M1 Finance Review 2024: Invest, Borrow and Spend
Written by
Andrea Norris
Edited by
Melanie Grafil
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
GOBankingRates Score
M1 Finance
-
Portfolio Construction
4.5
-
Dynamic Rebalancing
4.5
-
M1 Borrow
5.0
-
Fees
4.5
Pros
- No account management fees
- No trading commissions
- Portfolio customization
- Auto invest options
- Margin loans that can be used for any purpose
Cons
- No tax-loss harvesting
- No human advisors
- Small selection of financial tools
- Inability to link external accounts
- Only buy or sell orders
M1 Finance Overview
M1 Finance is a commission-free, self-directed brokerage that lets investors customize portfolios and automate investing mostly through its simple-to-use app. The app provides investing, spending and borrowing functionality to M1 users all on one platform.
Using M1 Invest’s intuitive construction, users can create a custom portfolio, choose a curated one or try both. Portfolio management is easily automated, making it a great way to begin investing in stocks.
M1 Borrow allows eligible users to take out a low-rate margin loan on up to 40% of the total value of investments held in their M1 Invest account.
M1 Spend is a little less impressive. This function boasts an interest-bearing checking account with an attached cash-back card, but only users who pay the $125 annual M1 Plus fee get these perks. The M1 cash-back credit card is also available to eligible users but requires a $95 annual fee unless the user pays for M1 Plus.
M1 Finance Review: Key Features
The M1 platform may lack features some investors need. However, these four features make M1 Finance worth considering.
Portfolio Construction
An M1 portfolio is called a “pie” — much like a pie chart — and each pie can have up to 100 slices. Each slice represents an individual stock, ETF or even another portfolio. Users control what percentage of the portfolio each pie slice represents. Even though the M1 platform is self-directed, users can construct a pie, choose a curated pie or combine these options into one pie.
Thanks!
More than 60 Expert curated pies are available, created around specific investment goals like responsible investing or retirement planning. Community pies are shareable and allow users with like-minded values and goals to support a particular group of companies. For instance, the Women-Led pie comprises public companies that are all run by female executives.
The simple pie concept is ideal for new investors or anyone new to self-directed investing needing a user-friendly platform.
Good To Know
The default Auto Invest setting is “on” for all new M1 Finance accounts. Investors who want to manually manage their portfolio before automating can turn this feature off.
Dynamic Rebalancing
Once users have their portfolio constructed and determine the balance of the slices, rebalancing becomes a hands-free process. M1’s Dynamic Rebalancing algorithm takes over and auto-invests new cash into imbalanced portions of the pie. In other words, if you regularly add money to your portfolio, you won’t have to worry about picking and choosing the investments you want, calculating how much money you have to put into each security. M1 Finance will automatically invest your contributions according to your predetermined allocation.
M1 Finance also allows manual rebalancing on an entire portfolio or just part of it. With one click of the Rebalance button, the platform sells overweight securities to buy underweight ones. A portfolio’s target percentages become actual.
M1 Borrow
All M1 brokerage accounts extend a line of credit to any user with an investment account balance of at least $2,000. M1 Borrow is a margin loan, and borrowed money can be used for just about anything. Whereas most borrows use margin loans to buy more securities, M1 borrowers are not limited on how they can use the money. Users can borrow up to 50% of the total value of investments held in an M1 Invest margin account.
There is no application process or credit check for M1 Borrow, and it’s automatically available the day after eligibility requirements are met. There isn’t even a repayment schedule. Interest is billed monthly on the borrowed amount and can be paid back at any time. Borrowed funds can be transferred to an external bank account or added to an M1 Invest or M1 Spend account.
Fees
For those seeking a low-fee platform, M1 Finance delivers. Because M1 doesn’t provide access to financial experts or financial advice, they can forgo commissions. However, things changed at M1 Finance on May 15, 2024, and now users must be aware of potential fees.
The firm formerly offered an “M1 Plus” version that cost users $125 annually and provided additional features. However, that program no longer exists, and now all M1 users have access to the following benefits:
- Ability to set up smart transfers through automated if/then rules
- Choice of a morning or afternoon trade window; both are available if account equity is at least $25,000
- An M1 Borrow at 7.25%
- A APY M1 Spend checking account
- Up to 10% cash back via the Owner’s Rewards card with no annual fee
- Access to custodial accounts
Overall, that amounts to a huge plus for investors. However, it’s important to note that as of that May 15 date, users must now pay a $3 monthly program fee unless they have at least $10,000 in assets or maintain a personal loan at M1 Finance.
Fractional Shares
It can be hard for investors to build a truly diversified portfolio buying shares of individual stocks. Because share prices vary considerably from one stock to another, the universe of available investments can be quite small, particularly for beginning investors or those with limited funds. This problem is eliminated, however, when a brokerage firm offers access to fractional shares, as M1 does.
Imagine, for example, that you have $1,000 to invest and you want to buy Amazon, Microsoft, Booking Holdings, Berkshire Hathaway and Costco. If you can buy fractional shares of stock, as you can with M1 Finance, you can own $200 of each company. However, if you have to buy full shares of stock, you won’t get very far at all. As of mid-July, 2024, the share prices of these companies were $183.68, $436.86, $3,938.57, $670,605.75 and $831.50. At those prices, you could buy two shares of Microsoft and one share of Amazon, but you couldn’t even touch the others.
This gives M1 Finance a huge advantage of other brokerage firms that restrict stock purchases to full-share amounts.
Dividend Reinvestment
Some brokerage firms allow you to reinvest stock dividends into additional shares of the paying company. For example, if you own IBM and it pays a $1 dividend, you can choose to have that $1 reinvested into additional fractional shares of IBM stock.
But M1 Finance goes one step further. When cash dividends are paid into the account, you can choose to reinvest that money into the same security or have it allocated over your entire portfolio, in line with the percentages you chose when you set up the account. In other words, if you get that $1 dividend from IBM, you can choose to reinvest it into either IBM or every stock in your portfolio, keeping your overall allocation in balance.
At M1 Finance, dividends will automatically reinvest once the cash balance reaches $25 over the user’s cash balance threshold, unless this feature is disabled.
Shareable Portfolios
Users can share their custom pies with other users. Shareable portfolios are part of the M1 Refer and Earn program, which offers both parties $30 to invest when the requirements are met.Features M1 Finance Lacks
While M1’s pie and borrow features make it unique, it lacks a few basic functionalities that some users might miss.
Traditional Tax Harvesting
M1 Finance doesn’t have a traditional tax harvesting functionality. Instead, it minimizes taxes by selling securities following a specific order, from the lowest tax burden to the highest.
Linking External Investment Accounts
M1 Finance doesn’t link to external investment accounts. That means users can’t get an overall snapshot of their total portfolio diversification.
Financial Tools
One thing M1 lacks that many other investing platforms have is financial tools. Anyone in need of money management tools will not find them on the M1 app. Those who don’t want to use multiple platforms to manage their money and investments might want to consider another platform.
Empower, for example, is a platform that has these features. [33] It has a high minimum investment requirement and higher fees than M1 Finance but offers some of the features that M1 lacks.
M1 Finance: Best for New and DIY Investors
New investors who need the low minimum to get started and the ability to buy fractional shares are the ones who stand to benefit the most from M1 Finance. So are the do-it-yourself types who want control over every aspect of their portfolio.
M1 Finance also benefits passive investors who want a buy and hold strategy as well as the fee-conscious and the socially-responsible types who may appreciate community pies.
Anyone looking to access mutual funds, cryptocurrencies, futures, options or individual bonds won’t find them on M1 Finance. That’s why day traders may want to avoid M1. The company states clearly on its site, “We don’t believe in day trading or speculating as viable ways to build long-term wealth so we didn’t build M1 to do that.”
How To Apply
Getting started with M1 Finance is straightforward. Here’s how it’s done:
Supported accounts include individual taxable accounts, joint accounts, IRAs — Traditional, Roth, SEP — and trusts. M1 Plus subscribers can also open custodial accounts.
The minimum initial deposit to open an IRA is $500. All other account minimums are $100.
Trustworthiness and Security
Founded in 2015, M1 Finance now has over $5 billion in client assets under management. M1 is a registered broker with the Financial Industry Regulatory Authority and a Securities Investor Protection Corporation member.
Regarding security, M1 protects user data with military-grade 4096-bit encryption and offers two-factor authentication.
Final Take
The M1 Finance app was built for long-term, automated transactions, which is ideal for both passive and active investors. While no investment account should be set-it-and-forget-it, M1 Finance enables users to automate their portfolio management. The low account minimum and ability to buy fractional shares make M1 a great choice for beginning investors to get started with, reviewing expert pies until they’re confident enough to create their own.
While M1 Finance may excel in the invest and borrow categories, the spend category could use some enhancements for those who choose not to subscribe to M1 Plus.
John Csiszar contributed to the reporting for this article.
Information is accurate as of July 18, 2024.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
Is this your bank?
Take Advantage of our Best Offer(s)
