M1 Finance is a online brokerage platforms and robo-advisor platform that combines the best of both worlds, offering the flexibility of a broker and the automation of a robo-advisor. In this comprehensive review, we will go over the key features, benefits, and drawbacks of M1 Finance.
Account Setup: Simple and Straightforward
Getting started with M1 Finance is a breeze. The platform offers a user-friendly onboarding process, guiding you through the account setup step by step. You’ll begin by creating a username and password, followed by answering a few general questions about your investment experience. M1 Finance supports a variety of account types, including brokerage, Traditional IRA, Roth IRA, SEP IRA, custodial (M1 Plus only), and trust accounts. The minimum requirement to open an account is $100 for taxable accounts and $500 for retirement accounts. Once your account is set up, you can start customizing your investment portfolio.
Portfolio Construction: Tailored to Your Preferences
One of the standout features of M1 Finance is its portfolio construction capabilities. The platform allows you to create a personalized investment portfolio using its unique “pie” system. Each “pie” represents a section of your portfolio and can be customized to include a variety of securities such as stocks, ETFs, and REITs. M1 Finance offers over 60 pre-built Expert Pies, designed to align with different investment strategies and goals. These pre-built options cater to a range of investment styles, including passive investing, socially responsible investing, and dividend-focused portfolios. Alternatively, you can create your own Custom Pies, selecting specific stocks and funds to suit your preferences. This level of customization sets M1 Finance apart from traditional robo-advisors, giving you greater control over your investments.
Automated Investing: Set It and Forget It
One of the key benefits of M1 Finance is its automated investing feature. Once you have set up your portfolio, you can activate the auto-invest feature, allowing M1 Finance to handle the investment process for you. This means that any deposits you make into your account will be automatically allocated to the different slices of your pie, ensuring that your portfolio remains in line with your target asset allocation. M1 Finance’s algorithm dynamically rebalances your portfolio by directing deposits towards underweight slices and selling overweight slices when you make withdrawals. This automated approach saves you time and effort, making investing a hassle-free experience.
Integrated Banking and Borrowing: A Comprehensive Financial Solution
M1 Finance goes beyond just investment management. The platform offers integrated banking and borrowing services, allowing you to consolidate your financial activities in one place. With M1 Finance’s cash management account, known as M1 Spend, you can enjoy seamless access to a high-yield checking account.
This account comes with features such as direct deposit, bill pay, and a debit card. M1 Plus members also benefit from additional perks, including 1% cash back on purchases, a 1% interest rate, and check-sending capability. Moreover, M1 Plus members gain access to margin loans at discounted rates, providing them with the opportunity to borrow against their portfolio balance. This comprehensive approach to financial management sets M1 Finance apart from traditional brokerage platforms.
Fee-Free Investing: Keeping Costs Low
One of the biggest advantages of M1 Finance is its fee structure. The platform offers fee-free investing, meaning there are no commissions or account management fees. M1 Finance makes money through interest on cash balances, lending securities, and its optional M1 Plus subscription.
There are no additional charges for trading or rebalancing your portfolio. M1 Finance also reimburses ATM fees, making it convenient for accessing your funds. The platform is committed to minimizing costs for investors, ensuring that more of your money goes towards building your portfolio.
Customer Support and Education: Empowering Investors
M1 Finance provides robust customer support options to assist investors. You can reach their customer care team through a contact form, email, or phone during specified hours. While M1 Finance does not offer access to human financial advisors, their support channels are responsive and knowledgeable.
M1 Finance offers an extensive help center, featuring articles and resources to guide investors through various aspects of the platform. Their blog covers a wide range of investing topics, empowering users with knowledge and insights to make informed decisions. While M1 Finance may not provide advisory services, they equip investors with the tools and resources needed to navigate the platform effectively.
Security Features: Protecting Your Investments
Security is of utmost importance when it comes to online investing. M1 Finance employs robust security measures to safeguard your account and investments. The platform utilizes two-factor authentication and 4096-bit encryption to protect your personal information and data.
M1 Finance is a member of the Securities Investor Protection Corporation (SIPC), which provides protection for securities held in your account. Additionally, funds deposited into the M1 Spend account are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. With these security measures in place, you can have peace of mind knowing that your investments are protected.
Pros and Cons: Is M1 Finance Right for You?
Like any investment platform, M1 Finance has its pros and cons. Let’s explore the key advantages and drawbacks to help you determine if it aligns with your investment goals and preferences.
Pros of M1 Finance:
- Automated investing and customizable portfolios: M1 Finance offers the convenience of automated investing while allowing you to tailor your portfolio to your preferences.
- Integrated banking and borrowing: The platform’s cash management account and margin loans provide a comprehensive financial solution.
- Fee-free investing: M1 Finance eliminates commission fees and account management fees, making investing more cost-effective.
- Dynamic rebalancing: M1 Finance’s algorithm ensures your portfolio stays in line with your target allocation by rebalancing when you make deposits or withdrawals.
- Retirement investing: M1 Finance supports a range of retirement accounts, including Traditional IRA, Roth IRA, and SEP IRA.
Cons of M1 Finance:
- No access to advisors or recommendations: M1 Finance does not provide personalized investment advice or access to human financial advisors.
- Limited tax optimization: While M1 Finance minimizes taxes on withdrawals, it does not offer tax-loss harvesting, which may limit tax optimization for high-income individuals.
- Manual rebalancing: M1 Finance does not automatically reallocate funds already invested; investors must request a rebalance when needed.
- Lack of aggregation feature: M1 Finance does not offer external account syncing or consolidation, making it challenging to get a comprehensive view of your net worth across multiple portfolios.
Final Verdict: A Unique Blend of Brokerage and Robo-Advisor
M1 Finance offers a compelling investment management solution, combining the flexibility of a broker with the automation of a robo-advisor. It empowers investors to create customized portfolios while automating the investment process. With fee-free investing, integrated banking and borrowing services, and a user-friendly platform, M1 Finance stands out in the crowded landscape of online brokerage platforms. While it may not offer personalized advice or tax optimization features, M1 Finance appeals to self-directed investors who value control and flexibility in their investment journey.
Whether you’re a long-term investor looking to automate your portfolio or a hands-on investor seeking a comprehensive financial solution, M1 Finance has something to offer. Consider your investment goals, preferences, and the features outlined in this review to determine if M1 Finance is the right fit for you. Embark on your investment journey with M1 Finance and take control of your financial future.