M1 Finance Review: Is This the Total Money Management Solution You Need?

M1 Finance offers investing, along with a variety of banking services. Is it the right move for you?
Last updated Jul 17, 2020 | By Miranda Marquit
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Today, it’s common to see apps offering consumers the chance to easily invest their money and manage their finances. M1 Finance looks to combine investing and money management into one easy-to-use app, which allows you to manage your money in one place using a variety of tools.

If you’re looking for a complete money management solution, M1 Finance may be worth considering. Read our M1 Finance review to find out if this app could help you take control of your finances.

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What is M1 Finance?

M1 Finance is an investing app and platform that can be used online or on Android or iOS. It was founded in 2015 and is based in Chicago. According to the M1 Finance website, at least 150,000 investors are using the app to manage their money. In addition to providing general investing services, M1 Finance also offers the ability to borrow at low rates and use an FDIC-insured checking product.

M1 Finance is listed on FINRA’s BrokerCheck, and the company’s SEC registration was approved in 2016. As a result, M1 Finance is a legitimate brokerage firm with licenses in 53 U.S. states and territories.

How does M1 Finance work?

M1 Finance lets you choose your own investments and use them to construct pies. It offers individual stocks and ETFs you can use to construct a customized portfolio. It’s also possible to choose from expert pies designed to help you reach different goals, ranging from earning passive income to long-term wealth-building.

M1 Finance offers you the ability to invest in individual stocks using fractional investing. As a result, if you don’t have enough money to buy a full share of a company, you can get fractional shares and add them to your portfolio. The same is true of an ETF, which trades like a stock on the exchange.

Although you can’t invest in real estate or individual bonds, you can get exposure to these asset classes through bond and real estate investment trust (REIT) ETFs, as M1 Finance offers both. It’s even possible to get access to mortgage-backed security ETFs through M1.

M1 Finance offers a unique pie investing approach. When you sign up, you create a custom pie based on your holdings. Each pie is made up of slices. Your portfolio pie is constructed based on how much of the pie you want each slice to take. Each individual stock or ETF is a slice of your pie. For example, you could choose to create a pie with two individual stocks, one emerging market ETF, one bond ETF, and one REIT ETF. That’s five different securities. You can decide to allocate your pie evenly, with 20% of your money going to each, or you can choose a different way to divide them.

M1 Finance also offers Expert Pies, which are curated securities portfolios pulled together by the M1 team. These portfolios typically have high historical performance. You can add Expert Pies to your pie as well.

Your M1 Finance portfolio is completely customizable. The only limit is that you can keep only up to 100 securities in your portfolio. The money you contribute to your M1 Finance portfolio is divided up according to the percentages you specify, and M1 uses dynamic rebalancing to automatically rebalance your portfolio allocations according to your targets.

M1 Finance products

M1 Finance offers two main products, the Basic account and the M1 Plus account. The Basic account is completely free and has no fees attached to it. The M1 Plus account has an annual fee of $125, but it comes with more perks, including an interest-bearing checking account and cash back when you use the associated debit card.

No matter which account you sign up for, however, M1 Finance offers the following products:

  • M1 Spend: FDIC-insured checking account furnished through Lincoln Savings Bank. This includes a debit card for use and ATM fee reimbursement.
  • M1 Invest: The ability to create a fully customized portfolio complete with dynamic rebalancing. There are no management or trading fees associated with M1 Invest.
  • M1 Borrow: Once you have at least $10,000 in your portfolio (IRA funds excluded), it’s possible to borrow at low rates. Your portfolio line of credit allows you to borrow up to 35% of your non-IRA investment portfolio without worrying about traditional credit requirements. You can repay your line of credit from your M1 portfolio or a bank account.

M1 Finance at-a-glance

Basic M1 Plus
Minimum investment required $100 ($500 for an IRA) $100 ($500 for an IRA)
Management fees None None
Annual fees $0 $125
Transaction fees None None
Account types available
  • Individual
  • Joint
  • IRA (Traditional, SEP, Roth)
  • Trust
  • Individual
  • Joint
  • IRA (Traditional, SEP, Roth)
  • Trust
Asset classes
  • Stocks
  • Bonds
  • Real estate
  • ETFs
  • Mutual funds
  • Stocks
  • Bonds
  • Real estate
  • ETFs
  • Mutual funds
Features
  • Dynamic rebalancing
  • Portfolio line of credit
  • Tax minimization
  • Debit card
  • Dynamic rebalancing
  • Portfolio line of credit
  • Tax minimization
  • Debit card
  • Cash back
  • Interest-bearing checking

Who can use M1 Finance?

Anyone who is at least 18 years old and a U.S. citizen or permanent resident can open an M1 Finance account. You do need a current U.S. mailing address to qualify.

M1 Finance is likely best for someone who is interested in complete money management with the help of an investment portfolio. For those who want a truly fee-free investment portfolio (you still have expense ratios with ETFs), M1 Finance may be a decent choice. On top of being able to manage a portfolio, you can also access a line of credit and a checking account product.

M1 Plus can work well for those who want to use their portfolio to access a line of credit at a lower rate. Users can also earn a yield on the checking account balance and cash back when using the debit card.

On the other hand, M1 Finance isn’t likely to work well for an investor involved in frequent trading. Although it does allow you to invest in individual stocks, the trading window for the day is limited, so you can’t make a lot of trades during a day. For those interested in day trading, M1 Finance is unlikely to fit the bill.

How much can you earn with M1 Finance?

Because M1 Finance is a brokerage, how much you earn depends on the makeup of your portfolio. When you invest using M1 Finance, you buy a share of a stock or an ETF. The performance depends on how well the investment does over time, as well as any dividends you earn.

However, with investing, you realize gains only after you sell. So you might hold on to a stock for a long time, but you don’t receive money until you sell the asset. For example, if you bought one share of the SPDR S&P 500 ETF Trust (SPY) on Jan. 7, 2000, you would have paid $144.97. On Feb. 7, 2020, you could have sold that share for $332.20. You would have made $187.23. Now, imagine if you had bought 100 shares back then. Your gain would have been $18,723. That’s not bad for letting the money sit there for 20 years.

For many investors, earning money over time requires that you invest consistently and let your account grow before selling shares as needed down the road. With M1 Finance, it’s possible to set up automatic investments and grow your wealth over time. Your total return, though, depends on whether you sell investments at a gain or a loss, how well those investments do, and how often you sell investments for cash.

Other factors, such as taxes, expense ratios, annual fees, and other costs might impact how much you earn over time.

Maximizing your earnings with M1 Finance

Just about any time is a good time to start investing. Maximizing your earnings, though, takes discipline and planning.

  • Invest regularly: One of the best ways to maximize earnings as an investor is to be consistent in making contributions.
  • Let your money grow: Rather than selling shares and liquidating your investments frequently, give them time to grow, which lets compound returns do work for you.
  • Set a cash control threshold: With M1 Finance, you can set a cash control threshold and once your cash account exceeds that amount, the excess is automatically invested in your portfolio. When you receive dividends, they are put into your account as cash. With a relatively low cash control threshold, you can automatically reinvest your dividends.
  • Consider the M1 Plus upgrade: Even though M1 Plus has an annual fee of $125, you can make up for it with the 1% cash back when you use the debit card. Depending on how much you spend, it takes $12,500 in regular spending to reach that $125. If you know you’ll use the debit card for more spending and you don’t use credit card rewards, this may be worth it in some situations.

How to stay safe investing with M1 Finance

You cannot completely avoid risk when investing. There is always the chance that you’ll lose money. However, you can adjust your portfolio with M1 Finance, changing your pie so the slices that include bond ETFs are bigger, reducing your overall portfolio risk.

Additionally, it’s worth noting that investments are covered by SIPC insurance, which protects your account up to $500,000 if the brokerage fails. However, you should be aware that SIPC insurance doesn’t protect you from market events.

When choosing investments and constructing your customizable portfolio, take into account your own personal goals for your money, your investment timeline, and your personal risk tolerance.

Common questions about M1 Finance

Is M1 Finance legit?

Yes. M1 Finance is registered with FINRA and the SEC as a brokerage.

Is M1 Finance good for beginners?

M1 Finance can be a good choice for beginners. The website has an extensive collection of articles that explain basic investing concepts. On top of that, the concept of the pie makes it easy for beginners to construct a portfolio. M1 Finance takes care of the heavy lifting, streamlining the investment process so beginners don’t have to worry about market orders and the other trappings of traditional investment options. It also offers a handy mobile app that makes money management simple and convenient.

How does M1 Finance make money?

Like many other financial services companies, M1 Finance largely makes money from interest. It earns interest on the cash it holds, as well as on margin loans it makes through M1 Borrow. Because M1 Plus comes with an annual fee, that is another way it makes money. According to M1, most online brokerages make between 10% and 30% of their money from management fees and commissions. Rather than charging these fees, M1 Finance focuses on other ways to make money.

Which is better: M1 Finance or Robinhood?

Which app is better depends on your investing style and your goals. M1 Finance has limited trading windows, so it isn’t ideal for day traders. Additionally, it is set up so you base your portfolio on asset allocation and it’s designed for long-term wealth building and money management.

Robinhood, on the other hand, is often a better choice for day traders who want a free way to execute multiple trades per day. However, it’s important to note that trading outages have been a problem with Robinhood in the past.

Can you withdraw money from M1 Finance?

Yes, it’s possible to withdraw money from your M1 Spend account to an external bank account. Additionally, you can also use your M1 Spend debit card to get money from an ATM or even to make purchases.

If you want to withdraw money from M1 Invest, you first have to sell shares in your portfolio. Once the transactions are settled, you can then withdraw the resulting cash to an external bank account.

Finally, it’s possible to transfer your money. If you have an investment account or IRA, you can transfer to another custodian.

How to sign up for M1 Finance

As long as you are at least 18, have a U.S. mailing address, and are a U.S. citizen or permanent resident, you can sign up for M1 Finance. Start by providing an email address and setting up a password. Once you do that, you’re taken through the steps to set up an account.

  • Provide your phone number and enter the access code provided via email
  • Enter your name and address
  • Offer other identifying information include birthdate, employment and citizenship status
  • Answer questions that help M1 Finance build a risk profile
  • Input your Social Security number

Once you’ve answered all the required questions, you can choose to connect your bank account manually or instantly. M1 Finance uses Plaid to connect to bank accounts. Plaid is token-based, so your information isn’t stored with M1 Finance. Depending on your bank’s login requirements, you might have to enter an authorization code. Once you’ve connected your account, you can make the required $100 initial deposit and begin investing.

Other investment apps to consider

If M1 Finance doesn’t sound like the right fit, there are plenty of other investing platforms to consider, depending on your needs. Some potential possibilities include:

  • Wealthfront: If you’re more interested in a robo-advisor, Wealthfront can be a good choice. Wealthfront offers a college planning option, as well as a cash account with a decent APY. However, you need at least $500 to start and you won’t have as many customization options as with M1.
  • Robinhood: You can engage in day trading with Robinhood, without paying fees. However, you don’t have the same access to education and other banking options.

In the end, it’s important to choose an investment platform that aligns with your investment strategies and needs. Carefully consider your choices and choose what works best for you.

M1 Finance Benefits

  • Build, invest and optimize your money
  • Create your free investment portfolio
  • Automate deposits so you're always fully invested
  • Access your cash with an M1 checking account and debit card