m1 finance

M1 Finance Review

M1 Finance dubs themselves “The Finance Super App.” This website lets users invest, borrow, and spend money with a combination of investing and spending accounts. While they promote their services to younger, newer clientele, they’re perhaps better suited for more experienced investors, as they employ no financial advisors.

M1 Finance follows the time-tested philosophy of investing regularly to build a diverse, balanced portfolio over time. They consider the long-term approach to be one of the best ways to generate sustainable wealth. As such, they discourage day trading on their platform, and in fact take steps to prevent intraday trades. 

M1 Finance Pros and Cons

Every investment website has its own pros and cons to contend with. It’s up to individual users to decide if they work toward – or against – their interests and needs. 

Pros

  • Low minimum deposit
  • Ability to trade fractional shares and place individual stock/ETF orders
  • No trading fees or asset management fees
  • 80 “expert” portfolios to model your own investments after
  • Automated investing available at no extra cost
  • Integrated banking and investment services 

Cons

  • Transaction timing is out of your control
  • Investments limited to stocks and ETFs
  • No financial advisors to guide your investment decisions
  • No dashboard to show all external accounts in one place
  • If you’re inactive with less than $20 in your account for 90 days you’re charged a fee
  • No risk assessment questionnaire
  • No tax-loss harvesting

What is M1 Finance?

M1 Finance is a money management and investment app registered with both the SEC (Securities and Exchange Commission) and FINRA (Financial Industry Regulatory Authority). They offer tools such as self-directed trading, automated investing, fractional share investing, and margin lending. These investment opportunities might come in handy if you're looking to make extra money.

However, M1 Finance is not an advisory service. Its purpose is to combine automated investing with high degrees of customization so that experienced users can tailor their portfolios perfectly. It’s also one of a few free robo-services, as its basic service charges no portfolio management or trading fees, nor fees for deposits or withdrawals to connected accounts. 

M1 Finance Pricing

The regular version of M1 Finance is free for everyone. This basic tier comes with features such as:

  • No checking APY
  • Up to 1% international fees on M1 spend (checking account)
  • 3.5% interest rates
  • 1 daily trade window

M1 Plus is the premiere offering from M1 Finance. This account costs $125 per year – just over $10 per month – and includes features like:

  • 1% checking APY
  • No international fees
  • 2% interest rates
  • 2 daily trade windows

We’ll cover both versions of M1 Finance in more detail below. 

M1 Accounts

M1 Finance offers three basic accounts: Spend, Borrow, and Invest. Each of these serves a different purpose to help you on your financial journey. That said, the features vary somewhat depending on if you go for their basic or premiere service. 

M1 Spend

M1 Spend is M1’s checking account. It comes with a debit card linked to a spending account with no minimum balance or fees. This integrated digital bank account also links with your investment account, so you can sweep excess cash into your IRA, a taxable account, or even pay off your Borrow balance. 

The basic Spend Account carries no APY and a daily transaction limit of $10,000. They also charge up to 1% in international fees and offer no fee waivers for ATM withdrawals. 

The M1 Plus Spend Account offers more flexibility, with a daily transaction limit of $50,000. You get 1% APY on your checking account, plus 1% cashback on all purchases. Additionally, there are no international fees, and they waive ATM fees four times per month. 

M1 Borrow

M1 Borrow is this service’s margin account. You can take out money at 3.5% interest in the basic option, or 2% interest for Plus members. But regardless of which M1 account you go for, you have to have a total portfolio worth of $10,000 to borrow money. 

M1 Invest

M1 Invest is fairly straightforward. They allow you to choose your own stocks and ETFs for your investment portfolio, or mimic one of 80 “expert portfolios” to get a head start. They also support four types of accounts: individual, joint, IRA, and trust. 

The trading window opens at 9:30 a.m. EST when the New York Stock Exchange opens and runs until all orders have been executed. Any order you place before 8 a.m. EST are executed during the same day’s trading window. 

With the basic version of M1 Invest, users are limited to 1 trading window per day, with no options for smart transfers. M1 Plus members, however, have the option to enjoy a second trading window in the afternoon before market close. 

Additionally, smart transfers are available for users with balances over $25,000. Smart transfers are a way to automate cash flow, spending, and saving – rather than micromanaging your accounts. For instance, you can set up rules to keep a minimum amount in your checking account and invest the rest; tap into M1 Borrow if your account drops too low; or automatically transfer a contribution to your retirement accounts if your Spend balance rises above $1,000. You set the limits, and your account does the rest. 

Custodial Accounts

Aside from these three basic accounts, M1 Finance Plus clients also have the option to open custodial accounts for minors. You can deposit funds and rebalance the portfolio in the minor’s interest until they reach their state’s age of majority. (Usually, 18 to 21 years old.)

Upon reaching the proper age, M1 Finance will restrict all trading in the custodial account. The recipient of the funds can then take one of two options: withdraw the funds entirely, or transfer them to another taxable account. 

M1 Finance Features

Now that we’ve peered behind the curtain, let’s dive deeper into what M1 Finance has to offer its investors. 

Pie Investing

While M1 Finance does offer some limited banking and borrowing abilities, its bread and butter is stock market investing. To that end, they help you build your portfolio from the ground-up with what they call “pie investing.” 

When you first sign up with M1 Finance, you’re invited to build a new pie from scratch. This tutorial lets you pick three items and then customize each “slice” of your pie. Although this is meant as an introduction to M1 Finance, you can save your pie for later to expand upon. Alternatively, you can select one of 80 pre-prepared “Expert Portfolio” pies to automate your investing. 

The way that pies work is simple. Each stock or ETF is one “piece” of the pie. The size of the piece represents how much of your portfolio this asset represents. At the edge of the pie, each slice shrinks or expands to show how that asset behaves in relation to your desired allocation. This provides a visual so you can reallocate your funds to a more desirable setup. 

Portfolio Management

M1 Finance offers tools for both passive and active investors to monitor their funds. But regardless of which you choose, your portfolios are monitored and rebalanced frequently to reduce drift. This helps keep your allocation within desired parameters as cash flows in and out. 

M1 calls this “dynamic rebalancing,” as they attempt to account for both cash flow and the reallocation of currently deployed funds. Uniquely, you can also force a rebalance at any time, which is not a common feature in many robo-advisors. 

Investor Goals and Education

Unfortunately, M1 Finance is sorely lacking in its goal-setting abilities, as it’s not an advisory service. Although they do provide expert portfolios for reference, their base operation is as a “do it yourself” platform. 

That said, M1 Finance does offer some investor education to help you get started. They have dozens of articles on the importance of investing, the ins and outs of different retirement accounts, and how to save for retirement. Plus, their blog, social media, and newsletter are tailored to advise self-directed investors on how to improve their mindset and prospects in the market. 

User Experience

M1 Finance is built with the end user in mind. The mobile app is well-designed and mirrors full website functionality. (In other words, anything you can do online, you can do in the app.) Both the app and website move customers through each step of the investing process fluidly. And once your portfolio is defined and funded, you can easily check its performance, reallocate funds, and alter your cash flow. 

Customer Service

One place that M1 Finance has a below-average reputation is with their customer service. As they offer no financial consults, all customer service revolves around how to use the website and app. Your live service options are limited to phone or email, and many users report not receiving an adequate response to their queries or problems they encounter. 

That said, M1 Finance does provide a detailed FAQ page to answer the majority of your queries. Many articles also include video walkthroughs on how to use the website and app, as well as to explain their basic investing premise. (But don’t hold your breath on receiving advice from a financial advisor – they don’t have any.)

Is M1 Finance Right for You?

M1 Finance is an investing experience for users who have some background in the stock market. Intermediate investors will likely benefit from the hands-off approach, as you can:

  • Deploy a high degree of portfolio customization
  • Invest in pre-defined SRI (socially responsible investing), high-growth, or value portfolios
  • Take either an active or passive path, according to your preferences
  • Research how various retirement and M1 accounts work and the importance of building wealth 

If you're not sure what investment options work best, you can pick one of the pre-defined portfolios on M1 Finance. Most passive strategies outperform active strategies over time, and M1 finance offers a low-cost path to automated investing.

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