M1 Finance Review – Revolutionizing Robo-Investing

Joseph Meyer
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About M1 Finance

M1 Finance is a robo-advisor that helps you automatically rebalance your portfolio and invest in all commission-free ETFs and stocks. It is available on the web and as a mobile app for both Android and iOS devices.

The company has been gaining traction as more and more people are eager to invest in the stock market. The app has almost no setup procedure and can track and manage your investments without any intervention from you.

Here’s how it works:

The first step is setting up your account. It is a 5-minute process and involves inputting your personal details including your Tax ID, your date of birth, and you name. The app will also scan your email inbox for your financial accounts and will link them to your M1 Finance account.

Your investments can be funded directly from your credit card. The app will generate a barcode that you can use at any US financial institution to fund your account. This process is very quick because all the heavy lifting is done by the M1 Finance Bank.

Once your account is set up, you will see four different investment portfolios. If you’re a first-time user, you can create these four investment portfolios by selecting the diversification you wish to have. The app will use rules of thumb to partition your money into different funds based on your answers to three questions:

M1 Finance Basic Accounts

Great for Beginners

M1 Finance is one of the most innovative companies in the online investment space today. It’s a robo-advisor that makes it easy to invest your money without having to look at charts, graphs or bank statements.

The first thing you’ll notice about M1 Finance is that it offers a multitude of investment profiles … with the Basic being just one of them … making it a good choice for both entry-level investors as well as more experienced investors.

The Basic account is recommended for people who are just getting started and don’t require all of the bells and whistles of the Flex and Custom models. With the Basic account, you can still build a good retirement portfolio, make regular deposits and easily view all of your information in one place. … and get guaraneteed access to your funds within 24 hours.

Here’s a closer look at some of the strategy behind the Basic account.

How M1 Finance Works

M1 Finance was founded by four ex-Wall Street guys – Doug Merril, Lee Eisenberg, Dan Zappulla, Matthew Cullen. As a company, M1 strives to make personal finance simple and affordable. Merril and his team are experienced in banking, financial services, and mobile consumer technology. M1 is a robo-advisor that uses technology to make it easy for you to invest. And one thing that’s intriguing about M1 Finance is that they’ve actually managed to lower the costs to 0.25% (from the industry standard of over 1%) by using the efficiencies of technology.

Rebalancing

Have you ever wondered how people that read, follow, and analyze the stock market are able to get such consistent and impressive returns?

Some people use complex algorithms, others rely on an inside edge. But actually, the secret to consistently fantastic returns is something that is much simpler than that. It’s called “rebalancing.”

Rebalancing is the process of systematically bringing assets back to their target allocation by buying or selling portions of each of your holdings in unison. The idea is as simple as it is powerful. When asset prices get out of whack, you buy or sell to bring them back in line.

The premise of rebalancing is that over time the stock market tends to drift in one direction. No one is sure which direction, but everyone agrees it does. At any given point in time, the stock market can be thought of as a portfolio allocation of stocks versus bonds. This is true even if you are using exchange traded funds (ETFs) that capture the performance of multiple stocks. The true and eventual 60/40 mix might not be present at the current moment in time, but eventually it will converge to it.

Dividend Reinvestment

Plans: M1 Finance Review

  • Dividend reinvestment plans provide you with a golden opportunity to grow your money without paying taxes, by rolling your earned dividends into new investments.
  • The M1 Finance robo-investor service is a Dividend Reinvestment Plan that makes it easy to reinvest your dividends every month (or whenever you want).
  • M1 Finance is a Dividend Reinvestment Plan that allows you to buy fractional shares of stock.
  • This makes it much easier to pick the right mutual fund or ETF for you, and meet your investment objectives.
  • M1 Finance lets you choose from over 3,000 no-load, no-commission mutual funds and ETFs from providers such as Vanguard, Fidelity, Schwab, and iShares.
  • M1 Finance makes it easy to automate your investing, and save on trading and account fees.

Drilling Down Deeper on M1 Finance “Pies”

M1 Finance is an entire robo-investing platform as well as a money management system that wants to revolutionize the way you invest. Let’s take a deeper dive into the platform and look a little closer at the “Pies”.

M1 Finance Tax Considerations

(Investing Blog)

M1 Finance, a securities broker, has been providing robo-investing services for investors since 2014. The service provides a user-friendly online interface for creating and managing your investment portfolio. Through the M1 platform, you can manage investments in individual stocks, stock ETFs, bonds, and mutual funds.

If you’re new to robo-investing but have always wondered how it works, you’re in the right place. Below, you’ll learn about the basics of robo-investing, how M1 Finance is different from its competitors, and M1’s tax-related considerations.

How Does M1 Finance Make Money if they Don’t Charge Fees?

You probably pay fees when you buy a stock online, but who takes care of the rebalancing and the tax loss harvesting? M1 Finance does!

What are Treynor Ratio, Sortino Ratio and Sharpe Ratio?

The way to think of these ratios is what would you give up in return for a 1 percent outperformance over its benchmark over five years. One of the more popular ways to judge a fund's performance is by using a metric called the Sharpe ratio.

In short, the Sharpe ratio compares the excess return you've earned for the risk you've taken. The faster the excess return, the higher the Sharpe ratio is. The higher the Sharpe ratio is the better. Above 0.3 is considered excellent, above 0.5 very good, above 0.7 about average, and below 0.3 poor.

M1 Finance Features

M1 Finance is built on three pillars:

{1}. A community of investors who can share information and ideas.
{2}. A company that can make investing profitable.
{3}. An investment platform that makes it easy to listen to the community and connect with people.
{4}. Investing Community

In the world of investing, it’s easy for people to become isolated and depressed. Everyone feels like a total failure when they are losing money, even if their losses are nothing to be ashamed of compared to many. But everyone is looking for the next hot thing and how to beat the market and get rich quickly.

This isolation leads to a lot of poor investing habits. Negative investing communities are more likely to engage in poor investing practices like rationalizing losses as investments. Because they are so isolated, they have no one to pull them out of the slump. So the cycle goes on until a crisis eventually comes out of nowhere and costs them their retirement savings.

How to Sign Up For an M1 Finance Account

Let’s start with the main on signing up. It’s incredibly easy to get started on M1. (Prep, you’ll want to gather your bank screen shots and routing number and Social Security number.) Customers can get started in around 15 minutes … or even less.

Here’s the things you will need. You will need to head over to the M1 Finance website and set up an account.

First, you’ll be asked for a username and password. This info is used to login to your M1 account. Click the “Create Your M1 Account” Link and then set up your username and password, which they will ask you for when you come back.

Next, you will have to enter your bank information. This is where they will capture the money that you choose to open an account with them. So you’ll need to know about your bank account and its routing number to head over to the next step. (they will also ask you for your Social Security number.)

Build a Portfolio

M1 Finance is a robo-advisor that builds, manages, and maintains a diversified portfolio of individual securities within an asset allocation constructed according to the investor’s risk tolerance and goals. There are no account minimums and no trading fees.

We have been experimenting with M1 Finance for six months and have been very happy with the service. We feel that M1 Finance is a great tool to begin investing because it has some of the features of more expensive financial services but is frankly quite a bargain.

Open Your Brokerage Account

Investing in the stock market can be tricky, meaning if you don’t research and use the right online resources, you can lose money quickly.

M1 Finance is a unique investing system that allows you to invest in the stock market with zero fees.

So, is M1 Finance a scam? Or is it a legit way to invest in the stock market?

Let’s find out.

Fund Your Portfolio

If you’ve been itching to finally get started with investing but have put it off because of the painful slow process of asset allocation, you’re not alone. Robo-investing mechanisms aim to change that by making the process as simple as possible.

M1 Finance is the first startup to do this in a way that allows you to get started with investing in a matter of seconds. The startup has figured out a way to replicate an online brokerage account but with zero compatibility. What this means is that you can get started with as little as one dollar when you open up an M1 account.

The New York based start-up has figured out a way to give investors true portfolio management for free, but they make their money on the backend with the introduction of alternative products that could make you money.

The biggest draw of M1 Finance is that you can start making automatic deposits right away. The second thing is the streamlined interface and experience of using M1 that makes it as simple as possible. The third and most enticing draw is the lack of a traditional minimum balance.

M1 Finance Advantages and Disadvantages

M1 Finance is an online investment platform that is perfect for first-time investors who just want to keep it simple. M1 launched back in 2013 and offers nothing but low-cost index funds that you can buy and sell whenever you want. M1 uses an algorithm to create a unique investment portfolio based on your goals and risk tolerance.

M1 Finance Pros:

Current Robo-Investing platforms such as M1 Finance and Wealthfront are booming because they’re efficient, easy-to-use and provide a broad range of low-cost investment options. M1 Finance will offer you access to a diverse range of low-cost investments funds from Vanguard’s entire line up of ETFs (around 2,000 to date). These range from “conservative” with a few percentage points of risk up to “aggressive” with a 10%+ Annual Return.

Realistically, most of us don’t have the time to do the research necessary to invest in a broad set of Mutual Funds. The M1 Finance offering and service makes it easy to invest in a portfolio comprised of diverse funds and keep track of your investments. This broad scope of investment options makes it an ideal platform for all investors, from investors at the beginning of their investment journey to long term investors who are looking for continued diversification of their portfolio.

M1 Finance Cons:

M1 Finance has many great features for the daily investor. However, it’s not exactly perfect. The M1 Finance review will cover the cons of M1 Finance to help you better decide if the robo-adviser is a good fit for you.

There are a few features that could use some improvement.

Why You Should Open an Account with M1 Finance

I love M1 Finance for a couple of reasons.

One, I can easily set up automated deposits to buy stocks once a month. This is easier than buying and selling stocks.

Two, I can set up a local investing account to consider my hometown stocks. If you’re not from where I live, M1 Finance can set up an account using the stock exchange from your hometown.

Three, I can not only buy stocks, I can make investments in fractional shares, which means I can buy shares without spending all the money I have.

Four, I can experiment with lots of different strategies with my M1 Finance account without risking too much of my money. This is a great way to establish a personal investing brand, verifying your strategy with real data.

And five, it’s free.