Note: post contains referral links to M1 Finance. I have no formal relationship to M1 Finance other than being a satisfied user. None of the contents of this blog should be considered investment advice. If you decide to use my referral link, then we both get $10 once you fund your new M1 account.
I want to put $100 in my portfolio every Monday. This $100 will automatically distribute according to the slices in my pie: 25% S&P 500, 25% Bonds, 25% Gold, and 25% individual stocks that I pick.
And if I should change this to every Sunday, or change my investments then rebalance my “pie,” then I could do that.
M1 Finance is the only app I’ve found at allows me to invest like this is.
I first discovered M1 when I was lurking through personal finance subreddits, and found that people were sharing their investment “pies.”
I discovered that these pies – visual allocations of people’s investment portfolios – were created on M1 Finance. Here’s my pie:
I started using M1 in 2018 after I had some extra funds to invest. I did so because existing platforms I was using – notably Robinhood and Vanguard, were not customizable enough for the portfolio I wanted to build.
I ultimately put my investment money with M1 Finance over other robo-advisors because of individual control and portfolio customization.
M1 Finance = customized investing
Imagine that you want to set up a diversified portfolio with a few index funds and allocate a portion of your money towards individual stocks. I haven’t found an option that allows me to do this as elegantly as M1 Finance.
Let’s say you’re using an allocation like the All Weather Portfolio, and you wanted to invest in 5 random individual stocks.
Then you’d build your portfolio, ideally with the best funds with the cheapest expense ratios. For example: GraniteShares Gold ETF (BAR) has one of the lowest expense ratios for gold ETFs, and Vanguard’s Total Stock Market Index (VTI) is one of of the cheapest index funds tracking the stock market. Then let’s say you want to add Apple or Tesla stock to your portfolio.
You can’t pull this off within Vanguard’s platform, which mostly carry its own funds.
Neither Betterment nor Wealthfront allow investors to pick their own stocks or funds. They’re built on the hands-off, “we-know-investing-better-than-you” philosophy.
Here are some of M1’s features compared to its competitors:
| Features | M1 Finance | Other robo-advisors (Wealthfront, Betterment) | Robinhood |
|---|---|---|---|
| Fees | No fees | Management fees | No fees |
| Fractional shares | Yes | N/A (no individual stocks) | Yes |
| Portfolio rebalancing | Yes | Yes | No |
| Tax-loss harvesting | Yes | Yes | No |
| Recurring investments | Yes, to whatever is in customized “pie” | Yes, but to Wealthfront’s portfolio | Yes, but only to single stocks |
It’s worth noting that M1 Finance does recurring investments in the most optimal way. Like I mentioned at the start of this article, you’d be able to set a recurring investment of $100/week, and have that $100 automatically invested in each “slice” of your pie.
M1 Finance is comparable to most reputable robo-advisors in terms of features, except that it’s truly free to use.
However, M1 is not without a few drawbacks.
Main gripes with M1 Finance
None of these gripes are dealbreakers for using M1 Finance. They’re small tweaks to the user experience that I hope the M1 team will upgrade over time.
“Portfolio first” approach means individual stock investing is awkward
Let’s say you just wanted to buy $1000 of Microsoft. It’s not that straightforward, because you’d have to do it in the context of your “pie.”
This is annoying, but I see it as a feature, not a bug. It forces you to think in terms of a portfolio.
It is still possible to set up a “pie” that is 100% dedicated to one stock. Here’s how you can set up a second “pie” in M1.
No crypto, no penny stocks
You can’t invest in Bitcoin or other cryptocurrencies directly. There are also no over the counter (“OTC”) stocks, sometimes referred to as penny stocks. Unfortunate since a few of the promising crypto ETFs, like Grayscale’s Bitcoin Trust are legitimate and exciting. But M1 maintains that penny stocks aren’t good for investors.
However, there are crypto-related ETFs like BLCN available if you want to get some crypto exposure in your portfolio.
If you’re interested in investing in crypto, start here first.
Other nits
You might want to check the banks that M1 Finance does not currently support. Notably Citizen’s Bank, Chime and BBVA/Simple are not currently supported. If you’re with a major bank like Chase or Wells Fargo, you’ll be fine.
M1 also has a premium, paid subscription called M1 Plus. I don’t mind the advertisements and upsells for this since they offer so much for free with the regular M1 platform. Not unlike Robinhood Gold or Venmo’s Instant Cash – all the free fintechs now trying to monetize.
Oh, and another nit. It’s unnecessarily hard to edit your recurring buys in M1 (e.g. change from $100/week to $200/month). Tip: head to the “transfers” page and click on “rules” to edit your current investment schedule.
If you have any other questions/concerns, you should peruse M1 Finance’s FAQ Page.
Final verdict?
If you want to build portfolios for free, go with M1 Finance. You’ll be surprised at how easy it is to customize a portfolio or explore “Expert Pies,” whether you want to concentrate on Dividend Income, use a Philosophy like the All Weather Portfolio or stitch together your own.
And in case you’re not sold on M1 yet, their Wikipedia page has some promising stats:
In Investopedia’s 2019 Best Robo-Advisor Awards, M1 Finance was ranked Best for Sophisticated Investors and Best for Socially Responsible Investing and #2 overall.[11]
In February 2020, M1 Finance eclipsed $1 billion in assets on its platform, reaching that milestone faster than other fintech companies, including Acorns, Betterment, Stash, and Wealthfront.
If you’re more about trading individual stocks and you want features like options, margin and limit orders, you’ll want to use Robinhood. I still use RH for random impulse buys of single stocks.
Here’s a $10 referral bonus for M1 Finance
If you’re looking to build customized portfolios on a rock-solid investment platform, then sweeten your start with a M1 Finance referral link:
https://m1.finance/Z9ckRU3nfYA6
Note: You’ll receive your $10 referral bonus after if you fund your account within 30 days of signing up. More referral details here on M1’s page.