Personal finance can be complicated. With so many options for investing, savings accounts, retirement plans and more, it‘s tough to know where to start. That‘s where a robo-advisor like M1 Finance comes in. M1 Finance is an easy-to-use, automated investing platform with $5 billion in assets under management and over 500,000 members.
Overview of M1 Finance
M1 Finance offers commission-free trading of stocks, ETFs and crypto in individually customized investment portfolios. The key benefits of using M1 Finance include:
- Easy portfolio setup using "pies"
- Fractional share investing
- Dynamic rebalancing
- Retirement accounts option
- Borrowing capabilities
- Reward programs
Let‘s explore those benefits further and see how M1 Finance can fit into your financial strategy, whether you‘re a beginner investor or seasoned pro.
Construct Customized Investment "Pies"
The foundation of your investment strategy on M1 is to build a portfolio "pie" selecting individual stocks, funds and determining allocations between them. Each slice you add to a pie represents the percentage of your total investment directed to that asset.
For example, your portfolio pie could contain:
- 35% Technology stocks
- 25% S&P 500 Index ETF
- 15% Healthcare ETF
- 10% Communications stocks
- 5% Emerging Markets Bonds
- 5% Commodities ETF
- 5% Cash / Money Market
You have full flexibility when constructing your pie to match your preferred level of risk tolerance and investment horizon.
Once your pie is built, M1 Finance enables you to purchase fractional shares of the assets you selected. If one slice is 5% of your total portfolio value, then 5% of every dollar invested will buy a fraction of that asset.
Fractional shares open up investing opportunities without needing a large account balance to get started.
Automated Portfolio Rebalancing
As market conditions change daily, one asset class may outperform another causing your portfolio allocation to drift. M1 Finance automatically rebalances your account by directing a higher percentage of new money to the underperforming slices of your pie.
Rebalancing keeps your defined asset allocation intact over time instead of needing to manually trade positions.
Retirement Accounts
In additional to taxable individual and joint investing accounts, M1 Finance offers Traditional, Roth, SEP and rollover IRA accounts to save for retirement.
You can take advantage of tax deferred or tax exempt growth investing the same "pies" as your taxable portfolio. IRA accounts have slightly higher minimums as shown below:
| Account | Minimum |
|---|---|
| Individual Investing | $100 |
| Joint Investing | $100 |
| IRA | $500 |
| Trust | $100 |
Unique Features Beyond Investing
Beyond just investing, M1 offers some unique features and incentives worth considering:
M1 Borrow – Use your investment account value as collateral for low interest loans starting at 3.5% APR. Can be an option for accessing funds without selling positions.
M1 Spend – An optional cash management account with debit card, FDIC insurance, no fees, 1% APY interest and up to 1.5% cashback rewards. Helps manage your spending and cash withdrawals.
M1 Plus – For $125 annual fee, get lower borrowing rates, increased rewards on M1 spend account up to 10% cashback when spending on companies in your portfolio.
Evaluating Returns
According to performance analysis by InvestmentNews, here is a comparison of returns across different risk models:
| Portfolio | 1 Year Return | 3 Year Return | 5 Year Return |
|---|---|---|---|
| Conservative | 1.83% | 4.63% | 3.70% |
| Moderate | 11.51% | 9.24% | 7.18% |
| Aggressive | 21.49% | 13.85% | 10.62% |
Returns are highly dependent on risk tolerance and economic conditions, but this gives a sense for the range of outcomes.
Seamless User Experience
Part of what makes M1 Finance successful is the easy-to-use platform and mobile app:
The interface provides straight-forward tools accessible to beginners:
- View account balances
- Deposit / withdraw cash
- Manage and edit pies
- Review holdings
- Customer support options
Alert notifications help stay on top of account activity seamlessly across desktop and mobile.
Educational Resources
To complement the intuitive platform, M1 Finance also offers a strong library of educational resources including:
- Investing 101 guides
- Retirement planning tools
- Explanations of financial concepts
- Commentary on market news updates
This allows users to continue expanding their finance knowledge.
Integrations with external apps like Mint, Personal Capital or Excel further enhance the experience.
Pros and Cons to Consider
While M1 Finance has several excellent features as a fintech platform, there are some additional pros and cons:
Pros
- Easy account setup and deposit options
- Custom "pies" with fractional shares
- Access to retirement accounts
- Dynamic portfolio rebalancing
- M1 Plus rewards program
Cons
- Limited automatic tax-loss harvesting
- No access to human advisor
- Missing advanced order options
- Very limited cryptocurrency capabilities
So it may not have all the bells and whistles of traditional brokers with analysts and research. But excellent baseline robo-advisor capabilities.
Is M1 Finance Right for You?
If you‘re looking for an intuitive platform to manage customized portfolios across IRA or taxable accounts, M1 Finance delivers a top experience. The fractional share investing and automated rebalancing provide advantages over traditional DIY brokers. Retirement savers, beginner investors or those with limited starting capital can benefit.
However, traders needing sophisticated order options or access to an advisor may need to consider other alternatives. But for most individual investors building long-term, balanced portfolios, M1 is a great option to consider.
The low fees and unique rewards programs provide additional incentives on top of the seamless cross-platform functionality. Open an account in minutes to start taking control over your financial future.
