M1 Finance strikes a balance between the completely hands-off approach of a robo-advisor and the technical complexity of a full-service investment firm. It allows investors to build an investment portfolio based on stocks, funds and professionally managed portfolios that they select. If you’d like the simplicity of a robo-advisor but want to have a little more control over your money than they offer, it might be worth checking this platform out. If you want hands-on guidance from a professional though, consider enlisting the services of a financial advisor.
Services & Features: What Does M1 Finance Offer?
M1 Finance is an investment platform that offers a hybrid model of traditional investing combined with robo-advising.
The platform is built around portfolio templates that M1 Finance calls its “Pies.” This bit of wordplay is based on the visual setup of the platform, in which you build your portfolio around pie charts that show the allocation of your assets.
Investors can build their portfolios out of a mix of stocks, exchange-traded funds (ETFs), cryptocurrencies and portfolios that are either automatically or professionally managed, each of which you can select and weigh independently. For example, an investor who wants to include XYZ Co. stock in his or her portfolio can find and add this asset. Then the system will either automatically balance it with the rest of the assets in your portfolio, or you can set exactly how much of a portfolio should be made of that one stock.
You can research coins and build crypto Pies on M1 Finance, which doesn’t charge commissions for investing in cryptocurrencies. Bakkt, a crypto brokerage, assesses a 1% or 100 basis points fee on all crypto transactions on purchases and sales, reflected in the execution price.
M1 Finance offers users access to its managed or model portfolios, which are grouped based on investment goals. For example, you can select a pie for general investing, retirement planning and responsible investing.
The result is an interface from the robo-advising world. Unlike a standard investment platform where you purchase individual shares of stocks, M1 Finance balances your investments around your entire portfolio. You don’t select 100 shares of XYZ Co. Rather, you set your portfolio to contain 5% of XYZ shares. However, it also has some of the choices of an investment platform. While you can choose to have your portfolio entirely managed by M1 Finance’s algorithms by building your own portfolio entirely out of the platform’s portfolio choices, you can also independently add stocks and ETFs to the mix.
This is not to say that M1 Finance can take the place of a full-service investment platform. While the service offers tools such as stock and ETF screeners that allow you to search by some technical indicator such as dividends and price-earnings ratios, these are very limited. People looking for a truly sophisticated individual-asset experience will find the service very limiting. Instead, it is relatively clear that the option to select individual assets is an enhancement to M1 Finance’s core product. Perhaps the best way to think of this is as a robo-investment tool that allows individuals to round out their portfolios with individual stocks and ETFs as they see fit.
Finally, in addition to its investment services, M1 Finance offers limited banking options. Any money not actively under investment is placed in a checking account, which you can access and even get a debit card for, and lines of credit for margin trading are available to some customers.
Pricing: How Much Does M1 Finance Cost?
There are usually four types of fees to look out for when choosing a trading platform. You should look out for these when evaluating any investment or trading service:
- Trading Fees: Any fixed charge attached to each trade that you make. This can come in the form of a flat fee or what’s known as the “spread.” This is when your broker charges you based on the difference, if any, between the buying and the selling price of an asset.
- Trading Commissions: This is when a broker will charge you a percentage based on the volume or value of each trade.
- Inactivity Fees: Any fees that the broker charges you for not trading, such as for keeping money in a brokerage account.
- Non-Trading/Other Fees: Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account, taking money out of it or signing up for additional services.
In the case of a robo-advisor, you should typically expect these fees to come in the form of a management fee expressed as a percentage of your portfolio’s value. Most funds and advisories charge you a percent of assets under management, with the promise that they will grow your money faster than they take it.
M1 Finance is one of the cheapest advisors on the market. The platform previously offered two account options: the M1 Basic account and the M1 Plus account. However, the company has discontinued its M1 Plus membership program, making the previously premium features automatically available.
M1 Finance does not require a minimum balance but charges a $3 monthly platform fee for accounts with less than $10,000 in assets. Customers with an active M1 personal loan are not subject to the monthly fee.
Effectiveness: How Well Does M1 Finance Work?
Very well. It’s important to understand who M1 Finance is for. This is not a robo-advisory for investors who would like to be completely hands-off with their money. Nor does M1 Finance assume complete inexperience. Unlike many other platforms, setting up an account on this service does not involve questions about your personal goals or risk preferences. The system assumes you know this information already. Setting up an account is extremely easy, in fact, and that’s in part because M1 Finance skips many of the questions that help new investors put their choices in context.
While M1 Finance does offer its funds around categories of investment, it doesn’t offer nearly the degree of advice of comparable services.
Instead, M1 Finance is very well targeted for someone with a degree of knowledge and experience in investing, but not necessarily an interest in active or granular fund management. Investors who understand enough about the stock market to take advantage of M1 Finance’s individual assets will find a lot to love here. The ability to mostly keep your hands off of your money, but occasionally introducing specific assets that catch your eye makes for a compelling sales pitch to a specific type of investor.
If you just want to build an account and leave it to the pros, M1 Finance is fine but not particularly outstanding. You might be better off with a service like Betterment that offers a little bit more financial advising. However, if the idea of a fund-based investment that you can rebalance as you like is both clear and interesting, M1 Finance may well be the platform for you.
Bottom Line
M1 Finance is a robo-advisor platform that allows you to introduce individual assets into your investment portfolio. While not for everyone, it is a terrific fit for investors who are generally hands-off but who would still like to stay somewhat engaged with their money. However, people looking for a truly sophisticated individual-asset experience will find this robo-advisor limiting. For both types of investors, M1 Finance remains a relatively affordable option.
Tips on Investing
- Robots might do a good job passively watching your portfolio, but a human financial advisor can provide more nuanced feedback about specific services, like tax planning, retirement planning or estate planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Are robo-advisors right for you? In our article on the subject we discuss exactly what a robo-advisor is, how they work and what they can do for your portfolio. This is a newer section of the market and it’s increasingly popular due to its simplicity and robust investment options.
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