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If you’re looking for a portfolio management platform for both your brokerage account and especially for your retirement IRA accounts, then M1 Finance is the perfect solution for your investment needs. In this article, I’m going to go over who and what M1 Finance is, the sign-up experience, trading experience, tools, features and who this investment platform is best suited for. Specifically, I’m going to dive into their pie investing system, fractional shares, dynamic rebalancing, Robo Advisor options and so much more. I will also go over the pros and cons of M1 Finance and share with you some real-world portfolio options.
Be sure to also watch my detailed YouTube video review of M1 Finance below.
M1 Finance is a free desktop, mobile app brokerage and retirement investment platform. It offers you the ability to trade stocks, exchange-traded funds or to use their Robo Advisor option providing you an automated approach to investing. They offer some very advanced portfolio management solutions where you can purchase fractional shares and dynamically rebalance your portfolio if needed.
The account creation process is pretty straight forward and it took less than a couple of minutes to create an account. To qualify to open an account you must be a United States citizen or permanent resident (green card holder) over the age of 18 with a valid mailing address to apply. They also offer joint brokerage accounts that are ideal for couples, parents with children over the age of 18 and even adults caring for aging relatives. You can also set up trust accounts on M1 Finance. M1 Finance offers a lot of flexible account creation options that should fit almost everyone’s investment needs.
M1 Finance shines in its simplicity. On the desktop side, it is very easy to choose the stock, funds and expert pies to quickly get your investment portfolio off the ground. This all translates nicely as well to the mobile app. Where M1 Finance is weakest is in the research information. This is not an issue with me as it is very simple to integrate M1 Finance to Atom. Atom works seamlessly with M1 which is a completely free investment research platform.
SECURITIES INVESTOR PROTECTION CORPORATION (SIPC) protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. Click here to learn more information.
M1 Finance offers checking accounts that are FDIC insured, traditional brokerage accounts, traditional IRAs, Roth IRAs, SEP-IRAs all of which are SIPC insured. They also allow you to transfer over an IRA from another brokerage firm and the ability to roll-over your 410k plan into an IRA within M1 Finance.
M1 Finance’s entire interface is based on their investment pies. Pies are simply your entire portfolio, or pieces of your portfolio, with investments contained within those pies. Within a pie, you can have stocks and exchange-traded funds. M1 Finance does not offer mutual funds within their pies. You can either create a custom pie of your own or select one of their expert pies to invest in.
Example of custom pie: 34% VYM, 33% VYMI, 33% VNQI.
M1 Finance really shines with their Expert Pie offerings. They offer a vast selection of different diversified portfolio offerings based on your targeted investment goals and risk tolerance. Below is the M1 Finance Web Portfolio expert pie.
I absolutely love using M1 Finance’s pie method of investing. For me, it is an ideal tool to use in a retirement account, like an IRA for example.
I absolutely love the fact that M1 Finance offers you to purchase fractional shares. Every investment firm should offer this feature. What this allows you to do is purchase a portion of a stock or fund instead of owning an entire share. This is ideal for high-value stocks or funds. Amazon stock is a perfect example. Let’s say you only have $300 to invest in Amazon, but the stock is valued at $3000, you can still invest in Amazon with M1 Finance, but you would only own 10% of one share of Amazon stock. This is amazing because it gives you exposure to a company that you couldn’t before without having to purchase an entire share.
M1 Finance intelligently allocates money from every deposit to ensure your portfolio stays on track. That means you can invest cash into your Pie and maintain your investment targets and allocations without any manual calculations.
Whenever your account makes new trades, the M1 Finance algorithm identifies slices in your pie that are underweight and puts money into those first.
Below you can see Dynamic Rebalancing in action. Note that a $2,500 deposit realigns this portfolio with its initial allocation targets:
When removing cash from a portfolio, the algorithm identifies slices that are most relatively overweight and removes money from those first.
See it in action! Note that this portfolio has moved away from its targets over time, but that a $500 withdrawal first causes the most overweight slices to sell and bring the entire portfolio back towards its targets.
This is a great feature from an automatic portfolio rebalancing standpoint. There is a downside to this that you need to be aware of. If you happen to create a custom pie where you have an individual stock or fund that is significantly underperforming for whatever reason, let’s say the company filed for bankruptcy or there some other reason the stock is tanking, dynamic rebalancing will continue to throw money at this asset to maintain it’s percentage position in the pie. This is just something to watch out for if you plan on using this feature.
There are two checking account options with M1 Finance that are both FDIC insured, their free Basic account and their paid Plus account options. If you have significant cash reserves and you’re also planning to use this account to spend often, the I% APY and 1% cashback are an amazing deal.
This isn’t M1’s prime offering, but they also offer an FDIC insured digital bank account offering 1.5% APY and 1% cashback, along with the ability to borrow from your own portfolio at very low rates (3.5 & 3.25% at the time of this recording).
I personally use the Basic account but the Plus account is a great option nonetheless.
M1 Finance is an extremely strong offering in the very competitive investment market place. As you can see from this side-by-side comparison, they really shine with their industry-leading offering of fractional shares, dynamic rebalancing and services with no management fees. The annual fee in this comparison chart is for the M1 Plus account, if you use the M1 Basic there would be no annual fee.
M1 Finance also offers margin to access a portfolio line of credit, with up to 35% of your portfolio’s value. This can typically be accessed when needed in less than 10 seconds. I’m not a fan or advocate of margin trading. Trading on margin is extremely risky and I just wanted to inform you that this option is available on M1 Finance.
If you’re new to the stock market investing in either a brokerage account or a retirement account, then M1 Finance is the perfect fit for you. They offer a very simplified user interface and a more passive approach to investing.
If you’re looking to devote your every waking moment, or you’re a day trader, then M1 Finance isn’t for you.
I strongly recommend M1 Finance to anyone who is either a beginner, someone looking for investment automation or portfolio creation for their IRA account. I personally don’t like to day trade and the portfolio creation options that M1 Finance brings to the table are simply amazing.
What are your thoughts on M1 Finance? Have you already opened an account? What’s your experience been like? Please share your feedback in the comments section below.
If you’re interested in M1 Finance please click the link below.
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