Overview
M1 Finance positions itself as a unique solution for investors who prioritize automation and long-term wealth-building strategies over daily trading. Founded in 2015, M1 has gained traction with over 1 million users and more than $12 billion in client assets. Unlike traditional brokerages, M1 Finance merges the low-cost approach of a robo-advisor with the flexibility to create custom investment portfolios using stocks and ETFs.
The platform is best suited for investors who value simplicity and automation, as it eliminates the need for day-to-day management of investments. It's particularly appealing for those who prefer setting investment strategies and relying on automatic rebalancing. Compared to other brokers offering commission-free trades, M1 stands out with its unique "Pie" investment feature.
In the competitive landscape, M1 Finance's direct competitors include Robinhood, which also offers commission-free trading, and Betterment, which focuses more on automated investing but with less customization. M1 Finance's blend of features caters to investors who want control over each investment decision without the hassle of manual trading.
Fees and pricing
M1 Finance champions a no-commission model, meaning you won't pay for trades in self-directed brokerage accounts. This aligns with the industry trend but stands out because M1 also offers tailored investment services and tools normally found in pay-to-use platforms. Users should note possible charges like platform fees, regulatory fees, and account closure fees, which are not specified up front but can be found on their Fee Schedule.
One unique feature is M1's 3.10% APY for uninvested cash, which is notably higher than the interest rates offered by many competitors. Borrowing cost is another advantage; M1 extends margin loans at a competitive 5.65% APR, allowing investors to borrow up to 50% of their portfolio's value.
Here's a comparison of M1 Finance's fees against two competitors, Robinhood and Betterment:
| Fee Type | M1 Finance | Robinhood | Betterment |
|---|---|---|---|
| Stock Commissions | $0 | $0 | N/A |
| Account Maintenance | $0 | $0 | N/A |
| Margin Interest | 5.65% | 11% | N/A |
| Annual Advisory Fee | $0 | $0 | 0.25% |
While Robinhood matches M1 with $0 commissions, its margin interest rate is substantially higher. Betterment's nominal advisory fee may be appealing for those valuing comprehensive automated management over the DIY investing offered by M1.
Trading platform and tools
M1 Finance prioritizes ease of use through its web and mobile applications, though it lacks some of the real-time trading tools seen in platforms like Webull. M1’s web interface excels in its Pie-based investing approach. Investors can create, manage, and adjust their custom portfolios effortlessly.
Charting capabilities and technical tools are minimal compared to competitors, as M1's focus is not on day trading or speculative investing. This simplicity is intentional, targeting a different segment of investors who prefer to set strategies rather than actively trade. For those needing detailed chart analysis and frequent trades, Webull or TD Ameritrade might be more appealing due to their robust trading platforms.
M1's dynamic rebalancing feature, however, is genuinely innovative. It eliminates manual intervention by automatically adjusting your portfolio to align with your set targets. Although lacking in time-sensitive trade execution that appeals to day traders, it suits long-term investors prioritizing balance and diversification.
Finally, here’s a comparison of M1 Finance with Webull and TD Ameritrade:
| Feature | M1 Finance | Webull | TD Ameritrade |
|---|---|---|---|
| Custom Investment Pies | Yes | No | No |
| Real-Time Trading Tools | No | Yes | Yes |
| Free Margin Account Setup | Yes | Yes | Yes |
Range of investments
M1 Finance allows trading in stocks and ETFs, forming the backbone of their custom investment Pies. This selection caters to most mainstream investors but might fall short for those interested in a broader asset class range like options, mutual funds, or bonds, which are not available on M1.
Cryptocurrency trading is supported via a third-party integration, which may not satisfy crypto enthusiasts who can access more comprehensive features on platforms like Coinbase. M1's focus remains on straightforward, long-term investing, not on niche or high-volatility assets, making it a suitable choice for those with moderate investment goals.
While competitors such as E*TRADE and Fidelity offer wider investment options, they come at the cost of complexity and sometimes additional fees. Thus, M1’s limited but curated selection is a fair trade-off for users looking for ease and lower management costs.
Research and analysis
M1 Finance offers limited research tools, choosing simplicity over a comprehensive analysis suite. Investors can access basic market data and stock performance metrics, which may not suffice for those who desire in-depth research capabilities.
Platforms like Fidelity and Schwab provide a richer research experience, including third-party analyst reports and extensive screeners. M1 encourages users to rely on their external research sources or pre-set strategies for investment ideas, potentially pushing away data-driven investors seeking robust decision-making tools.
Users who prefer an intuitive and guided system might appreciate M1's dynamic balancing and auto-investing features more than the lack of sophisticated research tools. However, for those keen on active management and analysis, alternatives like TD Ameritrade’s thinkorswim platform offer superior resources.
Mobile experience
M1 Finance shines with its 4.7/5 rating on Apple's App Store and a 4.5/5 on Google Play. The app maintains the simplicity and functionality of its web platform, providing an effective environment for setting up portfolios and managing investments on the go.
However, the lack of real-time market updates and advanced trading functions may dissuade some mobile users, especially those favoring instant trades. Robinhood, with its faster order execution system, might serve better for such needs.
M1’s app delivers smooth navigation and seamless integration with core desktop features, making it a solid choice for those preferring passive investment management. The app encourages less frequent checks of investment performance, aligning with M1's long-term investment ethos.
Account types and retirement
M1 Finance supports various account types including individual and joint brokerage, retirement accounts like Roth, and Traditional IRAs. This flexibility in account offerings makes it a versatile option for investors looking to consolidate their financial portfolios.
A significant draw is the ability to borrow through margin accounts, though the high rates compared to other providers could be off-putting for some. An area where M1 lacks is the support for custodial accounts, which can be a deciding factor for users looking at family financial planning.
Competitors like Betterment have similar retirement account offerings but with more comprehensive planning tools. This means if you're seeking deep dives into retirement planning, Betterment might provide a better suite of services.
Who should NOT use M1 Finance
M1 Finance is not designed for active traders or individuals looking to speculate on market fluctuations. The absence of real-time trading capabilities and the limited scope of available assets might significantly hinder dedicated day traders.
"Dedicated day traders and those needing rich research tools might feel restricted by M1 Finance's offering."
Investors looking for broad market access including options, bonds, and funds should consider full-service brokers like Fidelity or Charles Schwab. Additionally, users who demand comprehensive customer support might need to look elsewhere, as M1 lacks 24/7 support and real-time assistance.
The bottom line
M1 Finance is a compelling choice for investors committed to automated, long-term investment strategies. Its approach combines a no-commission fee structure with a high degree of customization and automation through its Pie system, appealing to a particular niche of the investing populace.
However, if you are an individual who values extensive research tools, diverse asset access, and real-time trading execution, you might find platforms like TD Ameritrade or Fidelity more compatible with your needs.
DollarScout tip: M1 Finance’s automated features and customizable portfolios make it ideal for hands-off, strategic investors.
Ultimately, M1 Finance is best aligned with those looking to maintain a diversified investment strategy over time, with minimal active management and no additional trading costs.
