When it comes to making financial and investment decisions, most people prefer to tread carefully before putting their money into something. Some may turn to a broker to guide them through the process but it may not be an arrangement that suits everyone. This is when investment tools like M1 Finance come into the picture. Such platforms are convenient ways to navigate through the investment market and browse options for investment plans. But there are so many such tools in the market. Does M1 Finance hold up in comparison? Let’s find out.

What Is M1 Finance?

M1 Finance is a Chicago-based company and is an emerging investment management platform. While it has not been in the business for as long as its competitors like Robinhood and Wealthfront have been, it has made a mark for itself in the market through a few unique features. It acts as a traditional online brokerage firm but also manages to incorporate more new-age robo investor tools.

The service is fairly straightforward to use and customers can get started with their account after answering a few questions that assess their risk tolerance and the goals they have with regards to their investment plans.

M1 Finance App

With an M1 Finance account, customers can invest, borrow and soon even spend! Customers can invest automatically and for free in any custom stock and ETF portfolio. Once that is done, they can also borrow by accessing a low-cost credit line. The payback can be on a schedule that they set for themselves.

The platform is also in the process of rolling out a spending option where customers will be able to access digital banking options that can be integrated with the investments they have made on the platform.

How Does It Work?

The process of getting started with M1 Finance is not too complicated. When you sign up for an account, you will be asked some preliminary questions. Based on the answers you provide and the information the platform is able to collect, M1 Finance will recommend a portfolio specifically designed for you. This portfolio will include a range of investments that you can choose to explore though the final decision lies completely in your hands. The recommendations are based on the criteria exchange-traded funds (ETFs) set. Typically, after the platform carries out an assessment of your risk behavior, those who have a lower risk tolerance will be encouraged to invest in more bonds, while those who are less risk averse will be encouraged to invest in more stocks.

What sets the tool apart from some of the other services in the market is the concept of pie investing. The pie is the way for the investor to navigate the tool and keep track of their investments, and how their assets and holdings have been distributed. The entire investment portfolio is dictated by the pie, which has investments in various categories. Once you have signed up for an account, the investment portfolio will be offered to you in the form of a pie. In the pie, you can get a clear and concise view of the potential of an investment plan, price history, expense ratio, etc.

M1 Finance Portfolio

The next step after creating your pie, you will need to decide the kind of investment account you are looking for. The only criteria for selecting one from the variety of IRAs and brokerage accounts is that you should be a US citizen with current domicile in the country.

The final step after you have selected the type of investment account you want is to provide personal details like your date of birth and Social Security Number. You can then fund your M1 Finance account by linking it with your bank account.

How Much Does It Cost?

What is great about this investment tool is that you can avail a variety of features at absolutely no cost! These include a variety of different types of investment accounts, custom portfolios, expert portfolios, investing schedules, checking accounts, etc. This is a completely accessible portal that allows you to invest your money where you see fit without charging a bomb for its services.

As an alternative, you can also opt for an M1 Plus account which will cost you $100 per year and will allow you to avail some extra features. You will be able to access two trading windows, a checking APY of 1.50% APY and 1% cashback. This account also comes with a checking balance and you will be provided with tungsten metal debit card once you sign up for it.

Pros and Cons

There are a few pros and cons that the service has. The following is a brief glimpse into what the service succeeds in doing and where it shows room for improvement:

Pros

  • The service demands no trade fees. You can use it completely free while also availing the investment advice it offers.
  • At $100, it has a considerably low barrier to entry.
  • It does not charge you an annual fee (unless you have signed up for the M1 Plus account).
  • It offers more liquidity and has several different risk profiles to pick from.
  • The automatic rebalancing and automated investing features make the process all the more convenient.

Cons

  • This is a US-only platform so you are limited in terms of geography.
  • It does not allow any outside holdings like employer 401(K) or any other brokerages. You are limited to the portfolio and pie that is created within the investment tool.
  • It does not offer any tax-loss harvesting.

Final Thoughts

From the brief description of the investment tool above and the pros and cons that have been meticulously listed, one can see that the service does have a great deal to offer. Sure, it has some drawbacks but it makes up for them by providing the service for free, creating a dynamic portfolio for each member and giving them the freedom to invest, borrow and spend! In the sea of investment tools and services, M1 Finance is definitely one that stands out.

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