When we finally saved up a little extra money, we knew that it was time to start investing it. I did a ton of research online and finally settled on M1 Finance as our primary investment platform.
Over the past few years, M1 Finance has continued to be a robust and easy-to-use platform helping us reach our financial goals. Here is more background on our experience using M1 Finance.
What is M1 Finance?
M1 Finance is a finance app that allows you to buy and sell publicly traded stocks, bonds, and funds. All trades are completely free and there is no cost for a basic account.
One of the benefits of M1 Finance is that you can set up your account and automate your investments for you. The system will do everything to minimize tax implications and maximize your investment.
The app itself is free to sign up for and very easy to get started. The idea is to select a variety of different stocks and ETFs with a set percentage that add up to 100%. This creates your “pie” and each investment in stocks, bonds, or ETFs represents a separate slice.
Quick Look
| Assets | Stocks and ETFs |
| Mobile App | Yes, mirrors desktop app |
| Account Types | Individual or Joint Investing Traditional, Roth, or SEP IRA, or 401k Trust Account |
| Account Minimum | $100 min for taxable accounts $500 min for retirement accounts |
| Fees | $0 trading commissions $0 account fees |
| Premium Account | M1 Plus Account is $125 per year and includes an extra trade window, ability to borrow money at 2%, and earn 1% cash back on your savings |
Pros
Cons
Why We Chose M1 Finance
A few years ago, we had saved up around $10,000 that we wanted to start investing. At that point, we had fully funded our emergency fund and saved enough for our other short-term goals.
Our next step was to start putting our money into investments that would earn greater interest. While it would hurt, we were comfortable with the potential of our $10k losing value in the short-term.
This set us up for the ability to invest into the stock market with the goal of earning significant returns over at least 10 years.
Our first problem was finding a way to invest in the stock market. I had no experience and minimal knowledge of how these types of investments work.
I did spend quite a while researching different platforms to see what would work best for us. At the end of the day, I settled on M1 Finance for a few reasons.
The main reason was that there was no fee to sign up for an account and there are no trading fees. This means we can buy and sell as much as we want and there are no fees. For a young couple just starting out, saving money on fees was essential.
The second was the ease of use of the platform. By automating much of our investment strategy, we are able to continue to contribute regularly without worrying about the details.
Who is M1 Finance For?
M1 Finance works very well for anyone just getting into investing because it is simple to get started. It provides plenty of options to maximize your investment and choose your preferred strategy.
It also provides an easy way to automate your investing strategy with minimal ongoing involvement. Simply set your investment pie and then you can continue to contribute funds on a regular basis. Your money will be automatically allocated across your pie in the most optimized way.
M1 Finance also provides plenty of information to help select the right investment for you. They have a great research tool that shows historical performance along with company information.
There are pre-built expert pies available that you can invest into if you don’t know where to start. These will select the best stocks and bonds based on your goals. These include strategies for responsible investing, dividends returns, hedge funds, and planning for retirement.
M1 Finance is great for anyone who is looking for a hands-off approach to investing. It gives the perfect balance of being able to control your investments without overly complicating the process.
Even if you are a seasoned investor, M1 Finance is a good platform for creating a portfolio that you can hold for the long term. Simply create your pie, automate regular investments, and the app will optimize your portfolio. By not touching it for many years, you will likely be able to out-perform day traders and active investments.
Getting Started with M1 Finance
After we decided to use M1 Finance, we jumped right into using it.
First, we signed up for a free account here. I spent some time getting acquainted with the app and doing some research into what we’d like to invest into.
For us, we wanted to stay a conservative with our first investment. We wanted greater returns than our savings account but were nervous to potentially lose it all in a market crash. We also were expecting some sort of recession in 2020 simply based off the exponential growth over the few years prior.
Based on this, we built a conservative pie that was 60% bonds and had an expected annual return of 5% to 10%. The combination of less volatility and the ability to earn close to double digit returns made sense to us.
We also selected to put 5% of our investment into funds that mimic the Berkshire Hathaway, Coatue, and Icahn hedge funds. The remainder of our investment went towards the Vanguard S&P 500 ETF and a few individual dividend aristocrat stocks.
This pie has served us well over the past year, earning 10.53%. Throughout the COVID-19 recession, it faired very well and did not drop as much as the rest of the stock market.
Here is the actual pie we built and you can add it to your account, if you would like to use it as a starting point.
Adding More Pies
As we built up more savings that could be invested, we wanted to expand past just our first conservative investment pie. While 10% annual returns is pretty great, we also felt comfortable putting more money into more aggressive investments.
To do this, we decided to add a second pie to our M1 Finance account. They make it easy to add any type of investment, retirement, or trust account. For example, you could roll over a 401k or start a trust account for your children.
For us, we opened a second individual account that was linked to our first conservative pie. We call this our Aggressive pie since we chose a variety of growth stocks. While we are certainly no experts, we think these companies will continue to grow over the long-term.
Our aggressive pie includes stocks like Amazon, Tesla, and Microsoft that will likely see growth for quite a long time, even if they are a bit over-valued. We also picked other solid companies like Hormel, Home Depot, Disney, and Pepsico.
Over the past 4 months that we have owned this pie, it has made 10.73%. Annualized, that is around 32% returns.
Here is the full pie and you can add it to your account with just a click. After it is added, feel free to edit it to adjust to your own preferences.
Automated Investing
The nice thing about M1 Finance is that it you don’t have to make all your decisions yourself. The app has options to automate and optimize your investment strategy to make you more money over many years.
The first option is to set up recurring deposits so that you can invest on a regular schedule. This lets you automatically invest a certain amount each month without having to think about it. By regularly contributing even a small amount, your account will grow faster than if you just contribute sporadically.
Tax-Optimized Rebalancing
M1 Finance gives you the option to rebalance your portfolio at any time. This will sell and buy shares to get your portfolio back to your set allocation. The downside of this type of rebalancing is that you will have to pay taxes on any capital gains incurred while selling those shares.
Instead of pushing the rebalance button, M1 Finance has the option to automatically rebalance your account every time you deposit more money. They will buy more of your underweight shares to bring your allocation back in line.
This helps to reduce your tax obligation because you are not actually selling any shares when rebalancing your pie. This strategy is also beneficial because it helps to buy low and sell high since it focuses on buying more of the stocks that are currently performing the worst and will presumably increase over time.
Dividend Reinvestment (DRIP)
Another awesome feature is that you can choose to reinvest any dividends that are paid out to your account. Every time you get dividends paid out, they will show up in your account in cash. You can then choose to withdraw that cash or reinvest it.
M1 Finance does have a $25 minimum for investment, so you’ll have to wait until your have at least that amount in your cash account. By selecting the automatic reinvestment option, they will automatically invest your dividends into your portfolio based on your set allocation.
Over time, this is a powerful way to grow the value of your portfolio by using a dividend reinvestment plan, or DRIP.
Buy and Sell Twice a Day
The free basic account gives you access to two trade windows at 9:30 AM and 4:30 PM on business days. You are able to choose to buy or sell your holdings at any time, and then they will be processed at the next trade window.
If you upgrade to a M1 Plus account, it also gives you access to a third trade window at 3:00 PM.
I will say that depositing money into your account is generally very quick. They say 1 to 2 business days but many times it is processed within a few hours, depending on when you make your selections. Once you have the money in your account, they will invest it automatically during the next trade window.
Beyond Just Investing
Besides their investment platform, M1 Finance also offers the ability to borrow money using your investments as collateral. Once you have $10,000 in your portfolio, you will be able to borrow money at a low 3.5%. Upgrading to M1 Plus gives you access to borrow money at 2.0%.
You can also use an M1 checking account and debit card to make it easy to access your money and transfer to your investment portfolio. As a M1 Plus member, you can earn 1% cash back on your purchases and 1% interest on your savings.
Is M1 Finance Safe?
M1 Finance is a secure platform that you should feel comfortable investing in. While individual investments are not without risk and may lose value, the M1 Finance platform itself has taken steps to be secure.
First, they are regulated by the Financial Industry Regulatory Authority (FINRA) and must meet their standards.
They also insure Securities in investment accounts up to $500,000 by the Security Investment Protection Corp (SIPC). This protects us as consumers in the event that the M1 Finance company itself goes bankrupt and needs to be liquidated.
Money in M1 checking accounts is insured by the FDIC up to $250,000.
Finally, M1 Finance is dedicated to protecting our personal information by using the latest technology to improve their security. They take this very seriously and have a range of security features that include two-factor authentication and encryption.
Invest Today with M1 Finance
Investing in stocks and ETFs is one of the most proven ways to increase your wealth over time. Even if you only have a small amount to invest, start using M1 Finance to easily get started building your portfolio.
Sign up for a free M1 Finance investment account here.
