M1 Finance Review
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Overview
At Millennial Economics, we only review products and services we use ourselves. I have personally been using M1 Finance for my investing, and I think it is a great option for those looking for a unique and simple way to invest.
M1 Finance is an online brokerage that allows its users to invest in individual Stock, Index Funds, ETFs, and Bonds. Unlike traditional brokerages, M1 Finances uses a pie system to manage your portfolio. On the platform, you can choose from pre-built portfolios and portfolio allocations, or you can build your own from the ground up.
To build your pie you simply select what you would like your portfolio or “pie” to be comprised of. Let’s use the below stocks as an example:
Tesla (TSLA)
Apple (APPL)
PayPal (PYPL)
Hilton Worldwide Holdings (HLT)
Once you have decided what you want your portfolio to be comprised of, you will then decide how much of the “pie” each stock will take up. If you wanted your portfolio to be equally distributed among the four choices in our example above, your pie would look like this:
Tesla (TSLA) - 25%
Apple (APPL) - 25%
PayPal (PYPL) - 25%
Hilton Worldwide Holdings (HLT) - 25%
With M1 Finance, you don’t have to have an equal distribution in your portfolio, however. If you wanted your Tesla holdings to take up more of your pie than the others you could set your pie up like this:
Tesla (TSLA) - 50%
Apple (APPL) - 17%
PayPal (PYPL) - 17%
Hilton Worldwide Holdings (HLT) - 16%
Once you have built your pie you can simply fund your account and invest in that pie as a whole. This makes diversification easy and makes your investing simple. Instead of having to purchase stocks manually for all four companies, you can simply invest in your pie and M1 Finance will allocate your money as you have dictated.
This is the core of what M1 Finance does, and they do it well. We will talk about some of the additional features M1 Finance has to offer below.
Features
Invest
M1 Finance allows users to invest in Stocks, ETFs, Index Funds, and Bonds via their “pie” system. M1 Finance requires users to buy and sell via their pie system. To purchase a new stock you must add it to your pie.
Borrow
M1 Finance allows you to borrow up to 35% of the value of your portfolio. Rates are as low as 2%, and you can use the funds to purchase what you would like. It is important to note that there is risk involved when borrowing money using your portfolio as collateral. M1 Finance reserves the right to perform a maintenance call on your account if your portfolio value declines. What this means is that M1 Finance can sell a portion of your portfolio without your consent if your portfolio value declines and you have borrowed money from them. This can become even riskier if you used your borrowed money to purchase additional stocks. At Millennial Economics we do not advise borrowing money with your portfolio as leverage. If you decide to do so make sure you are aware of the risk.
Spend
M1 Finance offers an integrated debit card that offers a 1% reward and easy transfer of funds between your investment account, loans through M1 Finance, and your debit card account.
Auto-Invest (DRIP)
M1 Finance offers Auto-Invest or Dividend Reinvestment Plan (DRIP) to its users. This means that any dividends earned or money in your account can be automatically invested into your pies. This is a great feature if you are a dividend investor and want to take full advantage of compound interest.
Fractional Shares
M1 Finance allows for the purchase of fractional shares. This is a great feature and one of the major benefits of investing with M1 Finance. The ability to purchase fractional shares means you don’t have to buy whole shares all at once. You can purchase just a portion of one if you’d like. This decreases the barrier to entry of a stock, and when paired with Auto-Investing can become a powerful investing tool.
Portfolio Rebalancing
M1 Finance offers automatic portfolio rebalancing. Over time, your portfolio may not be allocated as you would like. It is possible that one company’s stock may grow more than another, yet you still want to keep the original allocations of your pie intact. M1 Finance will rebalance your portfolio to ensure you are keeping those allocations.
Recurring Deposits
M1 Finance allows its users to set up recurring deposits into their accounts to further automate their investing.
Investing for Children
M1 Finance allows users to invest in custodial accounts for children.
Retirement Accounts
M1 Finance allows users to invest in Traditional, ROTH, and SEP IRAs.
Fees
There are no investing fees associated with M1 Finance. There are fees/interest charges associated with borrowing money through M1 Finance.
Who is M1 Finance Best For?
M1 Finance is best for Beginner to Intermediate investors looking for automation features that make investing simple. M1 Finance is not a great option for day traders or investors looking to perform a high volume of complex trading.
Our Opinion
I have personally been using M1 Finance for some time now. It is a great option for anyone looking to invest in a simple way. With features like Pre-Built Portfolios, “Pies”, Recurring Deposits, Dividend Reinvesting Plan (DRIP), Auto-Invest, and Portfolio Rebalancing, M1 Finance makes the process of investing easy. If you are performing a high volume of trades, M1 Finance would not be a great fit for you as you must work inside of their “pie” infrastructure.
Happy Investing!
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Jarod Dickson
Invest with M1 Finance!
Receive $30 when you open and fund your account!