M1 Finance vs. Robinhood – Which Free Stock Trading App is Best?
M1 vs. Robinhood Comparison Review
By staff columnist, Alexandra DeLuise
Which Free Trading App is For Me – Robinhood or M1 Finance?
Robo-advisors are popular for a number of reasons, including their ability to save investors money on account management fees, the ease of 24/7 access to portfolios, and simplification—never mind automation—of the investment process. But what if things could get even more simple? This M1 Finance vs. Robinhood will delve into the pros and cons of each app for investors seeking free stock and fund trading.
Today the robo-advisor M1 Finance goes head-to-head with Robinhood, an investment trading app that isn’t technically a robo-advisor.
Although Robinhood allows users to invest and trade from their phones, the platform does not offer money management or portfolio monitoring options. Instead, Robinhood sticks to the basics of investing: buying and selling.
- M1 vs. Robinhood Comparison Review
- M1 Finance vs. Robinhood—Overview
- Robinhood vs. M1 Finance Comparison Chart
- M1 Finance vs. Robinhood—Top Features
- M1 Finance vs. Robinhood—Who Benefits?
- M1 Finance vs. Robinhood—Deep Dive
- Which is Better M1 Finance or Robinhood — the Takeaway?
M1 Finance vs. Robinhood—Overview
M1 Finance is a free DIY robo-advisor. You can choose from thousands of stocks and exchange traded funds. Each portfolio you create is composed of specific investments, in the percentages you choose. M1 calls each portfolio a pie, with the specific funds or stocks considered slices of pie. You can customize an investment “pie” of up to 100 slices.
If you prefer a pre-made pie of investments, M1 Finance also offers pre-designed portfolio pies created for specific investment needs (like retirement). Or you can focus on specific options like, socially responsible investments or a pre-designed stock and bond portfolio.
Pre-made “expert” portfolio categories:
- General Investing – perfect for well-balanced investments that match up with your risk level (like a typical robo-advisor).
- Plan For Retirement
- Responsible Investing (Socially Conscious)
- Income Portfolios
- Hedge Fund Followers
- Industries + Sectors
- Just Stocks and Bonds
- Other Strategies
And that’s what makes it similar to Robinhood, the ability to buy and sell stocks and ETFs for free.
Robinhood is not a robo-advisor, but that doesn’t automatically disqualify it from this competition. This investment tool offers free trading services designed to help you get started investing immediately, whether you’re new to the game or an experienced investor. Robinhood is fully customizable; investors can choose from thousands of investment options.
The two have a few features in common, too. Both offer sustainable investment options, though M1 Finance makes it easier to choose these options by dedicating an entire pre-built portfolio to socially conscious investing.
Robinhood vs. M1 Finance Comparison Chart
|Overview||Free robo-advisor with opportunity to customize investments.||Free app or web platform that allows users to trade stocks, ETFs, and cryptocurrency.|
|Minimum Investment Amount||$100||No minimum.|
|Fee Structure||Zero fees for investment management. Per service charge for mailed statements, account closure etc.||No account management or commission fees.|
|Top Features||Thousands of stocks, ETFs + strategies. Choose your own investments or pick from pre-made investment portfolios. Access to socially responsible funds. Rebalancing.||Extended-hours trading, ability to trade stocks, ETFs, options, + cryptocurrency.|
|Free Services||No management fees. Includes free rebalancing + buying and selling securities.||All services are free with Robinhood Instant.|
|Contact & Investing Advice||Phone (M-F) and email, 7 days per week.||Email support (M-F).|
|Investment Funds||Stocks, bonds, funds, and more. ||Stocks, options, ETFs, cryptocurrencies.|
|Accounts Available||Single + joint taxable brokerage. Roth, traditional, rollover + SEP IRA. Trust. Business accounts.||Individual account.|
|Promotions||Ongoing free investment management.||Invite a friend to try Robinhood and you both get a credit for free stock.|
M1 Finance vs. Robinhood—Top Features
M1 Finance Top Features:
- Pre-built portfolios available
- Extremely customizable
- Account rebalancing
- Multiple account types
Robinhood Top Features:
- Simple and intuitive app for Android or iOS
- Cryptocurrency and options trading available
- Extended-hours trading
- Ability to upgrade to Gold for more features
M1 Finance vs. Robinhood—Who Benefits?
If you like to customize your portfolio, you might choose either. DIY investors would benefit from both of these options. M1 Finance and Robinhood each offer an extensive array of investment options which can be assembled into a portfolio as unique as each investor. Although, for options and cryptocurrency trading, Robinhood is best.
If you like to take money matters into your own hands, you might like Robinhood. As we said before, Robinhood isn’t a robo-advisor. This means that investors are on their own to rebalance and manage their portfolios. If you’d rather not pay for someone else to manage your money, going for this free bare-bones trading app will save you money—you just need to be proactive about monitoring your account.
If you like just a bit of portfolio management, you might like M1 Finance. The M1 Finance robo-advisor makes it very clear when your portfolio is off-balance, so investors always know if they need to course correct. M1 Finance will then rebalance in one of two ways. Investors can easily trigger automatic portfolio rebalancing with a click of a button. Another option is to add additional funds to their account which the robo-advisor will use to bring your allocated investments back up to your goals.
Neither account offers access to human financial planners, so you’ll have to look elsewhere for more hands-on investing advice.
M1 Finance vs. Robinhood—Fees and Minimums
Good news for investors: M1 Finance and Robinhood are almost equally matched in the fees department. In fact, you can use either service for virtually nothing!
M1 Finance is a free service which means it does not charge trading or commission fees. The minimum to start investing with M1 Finance is only $100. This puts M1 Finance on the low end of minimums for robo-advisors, bested only by those who boast no minimum investment requirement.
Robinhood Instant, the basic account type, is also free. Robinhood Gold, a premium service that costs a flat fee of $5 per month, is also available to investors who are looking for more features. Gold members gain access to research from Morningstar and larger instant deposits than those available in with the Instant account.
Robinhood has a slight benefit for investors looking to start small, because the platform does not have a minimum investment requirement. Investors simply fund their account with enough money to purchase the investments they are interested in. Although, Robinhood only trades full shares so there are no fractional shares at Robinhood. If you want to buy one share of Apple (APPL), you’ll need to pony up roughly $200. Yet, there are many stocks priced as low as $10, for those investors starting small.
M1 Finance vs. Robinhood—Deep Dive
Making the decision between M1 Finance vs. Robinhood might become a lot easier if you know what you need out of your financial experience. As this deep dive shows, these tools offer very different options!
M1 Finance vs. Robinhood—Account Types
Currently, Robinhood only offers individual investment accounts with margin. Though they hope to offer more traditional accounts in the future, investors won’t find IRAs, trusts, or joint accounts here.
Robinhood Account Levels:
- Robinhood Instant – Basic investment account with margin.
- Robinhood Gold – Basic investment account with higher margin limits (you can borrow more to invest)
- Robinhood Cash – Lowest level account without instant deposits or settlements
M1 Finance Account Levels:
- Individual and joint investment accounts
- Traditional. ROTH, and rollover IRAs
- Business, LLC, corporate, and trust accounts
- M1 Borrow – a margin account where investors can borrow up to 35% of the value of their account
M1 Finance might be a better choice for investors looking for wider range of account options, especially retirement savings options.
M1 Finance vs. Robinhood—Trading Windows
M1 Finance markets itself as “a long-term investing vehicle.” As such, they only trades during a specific time each day. “M1’s trading window begins at 9am CT everyday the NYSE market is open and runs until all orders have been completed,” M1 Finance website. This is how M1 Finance keeps their services free, but is also a way of helping investors look long-term. M1 isn’t for investors seeking to trade throughout the day.
On the other hand, Robinhood offers more flexibility in terms of trades. After all, trading is what they do! Through Robinhood, investors have access to an extra 30 minutes of trading in the pre-market and two hours of after-hours trading. While an extra 2 ½ hours may not seem like a lot of time, it allows active traders a chance to trade on pre- or post-market news.
Visit the Robo-Advisor Selection Wizard, take a quick quiz, and find out which robo-advisor is the right one for you.
M1 Finance vs. Robinhood Reinvest Dividends
Robinhood doesn’t allow dividend reinvestment and all dividends are received in cash. Then investors can buy additional shares with the cash.
M1 Finance will reinvest dividends, once the cash balance reaches your predetermined balance. The dividends will be invested according to your preferred asset allocation. So if you wanted 20% of your portfolio invested in the Vanguard S&P 500 ETF (VOO) and your current percent is 18%, the cash from a dividend payment will buy shares in VOO to it reaches the 20% threshold.
This is one of the benefits of the robo-advisor automation of M1 Finance.
Robinhood doesn’t support partial shares. You need the full share price amount before you can purchase the security.
M1 Investment allows partial shares. If you have $50 to invest in Facebook (FB), you can buy a partial share of the stock that’s currently selling for approximately $197. With Robinhood, you’d need to wait until you had $197 to purchase one full share of FB.
Which is Better M1 Finance or Robinhood — the Takeaway?
If you are looking for straightforward, basic investing options, Robinhood is a good tool. You’ll have 24/7 access to your investments on your phone and have a wide range of investment options from which to choose including options and cryptocurrency. Through Robinhood, you can create a fully customizable investment portfolio all on your own, without any account management fees.
You may not get as many fancy features as M1 Finance offers, but Robinhood isn’t necessarily competing in the same arena. There are plans to add new account types and cash management to Robinhood’s platform, but currently it’s really playing up its strengths: offering free and easy investing services for new investors and experts alike.
M1 Finance has all the bells and whistles investors want out of a robo-advisor, including multiple account types and portfolio rebalancing. This robo is also extremely customizable; investors can choose from pre-made investment “pies” or create their own mix of investments as they see fit. M1 Finance also offers margin through M1 Borrow. M1 Spend is a cash management system with a debit card and high yield cash account.
Both platforms, although newer, have substantial adoption. M1 Finance assets under management were recently listed at $500 million with 100,000 accounts. While Robinhood doesn’t disclose AUM but estimates of accounts last year were 4 million.
Because M1 Finance is also free and has a low minimum initial investment requirement, investors can try the platform without the high upfront cost of some larger robo-advisors that require greater amounts of money to get started.
Read the complete M1 Finance Review
Direct Access: M1 Finance Website
Direct Access: Robinhood Website
Staff columnist Alexandra DeLuise combines her banking experience with real-world financial advice to provide simple money tips to everyday people.
*Disclosures: 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.