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M1 Finance – The Innovative Broker

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M1 Finance is a U.S. based online financial services company offering brokerage and custodial accounts, lines of credit, checking accounts, and IRA’s. They are an SEC registered broker dealer and a member of FINRA and SPIC. Like Betterment and Wealthfront, M1 Finance is a robo-advisor, offering financial advice and pre-built expert portfolio’s for everyone. Want a Green energy portfolio? They have it. Want a retirement based portfolio? They have it. Want a growth based portfolio or a dividend investment portfolio? They have that too. M1 Finance differs from Betterment and Wealthfront in that you can also choose your own investments, invest in individual stocks, and create your own portfolio. You don’t need to use their pre-built expert portfolios. If you decide you would like to join M1 Finance after reading this post, sign up through my referral link and get $50 when you deposit $100 within 30 days. If you would like to learn more about their robo-advisor competitor Betterment, click here for the full review.

History

M1 Finance was launched in 2015 by Founder and CEO Brian Barnes. In December 2017, M1 Finance eliminated their 0.25% fee to be more competitive with Robinhood and Webull. Their user-base doubled within 2 months of eliminating their fees. In February 2020, M1 Finance reached $1 billion in assets on its platform. It reached that milestone faster than its competitors – Acorns, Betterment, Stash, and Wealthfront. As of January 2021, M1 Finance has $3 billion assets under management and is rated 4.6/5.0 stars on the iOS App Store and 4.5/5.0 stars on Google Play. These are better ratings than Webull, Firstrade, Robinhood, Tradestation, TradeUp, Stash, Vanguard, Charles Schwab, and Betterment.

Platform

M1 Finance offers three products at this time. That is the M1 Invest, M1 Borrow, and M1 Spend. In addition to their products, they offer a premium M1 Plus Membership with a $125 fee. This membership gives the user a lower interest rate on M1 Borrow, a high APY on M1 Spend, access to the afternoon trading window, and the ability to setup Smart Transfers. Because M1 Finance only trades twice per trading window, they are not ideal for those wanting to day trade or “buy the dip” in a stock or ETF. M1 Finance is setup for dollar cost averaging and long term investments. If you are interested in buying the dip, consider joining Webull and get 4 free stocks when you fund your account $100.

M1 Invest

M1 Invest is M1 Finance’s brokerage accounts. You can use your brokerage account to invest in stocks and ETF’s, or open a tax advantaged Traditional or Roth IRA account to invest. Their IRA and investing brokerages accounts are free and you can open as many as you want. The only fees you pay are from ETF’s that you may choose to invest in. For example, Vanguard S&P 500 ETF (VOO) charges 0.03% and First Trust Global Wind Energy ETF (FAN) charges 0.60%. I personally invest in both of those ETF’s. M1 Invest’s latest product is custodial accounts. You can now open investment accounts for your children with M1 Finance. Like Webull, M1 Finance uses APEX Clearing Corporation for their securities transactions.

How does M1 Finance and their M1 Invest stand out from the crowd? The answer is their customizable and powerful Portfolio Pies and Auto-Invest features. You can choose to add any stock or ETF to your portfolio pie. Each stock or ETF would become a slice of the pie. You can even choose from over 20 pre-build professional pies to be your primary pie, or a slice of your overall pie. You can create a pie within a pie within a pie and mix expert pies with your own. You can even choose to transfer 1 stock or ETF between different pies, but that is a 2-3 day process that requires contacting customer support to pause your account and freeze trading while you make those changes.

By default, Auto-Invest is turned ON. You can turn this feature off at any time. You can even set a minimum cash balance so that Auto-Invest only works when you have more cash than the minimum balance. With Auto-Invest, you can setup recurring deposits to be automatically invested in your portfolio pie. For example, if you have Tesla taking up 5% of your Portfolio Pie and you deposit $100, M1 Finance will invest $5 in Tesla for you. Alternatively, if you have Tesla over allocated at 20% when you target is still 5%, Auto Invest will not purchase more shares in Tesla until the rest of your portfolio value catches up to your targets. If you have Auto-Invest turned off, then your contributions will sit in your brokerage account until you invest them.

Your allocated percentage versus your target percentage (%/%) is illustrated in the pie below and listed underneath the ticker symbol of each holding. The slices, or holding that stick out of your pie are over allocated, meaning you probably have more money than planned invested in those holdings. The under allocated slices are shown as shallow slices (See gray slices below). If you click on Manage Pie, then click on Rebalance, it will sell and buy in the next trading window to try to meet your targets. This is not recommended in a regular M1 Invest brokerage account because it is a taxable event. The Rebalance tool is better suited for the M1 Invest tax advantaged Roth IRA account.

As you can see from the desktop and app screenshots above, your M1 Finance homepage/Home Screen will display all of your Pie Slices (stocks, ETF’s, and other pies), showing their gains, losses, and slice percentages. Want to sell a stock? Simply click on “Edit Pie” and reduce your slice to 0% or click on Buy/Sell to only sell some of your holding. Want to rebalance your portfolio? Click on Rebalance. Move over to the Research Tab to research different stocks and ETF’s and read current news. You can even create a watchlist from the research tab, allowing you to keep an eye on companies you are considering investing in. What confuses most people is the landscape view in the app. When researching a stock/ETF or viewing your own portfolio through the app, the gain/loss chart is not shown unless you turn your phone sideways. That is the only way to view the gain/loss chart that is otherwise shown on the top/home screen of every other investment app.

M1 Finance has a strong online community. Join a subreddit on reddit.com or join the M1 Finance Investing Club facebook group and you will find people sharing their portfolio pies along with their earnings. Speaking of sharing, you can share your successful portfolio pie with someone through the App so that they could setup the same portfolio pie.

M1 Spend

Hold your cash in Spend and invest it when you want with a VISA Debit Card, instant transfers, and faster access to cash. M1 Spend is a 1% APY, 1% cash-back checking account. The 1% APY they offer is more than what most high yield savings accounts offer. To get that 1% APY and 1% cash-back, you need to upgrade to the $125/yr M1 Plus Membership. As a temporary offer, they are giving a 1 year free trial for M1 Plus. Even with the $125 fee, you can make that money back in the interest earned on your checking account. They even have a calculator to show you how much interest you would earn on your balance before you sign up.

With M1 Spend, you can setup recurring deposits and automatic transfers/investment deposits, integrating all of your M1 Finance accounts together for easy management.

M1 Borrow

M1 Borrow is a Portfolio Line of Credit (PLOC) that allows you to borrow up to 35% of your portfolio’s value when you have $10,000 invested at a rate of 3.5% APY. This is a very comparable rate to a Home Equity Line of Credit (HELOC) or a Margin account offered by other brokers. Join M1 Plus and your rate goes down to 2% APY. M1 Borrow only applies to your investment brokerage account, not your retirement IRA accounts. A PLOC gives you instant access to your funds and you can pay them back at any time. M1 Borrow may be a great way to transfer (refinance) your high interest debt from your credit cards/student loans to your PLOC, saving you money on interest.

This is a powerful product that can help you save potentially thousands of dollars in interest if you have credit card debt or student loans. Like a HELOC, you can also potentially use your PLOC to perform Velocity Banking, paying off your mortgage in half the time. Other potential uses for your PLOC include paying for a home renovation, paying for your wedding, starting a business, or handling an emergency.

M1 Plus and Smart Transfers

The $125/yr M1 Plus Membership fee initially looks high, but it’s not considering the 1% APY checking account with 1% cash back debit card, the best in industry 2% line of credit, access to trade in the afternoon trading window, and the ability to setup Smart Transfers. Smart Transfers allow you to automate and customize your financial plan in any way you like. For example, you can set rules that tell your M1 Spend checking account to stay at a minimum balance of $5000. If it goes under $5000, you can have money automatically transferred over from your M1 Invest brokerage account or your M1 Borrow Line of Credit to fund your M1 Spend checking account. You can also set other conditions to pay off your line of credit or automatically invest in your Roth IRA or individual brokerage account.

Conclusion

M1 Finance is my favorite investing platform at the moment. With its unique Auto-Invest Portfolio Pies, M1 Spend high interest checking account, and M1 Borrow Portfolio Lines of Credit Check, M1 Finance is perfect for long term investors like myself. They are currently planning to release a new credit card and they are evaluating offering a savings account so that you can manage all of your finances through M1 Finance. For a limited time, sign up through my referral link and get $50 when you deposit $100 within 30 days. You may also get a free 1 year trial of M1 Plus.

Check out my recent M1 Finance comparison to Robinhood and Webull here. Subscribe to the blog for upcoming M1 Finance Tutorials and Comparisons. Do you know of any other investing platform that offers Auto-Invest and Smart Transfers? Comment Below.

Affiliate Link Notice: This post contains affiliate links, which means I may earn a small commission at no additional cost to you if you decide to purchase or sign up for a product through my referral links. While you can sign up through any other means, it would help support the blog if you sign up through my links. Thanks.

Hyder A.

Hyder is the engineer and blogger behind Finance Throttle, a blog that helps you accelerate your net worth through personal finance. With a Master’s degree and 10+ years of experience in manufacturing, Hyder is well versed in the topics of engineering economics and financial studies helping him to invest in equipment and reduce manufacturing costs. Hyder is passionate about cars and earning money as he bought a Porsche at 21, became a landlord at 24, and paid off $40,000 in student loans at 25. Along with his wife, they are currently on track in paying off their $282,000 mortgage by 2026 (Only 7 years!)

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