M1 Finance Review 2024

Earning passive income is less a trend and more a necessity these days, considering the high cost of living and stagnant wages. However, most people either don’t have enough to invest or aren’t familiar with the myriad of investing opportunities.

Amidst this investment uncertainty, M1 Finance offers an easy-to-understand solution for everyone. Simply put, it’s an investment platform where you can invest your funds via a system called ‘pie investing.’

Since the M1 Finance app is available on iOS and Android, everyone can use it. However, it’s best to read this M1 Finance review before deciding if it’s the one for you.

What Is M1 Finance?

M1 Finance is an investment app that lets users customize their investment options to create a portfolio suitable for their needs. With more than 500,000 clients, the firm’s assets have reached 2 billion dollars.

One of the reasons for the app being so popular is its low cost. M1 Finance does not charge you anything for trading or portfolio management. On top of that, there are no withdrawal or deposit fees.

It’s a self-directed investment service that offers investment portfolio templates called Pies with automated investing tools. The firm uses Modern Portfolio Theory to create these Pies.

However, a slight difference is that M1 Finance doesn’t use a questionnaire to check your tolerance for investment risk. In simple words, the app allows you to invest your money in one of the pre-built templates or create your own customized portfolios, choosing each slice of the pie yourself.

In a way, M1 Finance is also similar to conventional brokerage platforms since it allows you to choose the investments for Pies. Plus, it lets you buy exchange-traded funds and individual stocks.

View M1 Finance Website

Account Setup

Setting up an account on M1 Finance is quite straightforward. All you have to do is enter your email address and choose a password. Following that, the app will take you to the next step, where you can build your Pie.

The app supports the following accounts:

Individual Investing Accounts: The app provides you an opportunity for automated investments. You can choose the stocks, portfolios, or ETFs you wish to invest in. Plus, you can select the share of your money that goes to each investment. Since M1 Finance has a proprietary trading system for automating customer activity, you don’t have to constantly deal with the ins and outs of investing.
Retirement Accounts: M1 Finance also lets you set up conventional retirement accounts, SEP IRAs, and Roth IRAs. None of these accounts require any additional cost. You can select your investments and professional portfolios. Moreover, you can choose to reinvest the dividends automatically.
Custodial Accounts: If you have the M1 Finance Plus, you can open a custodial account for your children under 18. Once your kid reaches the legal age, the app restricts activity on their account. Then, you can either withdraw all the funds or send them to a taxable account.
Trust Accounts: To set up a trust account on M1, you need to have $5000.

Once you’ve chosen the account, you’ll be asked to choose a Pie. You can select one of the templates on the app or build your own, including individual stocks and ETFs.

Depending on your investment preferences, you can select the ‘slices’ to make up your pie. Then, you just have to add your personal information and link your profile to a bank account.

Goal Setting

One thing to note about M1 Finance is that the firm does not call itself a robo advisory service. Therefore, you won’t find a goal-setting option in the app – something present in robo advisors.

Instead, M1 Finance advertises itself as an investing platform that takes care of your portfolio. Basically, it’s a DIY platform that assumes you know what you’re doing.

If you’re a beginner, you might find this a bit daunting. However, intermediate investors will prefer this arrangement since it removes distractions. The only goal-setting information you’ll find on the app is a few articles on saving for retirement.

How Does M1 Finance Work?

M1 Finance is not the same as robo advisors as it gives you full control over your investment choices. Although the app manages the flow of investments, you’re responsible for deciding where the money goes.

The app follows the Pie Investing model. Basically, the pie has different slices – up to 100 – and each slice is an investment. It can be an ETF or stock, depending on your choice.

Once you’ve chosen this, the Pie becomes your portfolio management tool. At the moment, the app has over 80 Pie templates that you can use as such or customize.

Now, when you fund your account, M1 Finance will automate investments. To put it simply, the app buys investment for each slice as per your chosen proportion. It does so when you fund your account after signing up and after that each time you add more funds.

Investment Categories

You can invest in one of the following categories on M1 Finance.

General: In this, you create your own diverse portfolio, depending on your risk tolerance.
Retirement: If you’re planning for retirement, M1 Finance lets you invest as per your retirement date.
Responsible Investing: It’s an option for investors who are socially responsible.
Stocks and Bonds: In this category, you can build a portfolio, including two ETFs.

It’s up to you to curate a pie as you want. For instance, if you choose the Stocks and Bonds Pie, you’ll get nine options. You can select 10% bonds and 90% stocks or 20% bonds and 80% stocks. Likewise, you can go up to all nine variations.

How to Fill Your Pie?

If you want to customize one of the pre-built templates, you’ll have to add different things to the Pie. For that, there are over 2000 ETFs on the app. Choose the ones you want to add to your Pie and construct accordingly.

After creating your Pie, save the changes. You may make different Pies for your separate investment goals. Since the app doesn’t have a limit on the number of Pies you can make, it’s suitable for people with multiple investment plans.

Finance Education

Since M1 Finance gives you full control, it also educates you on how to make good investment choices. Here are a few tools available on the firm’s website:

Education Center: The education center has multiple videos and articles that you can use to learn more about investing and the app’s features. Depending on your investment knowledge, you’ll find something new to learn in the education center. For instance, there are some simple articles, explaining basic concepts, like beta value and mutual funds.
Expert Portfolios: When you sign up for your account, you don’t necessarily have to create your own Pie. The app already offers you more than 80 expert portfolios that you can choose from. If you’re a beginner, this is a great feature for you.
Platform Features Guidance: The app also has video tutorials that teach you how to use M1 Finance to your full advantage. The simple videos explain how you can link your bank account, while the advanced tutorials teach you about scheduling recurring transactions and turning on auto-investing.

Learn more about M1 Finance

M1 Digital Banking

M1 Finance also offers digital banking that integrates with your investments on the app. M1 account has the following features:

Money Transfer: You can consolidate your accounts and move money between them.
Savings Account: M1’s savings account offers up to 5.00% APY.
M1 Plus: If you’re an M1 Plus member, you get enhanced savings rates and cashback rates on credit card purchases.

M1 Borrow

Along with investment opportunities, M1 Finance also lets you borrow money at low rates without additional paperwork. Previously, the eligibility for M1 Borrow was higher, but the firm has recently lowered it to $5000.

While the rate for the Basic account is 3.5%, you get a 2% rate on the Plus account. Here are some borrowing options for M1 Finance users:

Paying home equity loans or HELOC
Paying for auto and student loans
Eliminating credit card debt that has high interest rates
Paying for a wedding, a dream vacation, your kid’s college, or a business idea

Although M1 Finance does not charge a maintenance fee, it has some miscellaneous fees. As for the risk, there aren’t many.

However, if the value of your portfolio declines, maintenance will be triggered for your account. As a result, the firm may have to sell a portfolio portion to cover your loan.

M1 Finance Pricing

M1 Finance has two account options: M1 Basic and M1 Plus. The Basic account is free of charge and has the following features for each account type:

Invest: You can only invest during the AM trade window, starting at 9.30 EST. But there are $0 trade commissions.
Borrow: With a $5000 minimum balance, you can borrow at a $3.5% rate.

On the other hand, the M1 Plus costs $95 a year and has premium features. Besides, you get a 3-month free trial.

Invest: Along with $0 trading commissions, you get an additional PM trade window. Plus, you can create custodial accounts and make crypto trades.
Borrow: With a minimum $5000 balance, you can borrow at a 2% rate.

Pros of M1 Finance

M1 Finance is a good option for people who want to sit back and let an automated platform handle their investments. Here are some other pros of M1 Finance:

Free: The main attraction of M1 Finance is that it’s free of charge. You don’t have to pay any brokerage fees as you would with traditional options.
No Minimum Deposit: Initially, you don’t have to deposit any amount into your account. You can start investing when your funds are up to $100.
Customization: M1 Finance lets you choose the investments you prefer. Then, it automatically manages your portfolio.
No Commissions: When you purchase or sell securities in your Pie, you don’t have to pay a fee for it.
Fractional Shares: M1 Finance invests your money fully since it maintains fractional shares in your Pie.
Mobile App: The M1 Finance mobile app is a helpful tool that lets you stay connected to all your accounts with a single swipe. Also, it has a native newsfeed where you can see daily stories about market movements.
Safe: M1 Finance, being a Security Investment Protection Corp, is safe to use. Owing to the SIPC, your investment portfolio’s value is insured. Moreover, M1 Finance is regulated by the Financial Industry Regulatory Authority.

Cons of M1 Finance

Although it’s a dependable platform for investing, M1 Finance has a few cons you should be familiar with:

No External Holdings: M1 Finance only recognizes internal holdings. So, it won’t consider your other investments, like retirement plans sponsored by the employers.
Lack of Tax-Loss Harvesting: Unlike robo advisors, M1 Finance doesn’t offer Tax-Loss Harvesting. Instead, it has a Tax Minimization feature that lets you sell your assets in a tax-favorable manner. Although it’s helpful, it doesn’t have the same level of benefits as TLH.
Mutual Funds: You cannot buy mutual funds on M1 Finance since it only allows stocks and ETFs.

Final Verdict

Overall, M1 Finance’s Pie investment strategy is a straightforward and visually inclined way for you to see where all your money is going and how close you are to your financial goals.

It’s a suitable platform for people who want to invest in passive income or retirement without doing the additional heavy lifting that’s often associated with traditional methods.

At the moment, M1 Finance doesn’t offer day trading tools or mutual funds. Therefore, investors interested in mutual funds and Forex will find M1’s competitors – such as Ameritrade – better options.

To wrap up, M1 Finance is ideal for investors who want to have control over their investments and don’t wish to pay additional fees on commissions.