M1 Finance is a platform designed to simplify investing, borrowing, and spending, offering a user-friendly way to manage all your financial activities. This review will highlight the platform’s key features, benefits, and any drawbacks so you can determine whether M1 Finance fits your needs.
What Is M1 Finance?
M1 Finance is an all-in-one financial platform that provides automated investing, a checking account, and borrowing options. It offers a hands-off approach to building a custom investment portfolio without dealing with high fees or complex trading processes. With M1, you can choose to invest in individual stocks or exchange-traded funds (ETFs), and you don’t have to worry about paying trading fees. In addition to investing, M1 Finance provides a checking account with debit card access and the ability to borrow against your investments.
How M1 Finance Works
M1 Finance allows you to create a customized portfolio using a unique “pie” system. You select your desired stocks or ETFs, and M1 divides them into slices of a pie, which makes the management of your portfolio straightforward and intuitive. You can choose how much of each investment you want and then automate contributions. If you prefer, you can opt for one of M1’s ready-made pies, which offers a hands-off approach for those who don’t want to customize their investments.
The platform also offers fractional shares, meaning you can buy smaller portions of a stock that would normally be out of reach. This makes investing accessible for users with smaller budgets.
Once set up, M1 Finance automatically handles your investments, including rebalancing your portfolio if it drifts from your original allocation. You can also make manual contributions and trades if you prefer more control over your actions.
Fees and Costs
M1 Finance does not charge trading fees or commissions. The only fees you may encounter are for regulatory purposes when selling a stock, which are minimal compared to traditional trading fees. There is also an option to subscribe to M1 Plus, which costs $125 annually and provides added perks such as a second trading window, reduced borrowing interest rates, and a rewards debit card.
M1 makes money through its borrowing platform, where users can access loans at competitive interest rates. The interest rate varies, but it’s typically lower for M1 Plus subscribers. The free platform also generates revenue from a small fee on borrowed funds.
Key Features of M1 Finance
- Automated Investing: M1 Finance’s key strength lies in its automated investing approach. You can set up your portfolio and contributions, then let the platform do the rest, ensuring that your investments are regularly funded and rebalanced without you needing to actively manage them.
- Fractional Shares: M1 Finance allows you to purchase fractional shares, enabling you to invest in high-value stocks even with a small budget.
- Borrowing Options: Once you have $5,000 in a taxable account, you can borrow against your portfolio at competitive rates. You can access up to 35% of your portfolio value, and M1 Plus subscribers enjoy lower borrowing rates.
- Checking Account: M1 Finance offers a free FDIC-insured checking account that comes with a debit card and access to ATM reimbursements. M1 Plus users enjoy additional benefits, such as earning cash back on purchases and a higher annual percentage yield (APY) on account balances.
Who Should Use M1 Finance?
M1 Finance is ideal for investors who prefer a more passive approach to managing their investments. If you want to customize your portfolio without dealing with frequent trades, this platform makes it easy to automate your investing. Additionally, it’s a great choice for anyone looking to avoid trading fees and those who want to earn rewards with a checking account.
For those who don’t have the capital to buy full shares of stocks or ETFs, M1’s fractional share system makes investing more accessible, even with smaller amounts of money.
Who Should Avoid M1 Finance?
M1 Finance might not be the best option for active traders who enjoy choosing their stocks and making trades on their terms. If you prefer direct control over your trades and want to set specific parameters, you may find that a traditional brokerage is a better fit.
Additionally, M1 Finance is currently only available to U.S. residents, so it’s not an option for international users.
Final Thoughts
M1 Finance offers an easy-to-use, fee-free platform for investing, borrowing, and banking. With its automated investing process and the ability to invest in fractional shares, it’s a great option for those looking for a hands-off, low-cost approach to building wealth. The added features like the checking account and borrowing options make it a versatile financial tool.
However, if you’re an active trader or prefer complete control over your investments, M1 might not meet your needs. For those who prefer a more automated, simplified approach to managing their finances, M1 Finance could be the right fit.
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