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

m1 finance vs robinhood

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.

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

Robinhood vs. M1 Finance Comparison Chart

 M1 FinanceRobinhood
OverviewFree robo-advisor with opportunity to customize investments.Free app or web platform that allows users to trade stocks, ETFs, options and cryptocurrency.
Minimum Investment Amount$100No minimum.
Fee StructureZero fees for investment management. Per service charge for mailed statements, account closure etc. M1 Plus offers more features for $125 per year.
No account management or commission fees. Robinhood Gold margin account charges $5 per month plus interest (for amounts greater than $1,000)
Top FeaturesThousands of stocks, ETFs + strategies. Choose your own investments or pick from pre-made investment portfolios. Access to socially responsible funds. Rebalancing. Cash and lending.Extended-hours trading, ability to trade stocks, ETFs, options, and cryptocurrency.
Free ServicesNo management fees. Includes free rebalancing, buying and selling securities.All services are free with Robinhood cash and Instant.
Contact & Investing AdvicePhone (M-F) and email, 7 days per week.Email support (M-F) preferred and phone during trading hours.
Investment FundsStocks, bonds, funds, and more.
Stocks, options, ETFs and cryptocurrencies.
Accounts AvailableSingle and joint taxable brokerage. Roth, traditional, rollover and SEP IRA. Trust. Business accounts.Individual account.
Promotions and Direct Website AccessOngoing free investment management.Invite a friend to try Robinhood and you both get a credit for free stock.

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 stocks, cryptocurrency, options and funds.

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

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 M1 Finance or Robinhood 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 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” portfolio categories 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

For investors who want to select a group of investments, pre-made, 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.

Robinhood is not a robo-advisor like M1 Finance and doesn’t offer investment management or rebalancing.

Although, M1 is similar to Robinhood, in the ability to buy and sell stocks and ETFs for free.

How Does Robinhood Work?

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.

Robinhood is akin to a stock brokerage account which started out as an app. It’s very popular with millennials and now has over 5 million users and a slick web-based interface.

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

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 portfolios available
  • 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
  • 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 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 like just a bit of 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.

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

M1 is good for those seeking banking services. M1 Spend is a high yield FDIC insured checking account  that combines digital banking with bill pay and spending with the M1 Visa debit card.

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!

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.

M1 Plus is a higher level service for investors that want lower borrowing costs, two daily trading windows, instead of one, and a super charged checking account. The m1 Plus account offers a high yield checking account and a debit card with 1% cash back. Finally, M1 Plus customers get 4 ATM withdrawal fees reimbursed per month.

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

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. Robinhood Gold members gain access to research from Morningstar and larger instant deposits than those available in with the Instant account.

With Robinhood Gold, if you use more than $1,000 of margin, you’ll pay 5% yearly interest on the amount you use above $1,000.

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.

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 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 without instant deposits or settlements

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.

M1 Finance vs. Robinhood—Trading Windows

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 is how M1 Finance keeps their services free, 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.

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.

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

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. Robinhood hopes to offer dividend reinvestment in the future. Although it would be nice if Robinhood reinvested dividends, you can DIY dividend reinvestment when you get the cash in your account.

M1 Finance dividends are reinvested, 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.

Clearly, M1 Finance wins the dividend reinvestment race.

Can you buy partial shares on Robinhood and M1 Finance?

Both Robinhood and M1 Finance offer fractional 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 $209.

Although, there are also many stocks priced as low as $10, for those investors starting small.

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

M1 Finance vs. Robinhood—Safety

Is M1 Finance Safe?

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.

Is Robinhood Safe?

Robinhood is a SEC-registered broker-dealer and member of the Securities Investor Protection Corpoation (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.

M1 Finance vs. Robinhood—Extras

M1 Plus

M1 Plus is a higher level service for investors that want lower borrowing costs, two daily trading windows, instead of one, and a super charged checking account. The m1 Plus account offers a high yield checking account and a debit card with 1% cash back. Finally, M1 plus customers get 4 ATM withdrawal fees reimbursed per month.

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

M1 Borrow

If your account is valued at $10,000 or more, you’re eligible to borrow up to 35% of the account 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.

Robinhood Gold

Robinhood Gold offers tools to ramp up your Robinhood brokerage account. With Gold, you get access to four premium features:

  • Bigger Instant Deposits
  • Professional research from Morningstar
  • Level II Market Data from Nasdaq
  • Access to investing on margin

You can try Gold for free for the first 30 days. Sign up anytime from your account settings. After the free trial, the cost is $5.00 per month.

If you prefer access to a cash management account, then M1 is the best choice.

If you are a big time stock market investor and want research, high level market data then add a Robinhood Gold account.

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 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 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 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.

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 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.

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

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.

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*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.

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