When it comes to investing your hard-earned money, you want to make sure that whatever platform you choose to invest in is one you feel safe and comfortable with.
There are so many different investment options to choose from these days, and it can be difficult to narrow down which one is going to be best for your unique financial situation.
A popular new investment option is M1 Finance. M1 Finance is an online financial services company that offers investment services with a long-term strategy.
Here’s what you need to know about M1 Finance before you start investing.
What is M1 Finance?
M1 Finance is an online investment service that takes robo-advising and makes it more accessible.
When compared with other robo-advisors, it gives you more control of where your money goes, but still makes the hard decisions for you.
When you sign up for M1 Finance, you can create a ‘pie’ allocating specific percentages of your investment money to certain companies or sectors.
You can opt to copy expert investment pies, build your own completely, or opt for something in the middle.
For investment options, M1 Finance offers stocks and ETFs, and there is only a $100 account minimum to get started.
M1 Finance is also well-known for their commission free trading, which makes investing a lot more accessible to the average person. You can access their investment tools via the M1 Finance app or online.
Is M1 Finance safe?
M1 Finance is breaking the mold of a traditional robo-advisor by offering no commission fees and app-based investing. When investing your money in any new venture or platform, you may find yourself wondering if it is safe.
Although M1 Finance is a completely online service, they still offer the safety features that you would expect from any other broker-dealer.
They are registered as a broker with FINRA and are SIPC insured. SIPC insurance covers any securities you hold with M1 Finance up to $500,000.
In the very unlikely event that the company were to go out of business, you would not lose money. M1 Finance takes several other steps to protect your privacy and safety as well, going above and beyond the requirements for a robo-advisor.
All of their data is encrypted using military grade technology, so you can transfer information without fear of data loss or corruption. They also use two-factor authentication as well as biometric authentication to protect your account against identity theft.
When using your account on your smartphone, you will be asked to authenticate using your fingerprint or a photo of your face.
What investment strategy is M1 Finance best for?
M1 Finance is intended specifically for a buy and hold long term investment strategy and offers options for retirement saving.
It is not designed for day traders, as it doesn’t offer a full range of investment options and you can’t make real time trades.
If you are a day trader, you will likely find M1 Finance frustrating and likely won’t be able to use your desired investment strategies on it.
However, if your main goal is saving for the long-term future and you don’t need to make trades regularly, M1 Finance is a great option for you. It has several features that make long term investing easier to understand and even enjoy.
What are some of the advantages of M1 Finance?
There are many advantages that M1 Finance has over other online brokerages. One of the biggest advantages is that they don’t charge commission fees. Most other investing services charge commission fees on every single transaction. Although these fees may not seem like much at first, they add up very quickly.
M1 Finance does have a minimum account requirement, and you may get charged bank transfer fees, but other than that, there aren’t as many financial limitations to getting started with M1 Finance as there are with other investing services.
For those who are risk averse, this is great because you can start slow with your investing. You don’t have to put a large amount of money into your investments and face potential losses.
One of the other reasons people love M1 Finance so much is because it offers flexibility for long-term investments. If you want to be in complete control of your portfolio, you can, choosing every last stock and investment percentage.
However, if you’d prefer to let the experts do it for you, you can create a reliable portfolio in just a few clicks.
The pie chart graphics are a fun and helpful way to visualize your investments.
There are over 60 prebuilt pies you can choose from as well, so even if you want someone else to choose your investments, you still have some flexibility when it comes to your risk tolerance and the sectors you want to invest in.
One of M1 Finance’s most helpful features is that they will reinvest your money for you as the market changes and you start to earn dividends.
This ensures that you are always maximizing your portfolio to its fullest potential. It can even automatically buy and sell stocks for you to make sure your portfolio stays balanced according to your preferences.
Many robo-advisors don’t offer this feature, requiring you to rebalance your portfolio on your own. M1 Finance takes the hassle out of it by rebalancing automatically.
They also offer fractional shares, which means you can buy a portion of a share instead of having to buy the whole thing.
This makes it easier for the average person to invest in high value companies as part of their portfolio.
There are a few other helpful benefits that M1 Finance offers for its customers. They offer tax-efficient investing, reducing your long-term tax liability on your savings. When you need to sell stocks, the platform will automatically do this in a way that keeps your tax responsibilities to a minimum.
You can also set up recurring deposits, so you won’t have to remember to keep contributing to your account. You can time your deposits so that you make a small contribution every time you get a paycheck, or set up whatever schedule works best for you.
M1 Finance also has a loan platform called M1 Borrow. This allows you to borrow up to 35% of your account balance at a very low interest rate.
If you need to increase your cash flow, but don’t want to pull money out of your retirement savings permanently, this is a good option.
How can I get started with M1 Finance?
Setting up an account with M1 Finance is very simple.
They make the process quick and user-friendly so you can start investing faster. You’ll first need to create a profile using some basic personal information, such as your name, address, SSN, birthdate, and email.
Then, you will need to wait a short period of time for your profile to get approved, usually less than a day. Then, you can get started creating your investment pies.
Putting together your investment pies can be very fun. They will show you a tutorial ahead of time to answer any questions you might have. If you choose to create your own pie instead of opting for a pre-created one, you can easily search for stocks within the app.
You can then click on the stock to see its performance and an overview of the company. Once you have created a pie, you will need to link your bank account to fund your investments.
For a normal individual investment account, you will only need $100 to get started. You also have the option to link an IRA of any type to your account. If you want to use an IRA, you will need $500 to get started.
Are there any downsides to M1 Finance I should be aware of?
There are a few negative aspects to M1 Finance that you should know about before you get started.
The first is that it isn’t really designed for the complete investment beginner. While the platform itself is easy to use, there is very little investor education available to help you choose the right options for your needs.
This platform also doesn’t offer any human financial advisors you can talk to. While they do have a helpful customer service team, there aren’t any licensed financial advisors you can chat with if you need advice.
The ideal target audience for this platform is someone who has some experience with investing and likes the control and flexibility that M1 Finance gives them.
There are many other investment tools available online for total beginners that offer more resources and guidance.
On the flip side, this platform isn’t designed for day traders either. It isn’t set up for you to make short-term investments – the focus is more on saving for retirement and other long-term financial goals.
You cannot make real time trades on the platform, which makes it difficult to use day trading investment strategies. M1 Finance also doesn’t offer the research and statistics tools needed to make effective short-term investments.
The final downside to M1 Finance is that it doesn’t offer as many investment options as you might want.
Currently, the investment options offered are stocks and ETFs. Within these categories, you’ll find a huge number of investments, but there are other categories of investments that are lacking. For example, M1 Finance currently doesn’t offer bonds, mutual funds, and options for your portfolio.
Who are M1 Finance’s competitors?
There are several other robo-advisors and apps on the market that are competing with M1 Finance. Here are some of the main competitors that may be worth looking into.
- This is another investment app that does not charge commissions on trades. It is very similar to M1 Finance in that they offer stocks and ETFs. However, this platform is much more amenable to day traders, with research tools and short-term trades available. Robinhood also doesn’t have any minimum balance requirements and offers more tools to help total beginners get started.
- Webull also does not charge commissions on trades, and they are similar to M1 Finance in that they target intermediate investors. However, like Robinhood, this platform is much more suited to short-term trading strategies. They are known for their wide range of financial research tools available.
- If you like the robo-advisor concept and are trying to save for retirement, but want something slightly more beginner-friendly than M1 Finance, this may be a good option. Betterment offers more guidance and gives you the opportunity to talk to a live advisor. However, they do charge more fees than M1 Finance does.
- This is a popular investment app for total beginners. It helps you invest small amounts of ‘spare change’ into automated portfolios. While this app also has a focus on long-term investment strategies, it doesn’t offer the flexibility that M1 Finance does when it comes to building your portfolio.
- This is another popular robo-advisor that’s designed for long-term saving. While it does offer access to real financial advisors, it doesn’t offer some of the flexibility that M1 Finance offers. They also charge fees and have higher account minimums.
The Bottom Line
Overall, M1 Finance is a safe investment platform that’s proven to be very effective for people interested in long term saving. It’s one of the only robo-advisors to give you total control over your investments, so you can be more involved with your money and know where it’s going.
M1 Finance really stands out for the beauty and simplicity of the platform.
It’s very user-friendly and intuitive, and the pie chart model is visually appealing. Both the app and the desktop site run well, and they are known for having reliable customer service.
Since M1 Finance doesn’t charge fees and has low account minimums, they also make long-term investing more accessible to people of varying financial backgrounds.
The biggest downside of M1 Finance is that it doesn’t offer features for day traders. Overall, M1 Finance offers plenty of advantages, and may be a good fit for you if you’re interested in saving and have some investment experience already.