance fees
- M1 Finance features and tools
- M1 Finance user experience
- M1 Finance safety and security
- Is M1 Finance worth it?
What is M1 Finance and how does it work?
M1 Finance is a good option for those who are looking to take the next steps beyond a robo-advisor, but who don’t want to give up some of the account management features these automated investing platforms offer. With M1 Finance you create “pies,” visual representations of how your portfolio is divvied up, and you choose investments to place in each. Once you’ve set up your pie, it’ll automatically rebalance each time you make a deposit or withdrawal.
M1 Finance’s strength is that it’s a free way to manage your portfolio after you’ve decided how you want it to be structured. But that relies on you to decide what you want to invest in. M1 Finance doesn’t offer any human advisors or questionnaires that can help you decide this, although it does have pre-set pies (“Expert Pies”) that you can choose from. In addition, there are some accounts M1 Finance doesn’t offer, such as Solo 401(k)s, 529 plans and custodial accounts.
- Free for basic accounts: If you’re a set-it-and-forget-it investor, M1 Finance doesn’t charge any management fees.
- Slick interface: M1 Finance is heavily app-based, which forces it to prioritize beautiful and easy-to-understand visuals. For example, your asset allocation is pictured as “pies,” and charts show you how your money has grown over time.
- Excellent customization: You can choose to have up to 100 “slices” in your pie, with over 6,000+ securities from which to choose.
- Dynamic rebalancing: After you choose how much of which investments will go into your pie, M1 Finance will automatically rebalance your portfolio for you with each new deposit or withdrawal.
- No tax-loss harvesting: M1 Finance offers municipal bonds for those interested in a tax-saving option, but it doesn’t offer tax-saving strategies such as tax-loss harvesting. Tax loss harvesting is when you sell a certain investment when it’s priced low and buy a similar one so that you get essentially the same investment while also getting to write off that loss on your tax return.
- No day trading: You’re only able to trade once per day at 9:30 am EST with the free basic account, and that’s fine for buy-and-hold investors. But if day trading is your game, you’ll want an option that doesn’t limit you to one trade per day.
- Little guidance on what investments to choose: Being able to DIY your own investments is good for those who know what they want. For people with limited knowledge who don’t really know what they are looking for when it comes to investments, things get a little fuzzier. You can choose pre-built portfolios, but even then, there’s no easy-to-answer questionnaire to decide which is best for you, like with some of M1 Finance’s competitors.
M1 Finance investment approach
|Investment options||Exchange-listed securities, including stocks and funds|
|Socially Responsible Investing|
M1 Finance is unique among robo-advisors in that you get to choose your own asset allocation. When you create your account you’ll choose which investments you want from over 6,000+ exchange-listed securities, including individual stocks and funds. Wondering how to buy a stock on M1 Finance? It’s as simple as hitting the “edit” button on your pie and then adding it to the mix.
You can also choose a ready-built portfolio from a series of “Expert Pies,” of which M1 Finance offers about 100 options in areas such as “Responsible Investing” and “Plan for Retirement.” You can even choose to put one of these Expert Pies within your existing pie with your other choices, to form a sort of pie-within-a-pie.
One of the drawbacks of M1 Finance is that the platform doesn’t offer any tax-loss harvesting strategies or Smart Beta options that some of the bigger robo-advisors offer. Smart Beta is a potentially riskier strategy that uses a blend of passive and active investments with the aim of achieving slightly higher gains. The only way you can make your portfolio more tax-efficient with M1 Finance is by choosing to invest in a municipal bond fund for the bonds portion (if you choose it) in your pie.
M1 Finance fees
- Annual management fee: $0 for basic account, or $125/year for M1 Plus account
- Investment expense ratios: N/A
One of the best things about this robo-advisor is that M1 Finance fees can be as low as you want — even free. For most people interested in saving for retirement or another long-term goal, that’ll be enough of a draw on its own.
You can also sign up for M1 Plus, which unlocks the following features:
- An extra evening trade window
- A 1.5-point interest-rate reduction for M1 Borrow
- An M1 Spend account with extra features of its own
M1 Finance features and tools
When you make a deposit in your account, it’ll automatically be divvied up according to your pie. For example, if you deposit $100 and your pie is 50% Apple stock and 50% Google stock, M1 Finance will split it up and purchase $50’ worth of both.
This means that M1 Finance does support fractional shares. For example, if the price of Apple stock is $450, it’ll buy one-ninth — $50 — of a single share. This is handy because it means you can immediately invest any amount of money you have, rather than waiting until you’ve saved up enough for an entire single share of a spendy stock or fund.
M1 Spend and M1 Borrow
M1 Finance also offers its own version of a cash management account (“M1 Spend”) and a personal loan option (“M1 Borrow”).
There’s no real benefit to the M1 Spend account unless you pay a $125 annual fee for an upgraded M1 Plus membership. If you do, you’ll earn a decent APY of 1% on the money in your account, as well as a debit card that offers 1% cash back every time you swipe it.
M1 Borrow, on the other hand, lets you borrow up to 35% of the value of your portfolio on margin for a low interest rate. Borrowing on margin is risky, however, so make sure to fully research your options before reaching for this seemingly too-good-to-be-true option.
Pie-based asset allocation
Setting up your portfolio is as easy as pie — literally. You can use this visual approach to choose how much of which investments to put into your pie. There are 6,000+ investment options from which to choose, and your pie can have up to 100 different “slices” in it.
Dynamic portfolio rebalancing
After you’ve set your pie up, it’ll automatically be rebalanced each time you make a deposit or withdrawal. You can set up automatic deposits, which means your portfolio will also be rebalanced automatically according to how often you put money in. For example, a once-monthly deposit means a once-monthly rebalancing.
M1 Finance user experience
Another of M1 Finance’s strengths is that it has a positive user experience. The platform is designed to work especially well with the M1 Finance app on mobile devices. With space at such a premium and complicated material to present, M1 Finance has done an especially good job at designing a program that’s pretty and easy to use for anyone on any device.
One downside, however, is that it’s not always easy or intuitive to get in touch with customer service. Most of the links for “support” take you to an FAQ section of its website, and the l “Contact Support” button is hidden on the login page. All this does is redirect the user to a form with no live support, so it may be difficult to get ahold of someone within a short time frame if needed.
M1 Finance safety and security
- Two-factor authentication
- Military-grade encryption
- Member of SIPC
M1 Finance features two-factor authentication with your account as a way to keep it safe, as well as military-grade, 4096-bit encryption technology. If M1 Finance ever fails as a company, your money is also protected up to $500,000 by the SIPC.
Is M1 Finance worth it?
One typical feature of robo-advisors is that they often do everything for you, including picking your investments. If you’re at the point in your investing journey where you want to choose your own investments, M1 may work better for you than the more traditional robo-advisor. If you want a more hands-on investing experience you may be interested in a financial advisor.
For example, you may want to use a socially responsible investing strategy, in which you put your money toward specific companies that adhere to certain social, environmental, or ethical business practices. Or, you may prefer to pick specific technology stocks or add some other form of customization to your portfolio. With M1 Finance, you can do this without giving up all the other handy automation tools offered by a robo-advisor. Automation with customization is where M1 Finance shines.
Alternatives to M1 Finance
|Account minimum||Annual fee||Accounts offered|
|M1 Finance||$100 (or $500 for retirement accounts)||$0 for basic account, $125 for M1 Plus account||Individual brokerage, joint brokerage, trust accounts, Traditional IRA, Roth IRA, SEP IRA, IRA rollovers, and 401(k) rollover into IRAs|
|Betterment||$0||0.25% for basic digital||Individual brokerage, joint brokerage, trust accounts, Traditional IRA, Roth IRA, SEP IRA, Inherited IRA.|
|Acorns||$0||$12 for a lite subscription||Individual brokerage, Traditional IRA, Roth IRA, SEP IRA.|
M1 Finance vs. Betterment
If you’re trying to decide between M1 Finance vs Betterment, ask yourself: are you ready to take the next step in managing your account by choosing which investments you want? If not, Betterment might be better for you because it’ll choose your investments for you in addition to automatically rebalancing your portfolio. Betterment may also be a better option if you’re looking to reduce your tax bill, because it offers tax-loss harvesting.
M1 Finance vs. Acorns
If you’re looking for alternatives to M1 Finance you’ll likely come across Acorns. The key point in the Acorns vs M1 Finance debate is whether you’re looking to invest money on a smaller scale. Acorns lets you do this by rounding up your purchases to the nearest dollar, and then depositing the difference in your investment account. It’s an easier way to force yourself to invest. M1 Finance, on the other hand, requires you to make deposits of at least $10.
All information included in this profile is accurate as of 10/16/2020. For more information, please consult M1 Finance’s website.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.