M1 Finance Review: Free Robo-Advisor + You Choose Your Investments
M1 Finance Review-For the Engaged Investor
“Forty years of research into behavioral finance tells us that the best way to invest is to define a strategy and then automate it, a process that enforces discipline and encourages us to ignore short-term noise and capitalize on long-term trends,” said Brian Barnes, CEO of M1 Finance.
One of the newer robo-advisor platforms to hit markets, M1 Finance, offers a unique twist to the fintech landscape – hundreds of investment options for free. Previously showcased at NYC Finovate, M1 Finance brands itself as being geared toward an engaged investor. No passive questionnaires or blind investing here!
What makes M1 Finance stand out in the robo-advising arena is its delicious take on portfolio creation:
- Investors create pie charts to visually design their portfolios.
- Investors can customize up to 100 slices of pie to include ETFs, stocks, or even other pies.
- The visual nature of this platform makes it easy to see that your investing style is reflected in the investment options you have chosen.
For investors not sure where to start, M1 Finance also offers pre-made expert pies to choose from. Several expert pies are created according to your risk preference and are similar to similar offerings by other robo-advisory firms.
- M1 Finance Review-For the Engaged Investor
- M1 Finance Features at a Glance
- What Differentiates M1 Finance From Competitors
- Who Benefits from the M1 Finance Advisor Robo?
- M1 Finance Drill Down
- M1 Pre-Made Hedge Fund - Pershing Square Capital Management
- M1 Finance Sign-up Process
- How Much Does M1 Finance Require to Get Started?
- What Does M1 Finance Cost?
- Types of Available Accounts
- Is My Money Safe at M1 Finance?
- M1 Finance Pros and Cons
- Goldilocks Approach: Not to Hot, Not too Cold
- M1 Finance Review – Takeaway
M1 Finance Features at a Glance
|Overview||Free robo-advisor with opportunity to customize investments.|
|Minimum Investment Amount||$100|
|Fee Structure||Zero account management + trading fees.|
|Top Features||Choice to use pre-made portfolios or to create your own. M1 Finance manages + rebalances.|
|Free Services||Account creation, management + rebalancing. Investment trading.|
|Contact & Investing Advice||Email or phone 9-5 M-F CT + on-screen help button.|
|Investments||6,000 stocks or ETFs traded on the NYSE, NASDAQ + BATS exchanges|
|Accounts Available||Individual and joint taxable accounts; traditional, Roth and rollover IRAs; corporate, trust, LLC + partnership business accounts|
|Promotions||N/A since account services are free.|
What Differentiates M1 Finance From Competitors
M1 Finance is the most creative automated financial platform online at present.
Investors can choose from pre-made investment portfolios based upon risk tolerance, similar to comparable robo-advisors. But, this is just the beginning, there is so much more.
If you’re a DIY investor, you can create your own investment portfolio, in the percentage allocations that you prefer, and choose from over 6,000 stocks or ETFs traded on the NYSE, NASDAQ + BATS exchanges. After you’ve created your portfolio (or pie), M1 Finance will rebalance the assets back to your preferred allocation.
If you want more help with your investing you can choose from pre-made portfolios from the following categories:
- General Investing
- Plan For Retirement
- Responsible Investing (Socially Conscious)
- Income Portfolios
- Hedge Fund Followers
- Industries + Sectors
- Just Stocks and Bonds
- Other Strategies
The new M1 Borrow allows anyone with an account balance of at least $10,000 to borrow from their account. Interest rates are low and this is a great solution if you don’t want to sell your investments, but need money for another use.
Who Benefits from the M1 Finance Advisor Robo?
The DIY investor who wants to farm out the laborious task of rebalancing his or her portfolio.
The new investor look for a pre-made investment portfolio in line with her risk tolerance.
The investor who wants to copy the hedge fund investors, without researching their strategies.
The retiree seeking access to target date investment portfolios and the opportunity to invest on their own.
The income investor who wants a pre-made portfolio .
The cost conscious investor who wants their personal portfolio managed and rebalanced for free.
M1 Finance Drill Down
M1 Finance Pre-Made Investment Strategies
Typical M1 Finance robo-advisor services include a choice of pre-made investment portfolios according to your risk tolerance:
- Ultra Conservative
- Moderately Conservative
- Moderately Aggressive
- Ultra Aggressive
The Ultra Conservative portfolio is allocated with these funds in the following percentages (90% bonds vs 10% stocks):
- Short Term Treasury Bonds – SHY – 82%
- Municipal Bonds – MUB – 2%
- Small cap US Stocks – VB – 6%
- Large cap US Stocks – VOO – 2%
- Developed Market Stocks – VEA – 6%
- Emerging Market Stocks – VWO – 2%
On the other end of the spectrum, the Ultra Aggressive portfolio is allocated as follows (99% stock vs 1% bond):
- Large cap US stocks – VOO – 29%
- Mid cap US stocks – VO – 9%
- Small cap US stocks – VB 13%
- Developed Market Stocks – VEA – 34%
- Emerging market Stocks – VWO – 7%
- International Bonds – BNDX – 1%
- Real Estate REIT – VWO – 7%
The other general investing portfolios fall in between in their allocation percentages to stocks vs bonds. You can view all of the pre-made portfolios without funding an account, although you will need to go through the sign up process. Each of these “robo-advisor” replica portfolios contain between six and ten individual funds.
Compare; M1 Finance vs. Betterment
The remaining seven categories of pre-made portfolios are created in line with their strategy. For example, the income portfolio includes only domestic and international bond funds. The miscellaneous “Other Strategies” pre-made portfolios include Blue Chip, Global Growth and Global Value strategies.
M1 Finance DIY Investment Strategies and Asset Mix
If you want to create your own combination of investments (or investment pies) you can choose from 4,325 stocks. M1 Finance also offers a stock screener to help you construct your own investment portfolio.
You can also add in funds, from the selection of 1,909 offerings. There’s also a screener to help you choose funds as well.
Other M1 Finance Investment Features and Tools
Whether you design your own or choose a pre-designed pie, the platform makes it visually clear which of your investments are off-target by changing the shape of the slice of pie. When new money is added or withdrawn, it automatically affects the section of your pie that is most off-target in order to rebalance itself. For example, if you want 50% of your investments to be stocks-based, but you are only at 48%, then any new money that you add to your investment portfolio will automatically go to that portion of the pie.
You can also initiate rebalancing without adding funds by pressing the sales icon.
M1 Finance makes all trades at 9 AM Central time only.
Dividends are reinvested automatically once they total $10.
You can schedule a free consultation with an M1 Finance representative for guidance navigating the platform.
If your account is valued at $10,000 or more, you’re eligible to borrow up to 35% of the value, and pay it back on your terms.
The process is fast and does’t require a credit check. The low interest rate is great if you want to refinance existing high interest rate credit card debt or pay for your wedding.
M1 tax efficient investing uses a strategy when selling securities to help reduce the amount owed on taxes automatically. It’s not tax–loss havesting, but it does take into account potential tax consequences when selling an investment by choosing the shares with the lowest tax basis.
Next, take a look at an actual investor and how he goes through the M1 Finance investment platform.
M1 Finance Investor Profile
Jason – An Aggressive Investor
Jason is a risk taker, with a high paying job. He’s 35 with a well funded 401(k) account at work. He wanted to try one of the riskier portfolios. He decided to try a Hedge Fund Replication portfolio.
The Hedge Fund Replication Portfolios include the following portfolio management company choices:
- Berkshire Hathaway
- Coatue Management
- Green Light Capital
- Icahn Capital
- Paulson & Company
- Pershing Square Capital Management
- Tiger Global Management
- ValueAct Capital
Jason decided to invest a few thousand dollars in the Pershing Square Capital Management fund. The Pershing portfolio seeks to replicate Pershing Square Capital Management by investing in the holdings and allocation in the firm’s most recent SEC 13F filing. The securities in this pie are:
M1 Pre-Made Hedge Fund - Pershing Square Capital Management
|Investment Holding||Symbol||Percentage Investment|
|Restaurant Brands International Inc.||QSR||22%|
|Chipotle Mexican Grill Inc.||CMG||18%|
|Mondelez International Inc.||MDLZ||17%|
|Air Products and Chemicals Inc.||APD||09%|
|Howard Hughes Corporation||HHC||17%|
|Platform Specialty Products Corporation||PAH||07%|
|Valeant Pharmaceuticals International||VRX||05%|
|Nomad Foods Limited||NOMD||05%|
Jason decided to move on and create another pie. This time he’s choosing his own investments.
He appreciates the opportunity to create an infinite number of pies.
M1 Finance Sign-up Process
The sign up is quick and easy.
- Plug in your email address and create a password.
- Answer a few questions.
- Next you build a sample portfolio.
- Choose the account type by selecting from the account list.
At that point, before funding the account you can explore the platform’s features. You can look at the pre-made portfolios and explore the thousands of investment options for your DIY portfolio.
Finally, you can transfer money in to fund your portfolio.
How Much Does M1 Finance Require to Get Started?
Unlike many other robo-advisors, M1 only requires $100 to get started! And you can open an account for free.
What Does M1 Finance Cost?
M1 Finance is free. There are zero account management fees.
The only fees you can expect to pay are the underlying ETF and mutual fund management fees that go directly to the fund provider.
As you’d expect, M1 Finance does charge for services such as overnight mail delivery, paper statements, retirement account termination and a few more.
Types of Available Accounts
M1 Finance caters to individuals and business accounts. The company also handles trust accounts.
Available M1 Finance accounts:
- Individual and joint investment accounts.
- Roth and traditional IRA accounts
- Business accounts for corporations, LLCs, or partnerships
- Revocable and irrevocable trust accounts
Is My Money Safe at M1 Finance?
Apex Clearing Corporation is M1’s clearing firm and custodial bank. Apex is a well-known firm and provides similar functions for many of the world’s largest institutional and retail brokers. M1 employs top level security. Your data isn’t stored on any device and all information is encrypted in transit between your computer and M1 as well as on the M1 servers.
M1 Finance Pros and Cons
M1 Finance Advantages
M1 Finance account management services are free.
The $100 minimum investment amount makes it easy for the new investor to dip her toe into the markets.
The visual structure of the pies makes it easy to understand what you’re invested in.
Adding money to your account is clear cut. The platform invests new money according to your asset allocation preferences.
The automated portfolio rebalancing makes investment management easy.
The opportunity to choose your own investments and receive portfolio rebalancing for free is a huge draw.
M1 Borrow is a nice option when you need extra cash for a low interest rate.
M1 Finance Disadvantages
In contrast with other automated or robo-advisors, M1 Finance doesn’t offer a risk quiz. This could be a disadvantage to a newer investor. Thus, if you’re not confident of your personal risk tolerance, you might seek an online risk tolerance quiz for guidance.
Regarding the Hedge Fund Replication choices, M1 invests in the publicly listed securities of the specific fund. Yet, you don’t know the price that the hedge fund manager paid for their holdings. And part of smart investing is buying at the right price. This option is best for only the most aggressive investors.
M1 doesn’t offer tax loss harvesting.
Goldilocks Approach: Not to Hot, Not too Cold
You choose how engaged you want to be with your portfolio management. From pre-made pies to DIY investment pie creation, you decide which investment road to take.
M1 Finance is great for on-the-go portfolio management with apps for ios and android devices.
M1 Finance is user-friendly, so once your initial portfolio is set up it is easy to manage. Just like a bank account, investors only need to worry about depositing or withdrawing money; the platform itself takes care of the trading and the money gets allotted to your pre-determined specifications.
Even with a fully customizable platform, some people worry about the human touch some robo-advisors lack. M1 Finance has a customer support team available during business hours, so if their extensive FAQs can’t answer your questions, a real human can.
M1 Finance Review – Takeaway
One thing that M1 Finance repeats often is that the money you are investing is your money, so it should be working for you. The company reinforces this over every aspect of its design: the customizable pie-chart investments, ability to withdraw most of your funds by the next business day and user-friendly designs.
M1 Finance offers a promising alternative to other investing options out there. If you’re stuck between a DIY approach and a fully automated robo-advisor, then M1 is a nice in-between solution. In particular, this platform adds depth and customization to the robo-advising market. Engaged investors, who want hands-on and easily accessible investing options, will find that M1 Finance has a lot to offer.
If you’re sophisticated enough to know what you want in your investments, but don’t want to constantly rebalance and maintain your investment portfolio, M1 Finance is a good alternative. (Click on the link to check out M1 Finance.) We’re all so busy today, that you need to pick and choose how you’ll spend your time. If you like to pick your investments, and seek investing inspiration as well, then consider M1. With the low $100 entry fee, and free account management anyone can dip their toes into the investing world.
Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.
Updated; October 18, 2018