Online brokers are a diverse breed, each offering different benefits and downsides. Some will suit you more than others depending on your investment preferences and requirements.
M1 Finance specializes in providing diverse, flexible investment opportunities to traders of all levels, and offer a comprehensive and high-quality service to help you begin to grow your investments today. It provides numerous benefits a the busy investor.
How does M1 Finance Work?
M1 Finance is an online brokerage service that gives you the freedom to build and develop your investment portfolio. They are ideal for everyday traders and combine tech-savvy robo-advisors with a more traditional brokerage service.
M1 offers a variety of investment choices, from stocks to exchange-traded funds (ETFs). They also provide an option to automatically balance your portfolio, with the ultimate in tax minimization.
A Customized Pie
The service works through the creation of stocks and portfolios, which are known as “pies.” Your pie is fully customizable and adaptable according to the needs and preferences of the individual.
This gives you control over the direction your investment takes and develops. You are free to add ETFs and stocks as and when you wish, and can choose how much “weight” each investment carries within your portfolio, allowing total flexibility.
M1 also offers the choice of “prebuilt” pies, allowing you to leave the financial planning to the pros and enjoy the rewards.
M1 Finance gives you the opportunity to purchase fractional shares in large corporations. This means you can buy a small portion of a share instead of having to have enough money to buy the entire share of stock.
For example, as of this writing, a share stock in Google’s parent company (ABC Inc.) will cost you $1,030. Instead of having to buy one full share at that high price, you could purchase $20 of ABC stock or a small fraction of a single share.
This gives small investors the option of diversifying into small pieces of a lot of different companies.
An Automated System
Once you have selected your pie and decided which assets are best for you to investigate, you have the choice to sit back and allow the automated system to do the hard work for you.
Once you have deposited your initial investment, it will be allocated within your portfolio depending on your selections. This means that you will receive the best and most up to date deals the market has to offer without having to monitor and worry constantly.
Whenever your account reaches $10, it will be automatically reinvested in the next trading window, with zero effort on your part.
Investing with M1 Finance is designed to be as easy as possible for the investor, so there are a wide variety of account types to choose from depending on your needs. The four main types of accounts are:
- Individual: Suitable for your individual investing needs, this is a taxable account. It’s a good choice for newbies and experienced traders alike.
- Joint: An account which is shared with a relative, partner, or spouse.
- Retirement: If you are thinking of investing long-term and assuring yourself of a nest egg once you stop working, this is the ideal account for you. Choose from a traditional, Roth, or SEP IRA, depending on your preferences and long-term goals.
- Trust: Also suited for those thinking long term, a trust account allows you to set up investments on behalf of an individual or a group. This can be ideal for children, families, and other dependents who may have future expenses.
M1 Finance Fees
M1 is unique in its lack of fees for setting up or managing your portfolio. They only require an initial deposit of $100, making investments accessible even to those new to the game.
Also, they offer low rates of interest on borrowing against your portfolio, allowing you to spend on those significant life events such as a house deposit or dream wedding day without fear of incurring large fees or jeopardizing your portfolio.
How Does M1 Finance Make Money Without Fees?
The truth is that online brokerages can make money in a lot of ways. In fact, most brokerages make less than 30% of their revenue.
M1 Finance generates money by:
- Lending securities
- Interest on cash held
- Extending credit through margin trades
- Distributing certain funds
- Transactions on non-standard exchanges
Lack of fees
Regarding its brokerage services, M1 Finance is not necessarily unique in its offerings; other brokers also offer the ability to custom build your portfolio or purchase fractional shares in large companies. Where M1 Finance stands out is in its lack of fees.
While other companies may require you to pay an upfront cost with your initial deposit, along with charges for creating and curating your portfolio, this is not the case with M1.
Another critical feature of M1 is the ease of the automation process. Once you have selected your pie and set your percentages, you are free to watch the investment grow without having to perform daily calculations, alterations, or market research.
The system will take care of the complicated aspects, leaving you free to focus on other areas.
Fractional shares are an innovation which allows you to buy into a large company for a fraction of the price, allowing you access to potentially lucrative revenue streams.
It also means that you can control your investment down to the penny – there is no need to buy a whole share, allowing for a more interesting portfolio, which is actively using and working with every penny it contains.
Whether you want to specialize in stocks, ETFs, or an equal combination of both, M1 allows you to cherry pick your portfolio to ensure that every element is how you want it.
There will be no risk of wasted potential or dormant investment; you can choose exactly where your money goes and how much is dedicated to different assets, allowing you to create a unique and diverse portfolio.
Customization and control
Ultimately, one of the critical benefits of M1 is that it puts the power in the hands of the investor. You decide where, when and how much, can rebalance your portfolio at will, and can obtain access to expertly approved and crafted portfolios easily.
You can also grow your investment from a distance using automation. This is ideal for passive investors or those new to the industry who are making their first investment.
A steep learning curve
Though M1 is ideal for beginners, it can be tricky to learn the ropes of the process and interface at first. With no actual human being to turn to for guidance, it could quickly become overwhelming for those taking their first steps.
The system is geared toward those with at least a basic knowledge of handling their investments.
Unlike more flexible stock brokers, M1 only trades once a day in what is known as “batch trades.” On the plus side, this allows them to keep the system free, and it’s how they achieve their impressive zero-fee status.
On the downside, if you are a flexible and active trader, looking to continually follow and react to the ever-changing trends in the market and keen to trade instantly should something suddenly change, you will find this a frustrating and ineffective feature.
In this case, you would have more success with a more active trading broker.
No human interaction
While the robo-advisors have clear benefits that allow the system to run smoothly and efficiently, life is not always straightforward. Inevitably, you will have a question or scenario which you require advice on, and unfortunately, there are no human financial advisors available.
This means that if you are interested in learning more about investing, you are not going to get many details here.
M1 Finance Review Bottom Line
Investing always has the potential to be a risky business. Deciding how much to invest, the assets to pursue, and the broker to trust are all difficult but crucial decisions, and it is essential to find one that is a match for your ideas and financial aspirations.
It is important to research carefully and make sure that your selection can provide you with the best service for your individual needs.
Some factors are an absolute must in a broker. Reliability, security, and an ability to help your portfolio to grow and expand are all must-haves in any investment broker.
M1 Finance offers a high-quality system which allows you a balance between hands-on and hands-off investment; you can decide where your investments are spent and at what percentage, and then let a team of experts do the rest of the work for you.
There are of course pros and cons to every brokerage, and for fast-moving, reactive traders who desire in-person financial advice, another service may be more appropriate to ensure that your needs are met.
However, as we’ve seen in M1 Finance reviews, this broker has a great deal to bring to the table. Its services offer efficient and effective investment opportunities with the fbonus of zero rates and an automated system for your utmost convenience.
If you are looking for an affordable and accessible financial solution which allows you to build and develop a diverse profile that includes fractional shares in larger corporations, M1 should be a serious contender.