M1 Finance is an American financial services company that refers to itself as “The Finance Super App”, and it is not an empty boast. The company was founded in 2012 by the owner, Brian Barnes, and has been available to the public since 2015. So far, they have accumulated more than $5 billion in assets under management.
M1 Finance is a hybrid between a Robo-Advisor and a traditional financial advisor delivered with commission-free trading making money management easy. It achieves this through the use of the latest technology, to make investing simple and cost-effective for investors with limited initial funds. This allows users to monitor investments quickly, leaving you more time to get on with the rest of your life.
You don’t need any money to open your account and set up your portfolio. But you will need $100 before you can start investing. So, you don’t need to have thousands of dollars before you start investing with M1 Finance.
Build your portfolio using investment pies
Each asset you choose is one slice of your pie. The slices can be bonds, stocks. or Exchange Traded Funds (ETFs). You can choose an asset allocation based on your risk tolerance from a selection of 60 different pies, each based on modern portfolio theory.
Full explanations of every pie are included, making it easy to understand if you are unfamiliar with many investment terms, products, and theories. You can then remain with your chosen allocation or choose your own asset selections within your pie.
M1 Finance automatically rebalances your pie so that you remain within your chosen risk tolerance.
The pies are designed around these differing investment goals:
- General investing
- Plan for retirement
- Income earners
- Industries and sectors
- Hedge fund followers
- Responsible investing
- Just stocks and bonds, and
- Other strategies (based on your interests).
Once your portfolio has been chosen, you can then select the account type that fits your needs:
- Individual Account
- Joint Account
- Retirement Accounts (Traditional IRA, Roth IRA, SEP-IRA)
- Trust Accounts
- Custodial Accounts (UTMA, UGMA)
Whether you are investing for retirement or in a taxable account, M1 Finance has an option to suit you. You can borrow against your investment at an interest rate of 3.5% with a feature called M1 Borrow. You need a minimum balance of $5,000.
M1 Spend is a free checking account you receive automatically and comes with one ATM fee reimbursed per month.
M1 Plus is a newer feature that offers Smart Transfers, where you can set your own rules to invest money when your checking account balance is higher than you need it to be. You can also get custodial accounts and borrow money, at the lower interest rate set at just 2%.
With M1 Plus your checking account earns 1% interest, and you get 1% cashback when you use your debit card for purchases. Four ATM fees/month are reimbursed, and any international fees are waived. M1 Plus costs $125/year, but the first year is free.
M1 Finance comes with some great advantages, including:
- Free to invest: no trading commissions or hidden fees.
- Free consultation: you can schedule a free consultation with a specialist at any time to learn how to use the platform.
- Wide range of investment options: stocks, bonds, and over 2,000 ETFs.
- Dividend reinvesting: your dividends are reinvested for free back into your entire portfolio, not back into the stock that paid the dividend.
- Active rebalancing: allows new money invested in your portfolio to buy your assets in the correct proportion to maintain your portfolio asset allocation.
- No cash holdings: when your cash balance reaches $10, it is immediately invested, ensuring your money is always working for you.
- Fractional investing: means you don’t have to buy a full share of any single stock.
- M1 Finance Mobile App: allows you to review your holdings, view transactions, check on your return, and even start a transfer when you are on the go.
No platform is ever perfect and M1 does have some disadvantages:
- Small trading window: trades only take place once per day at 9 am Central Time. M1 Plus trades twice per day.
- No cash holdings: this can also be a disadvantage if you want to build up a cash holding and invest when the market drops. To do this, you’ll need to keep cash in the checking account or elsewhere.
- No mutual funds
- Dividend reinvestment: these are only automatically reinvested when your cash balance is $10. If you receive a smaller dividend, you’ll need to wait until your cash balance reaches $10 for the reinvestment to occur
- No Tax-Loss Harvesting: although other tax minimization strategies are used across all investor accounts.
M1 Finance is suitable for:
- Passive Investors
- Long-term investors
- Dividend investors
- Investors who want customized investments
- Investors who want to be hands-off, and
- New investors (M1 does the work for you, you don’t need to worry about rebalancing and other aspects of investing that help you grow your wealth.)
M1 Finance is not suitable for:
- Day Traders and Active Investors: M1 Finance does not allow you to trade throughout the day, so there are other options more suited for you
- Mutual funds investors: these are not included, so you would have to invest elsewhere. However, with access to ETFs, you get much the same features as a mutual fund.
Here you can read a comprehensive M1 Finance Review.
Jeremy Biberdorf is a long-time internet marketing pro turned online entrepreneur and blogger. Check out his investing blog at Modest Money.
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