A growing trend and a popular option for investors in the digital age is automated investing, sometimes called “passive investing.”
Many times this can be accomplished with simple index fund investing, but sometimes you might want to take that a step further.
This is where the investing platform M1 Finance can be a great tool for helping you build and grow your wealth.
Most of use have busy lives and do not always have time or interest in becoming an investing pro.
The platform offers a bevy of investing options to help you reach your goals.
Below is my M1 Finance review and complete overview of the tool. Free to use the table of contents to jump to a desired section.
Quick Review: In short, I RECOMMEND M1 Finance. It is a solid platform to automate your investing, and I give it a 8.5/10 score. You can sign-up here to get started.
What is M1 Finance?
As I alluded in the intro, M1 Finance is a free brokerage and financial platform for anyone to take part in automated investing.
The company is part of the “robo-investing” and “passive investing” trend and popularity that has skyrocketed over the last few years.
M1 Finance offers their users a few personal finance options, but their main bread and butter is investing.
When you use them for investing, you have options to invest in stocks, like fractional shares of stocks or ETFs.
The other money features they have include loan options to borrow money. They boast no-paperwork, no credit checks, no loan officers, and no denials of applications for a loan.
And their interest rates are the lowest on the market.
Lastly and coming soon, M1 Finance is offering an FDIC insured checking account that will be directly integrated in their M1 app.
This checking account will have direct deposit, ability to easily transfer money, and option to get a debit card.
Is M1 Finance Really Free?
Yes, this is true. A few years ago M1 Finance offered a low fee of 0.25%, but then switched to a free platform.
You read that right! There are no trading commissions, no account maintenance fees, and no charges for deposits or withdrawals.
The only potential fees apply to unique transactions.
For example, if you open a retirement account at M1 Finance and later decide to close the account, there is a $100 account termination fee (this is standard at brokerage firms).
And there are potential fees if you request paper statements or wire transfers, too. You can read about any of there fees which can be found here.
Now, they also do offer investors a paid tier that they call M1 Plus, which is currently $125 per year. This gives you a bit more options on the accounts you have with M1 Finance.
For example, the upgrade offers discount interest on loans borrowed, more investing options, 1% cash back on all debit card purchases, interest on your checking account with them, and a few other small perks as well.
How does M1 Finance make money?
So now that you know M1 Finance is free and has a paid tier option, how else do they make money?
Typically, the company will make money by charging interest on the loans it offers to its account holders.
And M1 Finance also lends the securities that its customers purchase to other investors, where they will earn money from those loans too.
How M1 Finance Investing Works
While the robo-advisor does offer other services, their investing feature is by far their strongest product.
They offer various account types like an individual taxable account, joint account (with relative, spouse, etc.), retirement accounts (traditional IRA, Roth, SEP IRA), and even a Trust account.
Something I found unique with their platform is their Pie-based investing interface, to help you build and manage your investment portfolio much easier.
There are more than 6,000 stocks and funds to build Custom Pies or select from nearly 100 Expert Pies, designed to meet different financial goals and investment objectives.
For customization:
- Select investments to add to your “Pie,” these are the slices
- Set the target weight for each slice
- Fund your pie and the money will be added based on your percentages
- You can add, remove, or edit your slices at anytime
Or your can choose from expert Pies based on your financial goals, as M1 Finance offers various templates you can choose from.
These are created by expert advisors and brokerages, so your options are carefully crafted.
Why investors choose M1 Finance
When it comes to investing money, many people would prefer to simplify the process and remove the headaches and constant monitoring of their investments.
Besides being free to use, here are a few reasons people choose M1 Finance (and why it might be interesting for you).
- No manual trades, after you build or select your portfolio M1 does the rest
- Simple rebalancing and portfolio management that helps ensure your asset allocation stays on track
- Depositing schedule where you control the amount and frequency of cash flowing into the app
- Fractional share investing, which helps you build wealth down to pennies
- They use a tax-efficient allocation strategy to help reduce your taxes when you sell any securities
- Keep more returns and keep compound interest growing with their no fee platform
- Easy to use platform, visually appealing, and offers news and insights on your investments
Getting started
Getting started and opening an account with M1 Finance is very easy and does not take long to set up.
Remember, a minimum account balance of $100 is necessary to get started on M1. Once that $100 account minimum has been reached, deposits can be any amount above $10.
The minimum is higher for retirement accounts, which require an initial investment of $500.
Starting a free account requires some basic information about yourself. They will then use this information to verify your identity.
Next, you’ll then need to link a bank account. This is the account you want to use for making deposits into your M1 Finance account. And this bank account will also be where money can be transferred back to your bank too.
Once your account has been created, you’re ready to start investing your money and building your “Pie” portfolio.
M1 Finance Pros and Cons
Now that we got all that out of the way, you might be wondering about the pros and cons of the platform. From my research and interest in M1 finance, here are the pros and cons.
Pros of M1 Finance:
- Options to trade fractional shares
- No trading fees or account management fees
- Low minimum investment needed to open an account
- Multiple account types (IRA, Trust, Taxable, etc.)
- Options to invest in various stocks and ETFs
- Automated investing and rebalances of your portfolio choices
Cons of M1 Finance:
- No tax-loss harvesting, like other robo-advisors offer
- Only a single trade window where it executes, paid version offers an afternoon trade window as well
- No access to financial advisors if you have questions
I think M1 Finance is a great choice and option for most new investors. The company’s lack of fees and low minimum investment to open an account means that anyone can easily get started relatively cheap.
If you are looking to just get started, learn about investing, and have a more hands free approach — then M1 Finance is definitely worth using.
Additional FAQs
As with any platform, there are always some additional questions. While they have a great education center on their website, here are a few common questions people tend to have about M1 Finance.
Is M1 Finance Trustworthy?
Yes, M1 Finance is absolutely a trustworthy option for investing your money. The company is registered with the SEC as a broker dealer and is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC).
Additionally, they have 256-bit SSL Data Encryption and worth with a third-party custodian, which means M1 Finance has no access to your money.
Does M1 Finance Allow Fractional Shares?
With M1 Finance, they allow fractional sharing investing which is a benefit to you as the investor. Now it doesn’t matter if you have the exact number for full share of a stock. Instead whatever distribution you contribute, M1 will purchase fractional shares for you.
Is M1 Finance Good for Beginners?
M1 Finance is a great choice for beginners and advanced investors as well. With their easy to use platform, simple investing options and choices, no fees, and automated approach — anyone can get started and begin growing their wealth.
M1 Finance Summary
- Options for Fractional Shares
- No Trading Fees
- Low Minimum Starting Investment
- Multiple Account Types
- Limited Trading Hours
- No Access to Financial Advisors