M1 Finance vs. Robinhood – Which Free Stock Trading App is Best?

m1-finance-vs-robinhood-logos

M1 vs. Robinhood Comparison Review

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 Comparison Review will delve into the pros and cons of each app for investors seeking free stock and fund trading.

The Robinhood app allows users to invest and trade from their phones but does not offer money management or portfolio monitoring options. Instead, Robinhood sticks to the basics of investing: buying and selling stocks, cryptocurrency, options, and funds.

While M1 Finance offers stock and fund trading, along with pre-made “robo-advisor” investment portfolios.

You’ll find out if Robinhood is really free, whether you need both apps even though there is no “Robinhood robo-advisor.”

*Disclosure: Please note that this article may contain affiliate links to help pay for this site. We are committed to the highest standards of honest reviews.

The M1 Finance robo-advisor goes head-to-head with Robinhood, an investment trading app that isn’t technically a robo-advisor.

Robinhood vs. M1 Finance Comparison Chart

FeaturesRobinhoodM1 Finance
OverviewFree app or web platform to trade stocks, ETFs, options, and cryptocurrency.Free investment robo-advisor with option to buy and sell individual stocks and funds or pre-made investment portfolios.
Minimum Investment AmountNo minimum$100
Fee StructureNo account management or commission fees. Robinhood Gold margin account charges $5 per month plus interest (for amounts greater than $1,000)Zero fees for investment management.
M1 Plus-$125 per year.
Top FeaturesExtended-hours trading, ability to trade stocks, ETFs, options, and cryptocurrency. Margin-borrowing available.Thousands of investments to choose from. Rebalancing. Choose your own investments or pick from pre-made investment portfolios including socially responsible funds. Cash management and borrowing.
Accounts AvailableIndividual brokerage account.Single and joint taxable brokerage. Roth, traditional, rollover and SEP IRA. Trust. Business accounts.
Investment FundsStocks, options, ETFs, and cryptocurrencies.6,000 of stocks and funds.
Scores of pre-made investment portfolios - pies spanning various strategies.
Fractional Shares & Dividend ReinvestmentOffers fractional share and dividend reinvestment options.Offers fractional shares.
Dividends are received in cash and can be automatically reinvested in your portfolio in accord with your target allocation.
Cash ManagementIncludes high yield cash account and debit card.M1 Spend high yield cash account with direct deposit and debit card.
Borrowing - MarginMargin or borrowing to buy stocks is available. The amount of margin depends upon the portfolio size.Low interest line of credit available for up to 35% of portfolio value. The money can be used for any purpose.
Contact & Investing AdviceEmail support and chat. No phone support available.Phone (M-F) and email, 7 days per week. Customer service available to help with IRA rollovers, onboarding and account set up.
Free ServicesAll services are free with Robinhood cash and Instant.Free investment management. Includes free rebalancing, buying and selling securities.
PromotionsFree stock when you open an account.Ongoing free investment management.

After reading this M1 Finance vs Robinhood review you’ll find out the answers to the following questions (and more):

  • Is M1 better than Robinhood?
  • Can you day trade with M1 Finance?
  • Can you trade options on M1?

For both new and experienced investors there’s a lot to like about both platforms, learn if the M1 Finance app or Robinhood app is right for you (or both).

M1 Finance vs. Robinhood—Overview

M1 finance vs Robinhood

How Does M1 Work?

M1 Finance is a free DIY robo-advisor. You can access your investments through the M1 Finance app or desktop version.

Choose from thousands of stocks and exchange traded funds to invest. 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 M1 Investment pie with 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” pies include:

  • 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

We really like the pre-made investment pies. There is an investment strategy available for a multitude of investment strategies!

Investors who want an easy, intelligently designed investment portfolio then then M1 is ideal.

After you’ve selected your investments or chosen a pre-made investment pie, then M1 rebalances the investments back to your preferred investment mix, or asset allocation periodically, keeping your percentages invested in each fund or investment consistent.

M1 Finance also offers M1 Spend, M1 Borrow and M1 Plus features, described below.

How Does Robinhood Work?

Robinhood 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.

Robinhood is akin to a stock brokerage account which started out as an app. It’s popular with millennials and now has over 10 million users and a slick web-based interface.

Robinhood isn’t a robo-advisor and doesn’t offer automated rebalancing.

To trade just download the app (or create an account on your computer), input a company or fund name, click “search” and the security populates, along with the price and basic company information. To buy or sell, click “trade”.

The Robinhood app supports various types of trades:

  • Market orders
  • Limit orders
  • Stop-limit orders
  • Stop orders with good-for-the-day or good-till-cancelled options

While, M1 doesn’t offer these types of trade orders.

Robinhood vs M1 similarities include the basic opportunity to buy and sell investments for free.

The two have a few other 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.

M1 Finance vs. Robinhood—Top Features

M1 Finance Top Features:

  • Pre-built investment portfolios or M1 pies
  • Stock and fund investing
  • Extremely customizable
  • Account rebalancing
  • Multiple account types
  • M1 Spend – cash management
  • M1 Borrow – low interest rate loans

Robinhood Top Features:

  • Simple and intuitive app for Android or iOS
  • Stock, fund, 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 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 prefer to rebalance your investments, keep an eye on tax efficient investing and trade throughout the day, then choose Robinhood a free bare-bones trading app will save you money—you just need to be proactive about monitoring your account.

If you’re a frequent trader and want access to stocks, funds, options and crpyto, then Robinhood is for you.

If you like investment portfolio management, you might like M1 Finance. The M1 Finance robo-advisor makes it very clear when your portfolio deviates from your desired asset mix. When this happens,  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.

For access to pre-made portfolios, M1 Finance is for you.

In the M1 vs. Robinhood race, M1 wins if you’re seeking retirement, trust, business or joint accounts.  

Neither account offers access to robo-advisor with  human financial planners, so you’ll have to look elsewhere for more hands-on investing advice.

Robinhood vs. M1 Finance

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!

Fees and Minimums

Winner: It’s a tie.

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

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.

M1 Plus is a higher level service for investors and offers additional features:

  • Lower borrowing costs
  • Two daily trading windows, instead of one
  • High yield checking account and debit card with 1% cash back
  • 4 ATM withdrawal fees reimbursed per month

The fee for M1 Plus is a reasonable $125 per year.

Robinhood

Robinhood Instant, the basic account type, is also free. You can trade investments for free.

Robinhood Gold, a premium service costs a flat fee of $5 per month and offers these features:

  • Access to Morningstar premium research and Level II Market data
  • Larger instant deposits
  • Margin investing

Robinhood has a slight advantage 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.

M1 Finance Tutorial- Investing Basics With Stocks and Bonds

Account Types

Winner: M1 Finance

M1 Finance

M1 offers a wide range of accounts which is important for more seasoned investors.

M1 Finance Account Types:

  • Individual and joint investment accounts
  • Traditional. ROTH, and rollover IRAs
  • Business, LLC, corporate, and trust accounts

M1 Finance is a better choice for investors looking for wider range of account options, especially retirement savings options.

Robinhood

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 Type:

Individual investment account with margin. This account is broken into three options:

  • 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 with commission free trades. Excludes instant deposits or settlements.

It is important to understand the risks of investing on margin or borrowed money. This strategy is not for beginners.

If the stock you buy on margin declines in value, you must add additional funds to your account to cover the margin call. So, make sure that you can afford a “worst case scenario” when investing on margin.

Trading Windows

Winner: Robinhood

M1 Finance markets itself as “a long-term investing vehicle.” As such, they only trade during a specific time each day, unless you purchase M1 Plus.

“The M1 Finance trading window begins at 9 am CT everyday the NYSE market is open and runs until all orders have been completed,” ~M1 Finance website

This helps M1 Finance keep costs low, but it is also a way of helping investors look long-term. M1 isn’t for investors seeking to trade throughout the day.

For a nominal $125 per year, the new M1 Plus service offers a second trading window in the afternoon.

Robinhood

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. And of course, Robinhood investors can trade throughout the day as well.

We aren’t advocates of frequent trading, but understand that some investors like to trade frequently, and for those investors, Robinhood fits the bill.

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 – DRIP and Fractional Shares

Winner: It’s a tie – kind of.

For small investors, seeking to invest in fractional shares, either Robinhood or M1 Finance are fine.

M1 Finance

All M1dividends are received in cash.

If you have the ‘automate’ feature turned on, then once the cash balance reaches $25.00, M1 will reinvest the dividends into your M1 pie or portfolio in line with your preferred asset mix.

For example, let’s say you’re investing in the “Just stocks and bond” 60% stock 40% bond pie. And due to the stock market increasing in value, your asset allocation drifts to 65% stock and 35% bonds.

The dividend will be invested in the bond fund, up to the point that the asset allocation returns to 60% stock – 40% bond.

M1 Finance offers the opportunity to invest in a fractional share which is a partial share of stock or fund. For example, you could invest $100 in Apple stock (AAPL), which is trading at $113.69 today. You would then own roughly 88% of a share of Apple!

Robinhood

Robinhood offers both fractional share investing and dividend reinvestment. Both must be enabled on the app.

Safety

Winner: Slight edge to M1 Finance.

M1 Finance

Is M1 Finance Safe? Yes – as safe as any financial institution.

Your money is insured by SIPC (Securities Investor Protection Corporation) against loss of cash and securities from a brokers failure. It does not protect against normal investment price declines.

M1 Spend and M1 Plus accounts are further insured through Lincoln Savings Bank.

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.

Robinhood

Is Robinhood Safe? Yes – but…

Robinhood is a SEC-registered broker-dealer and member of the Securities Investor Protection Corporation (SIPC). Stocks and options (not cryptocurrency) are protected up to $500,000.

Your account is protected by the high level BCrypt hashing algorithm and never stored in plaintext. Sensitive details are encrypted before stored. The apps use TLS protocol ad banking credientials are only acessed once, during initial set up.

Two factor authentication, touchID, FaceID or custom pin codes are also available.

Although, there have been a few reported incidents of Robinhood hacks and scams.

Automated Rebalancing

Winner: M1 Finance

Automated rebalancing was touched upon above and has been shown to be an excellent way to “buy low and sell high”.

The rebalancing concept begins with choosing your preferred asset allocation or asset mix. That is simple the percent that you choose to invest in each individual stock or fund.

If you are a moderate investor who prefers investing in funds you might choose this asset allocation:

60% – Vanguard International total World Stock Market (VT)

40% – iShares Tr Core US Aggregate Bond Fund (AGG)

After a run up in the stock market your asset allocation might drift to these percentages:

65% – Vanguard International total World Stock Market (VT)

35% – iShares Tr Core US Aggregate Bond Fund (AGG)

To keep your preferred risk level and asset allocation you’ll need to sell shares in VT and buy more in AGG to return to the 60% stock – 40% bond asset allocation. This also forces you to sell investments as they get more expensive and buy more shares of “cheaper” assets.

M1 Finance

M1 Finance offers automated rebalancing, which is a feature that saves the DIY investor a lot of time and hassle.

This can be enabled in the app or on the web platform. When dividends and new money comes into the account, it will automatically be allocated to reach the preferred asset allocation.

Additionally, at any time you can initiate a “rebalance” of your account on the platform.

Robinhood

Robinhood does not offer automated rebalancing. If you want to rebalance your account, you need to do it manually by buying and selling shares within the account.

M1 Finance vs. Robinhood—Tax-Loss Harvesting

Winner: M1 Finance

Tax loss harvesting allows investors to reduce taxes and improve investment returns when selling a security. A losing security is sold, and the loss is used on the tax return to offset investment gains. A similar, although not identical security is bought to replace the one that was sold.

M1 Finance

M1 finance offers tax-optimization. That means that when a security is sold, M1 chooses to sell the shares with the smallest tax consequences.

M1 doesn’t offer tax-loss harvesting.

Robinhood

Robinhood does not offer tax-loss harvesting.

Customer Service

Winner: M1 Finance

M1 Finance

M1 finance phone customer support is available when the stock market is open. Email is available 24/7.

M1 customer service offers a special IRA rollover concierge.

Robinhood

Robinhood lacks phone support.

When seeking customer support, you’re directed to a contact page that takes you through a questionnaire.

Email and chat are also available.

Pros and Cons of M1 Finance and Robinhood

M1 Finance Pros

  • 6,000 stocks and funds for investing
  • Can invest in pre-made investment pies or portfolios
  • Rebalancing
  • High yield cash management available – M1 Spend
  • Low interest rate borrowing available – M1 Borrow
  • Multiple account types

M1 Finance Cons

  • Doesn’t offer live advisors like some other robo-advisors
  • There have been online complaints about customer service
  • Doesn’t offer bond, crypto, or options investing

Robinhood Pros

  • Extended market trading hours
  • More frequent trading available (this could be a pro or a con)
  • Access to stocks, funds, options and crypto
  • High level investment research

Robinhood Cons

  • Might make trading and margin investing too easy and encourage less experienced investors to get in over their heads.
  • No rebalancing or tax loss harvesting
  • Limited account types
  • No phone support

FAQ

Which is Better M1 Finance or Robinhood?

M1 Finance is best if you’re seeking investment rebalancing and pre-made investment portfolios. Robinhood is best if you want to trade stocks, ETFs, options and cryptocurrency.

Is M1 Finance Safe?

Yes, your data is protected with military-grade 4096-bit encryption. Two-factor authentication is also available.

Can you day trade with M1 Finance or Robinhood?

You can’t day trade with M1 Finance.
Robinhood accounts valued at less than $25,000 are limited to no more than three day trades in a five day trading day period. Accounts valued at more than $25,000 can day trade.

How do I open a Robinhood account and get free stock?

New investors can open an account and receive one share of randomly selected stock. The value of the stock will range between $3 and $175. Be aware that there’s a 98% chance that the value of the stock will be less than $10. You can sell the stock after 2 trading days. (This offer can be canceled at any time.)

Which is Better M1 Finance or Robinhood — The Takeaway?

M1 Finance has most of 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 good cash management system with a debit card and high yield cash account.

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 or computer and have a wide range of investments 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.

Robinhood is designed for the stock, ETF, options and crypto investor.

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, but currently it’s really playing up its strengths: offering free and easy investing services for new investors and experts alike.

If you have to choose just one platform, M1 Finance wins hands down with investing, pre-made investment portfolios, rebalancing, lending and cash management. 

Both platforms, although newer, have substantial adoption. M1 Finance AUM (assets under management) were recently listed at $2 billion. While Robinhood doesn’t disclose AUM.

Because M1 Finance and Robinhood are free with low or no minimum initial investment requirement, investors can try the platforms without the high upfront cost of some larger robo-advisors that require greater amounts of money to get started.

In fact, you might fund an account at M1 Finance and Robinhood to find out which platform you prefer.

Read the complete M1 Finance Review

More Comparisons:

*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.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top