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M1 Finance is a fee-free platform that combines investing, cash management, and borrowing under one roof. A drawback, however, is that it doesn’t offer human advisor support or provide tax-loss harvesting. Instead, M1 Finance has a tax minimization feature aimed at reducing investors’ owed taxes.
Overview of M1 Finance
M1 Finance is an intuitive wealth-building platform offering automated investing with personalized portfolios. It’s one of the best investment apps for straightforward portfolio diversification through fractional share investing.
Designed for long-term investing, M1 Finance offers individual brokerage accounts, IRAs, a crypto-trading account, and trust accounts for passive and active traders. Margin trading and commission-free trades are also available.
M1 Finance doesn’t provide tax-loss harvesting. Instead, it has a tax minimization feature aimed at minimizing investors’ owed amount in taxes. It reduces your taxes by selling investment securities with the lowest tax burden first. This includes short-term capital loss (from biggest to smallest loss) and long-term capital loss (from biggest to smallest).
Ways to Invest with M1 Finance
Individual and Joint Brokerage Accounts
M1 Finance is a hybrid investment app that combines self-directed trading and automated management. The app uses pie-based models that let you choose which stocks, ETFs, or portfolios you want to invest in and what percentage of your money you’d like to allocate toward each investment.
You can also invest in M1’s Model Portfolios, which are themed investment portfolios of stocks and ETFs aligned to different goals, such as socially responsible investing or retirement.
On the self-directed side, the M1 app lets you buy or sell individual securities or slices of your pie portfolio. M1 Finance offers fractional shares, auto-invest settings, dollar-cost averaging, portfolio rebalancing, and tax-minimization features. Margin trading is available for account balances over $2,000 at a competitive 7.25% rate.
Retirement Accounts
M1 Finance offers the following automated retirement account options:
Each retirement account allows you to pick your own stocks and ETFs, select professional portfolios, purchase fractional shares, and automatically reinvest dividends.
Custodial Accounts
M1 Finance offers UTMA/UGMA custodial account options for parents or guardians to invest on behalf of their children. Once your child or dependent reaches the age of majority in their state (usually 18 or 21), M1 Finance will restrict all trading on the account.
The custodial account beneficiary has two options once they reach the age of majority: Withdraw the funds or transfer them to another taxable investment account.
Crypto Account
The M1 Crypto account allows you to invest in commission-free cryptocurrencies like Bitcoin, Ethereum, and Litecoin. You can currently create your own customized “pies” (or portfolios) and set target percentages for each pie. Automated trading is also available for cryptocurrencies.
You can also invest in the following crypto-related ETFs and trusts:
- ProShares Bitcoin Strategy ETF (BITO)
- Grayscale Ethereum Classic Trust ETF (ETCG)
- Grayscale Ethereum Trust (ETHE)
- Grayscale Bitcoin Trust (GBTC)
- Grayscale Litecoin Trust ETF (LTCN)
- Grayscale Digital Large Cap Fund LLC (GDLC)
You’ll also have access to M1 Finance’s large selection of OTC securities like Adidas (ADDYY), Nintendo Co., Ltd. (NTDOY), and Tesco PLC.
M1 Finance offers a custodial wallet powered by Bakkt.
Trust Accounts
If you’re considering setting up a trust account, you’ll need at least $5,000 to get started. M1 Finance supports both revocable and irrevocable trusts. You’ll need an existing M1 Finance account before you can set one up. Once signed up, you can add stocks, ETFs, real estate, cash, businesses, and more to your account.
M1 Finance encourages clients to consult an estate planning or family attorney before opening a trust.
Investment Options
With M1 Finance, you can invest in commission-free stocks, ETFs, fractional shares, and cryptocurrencies. If you’re interested in socially conscious investing options, M1 Finance offers pre-made ESG ETF pies.
M1 Finance Fees
M1 Finance requires a $100 minimum to open a standard individual or joint brokerage or crypto account. IRAs require a $500 account minimum, and trust accounts require a $5,000 minimum.
There’s a $3 monthly fee for accounts under $10,000. If your account is $50 or less and there has been no trading or deposit activity over 90 days, you may be subject to a $50 inactivity fee.
Pros and Cons M1 Finance
M1 Finance Pros
- Offers multiple investment options, including crypto and trusts
- DIY and automatic investing strategies
- Tax minimization features
- Fractional share investing
- auto reinvest dividends
M1 Finance Cons
- Doesn’t offer mutual funds, futures, or options trading
- Doesn’t offer advanced features like tax-loss harvesting
Is M1 Finance Trustworthy?
The Better Business Bureau has given M1 Finance an F rating. The BBB cites the number of complaints filed against the business as the reason for its rating.
The bureau primarily rates companies on customer interaction, complaint history, type of business, time in business, advertising issues, and licensing or government actions. The BBB also states that its ratings don’t predict whether a company will be reliable or perform well.
March 18, 2024, FINRA fined M1 Finance $850,000 for misleading and exaggerated claims made by influencers on the firm’s behalf. Approximately 1,700 influencers were working on the company’s behalf and promoting misleading information that violated multiple FINRA rules. M1 Finance failed to review influencers’ content and implement a reasonable system for supervising claims.
M1 Finance Alternatives
M1 Finance vs. Betterment
M1 Finance and Betterment Investing are both suitable choices for passive investors who want to utilize automated portfolio management. But fees, features, and account options differ for each platform.
If you’re solely interested in automated investing but don’t want to worry about minimum requirements to set up an account, Betterment is likely the better option. M1 Finance is preferred for investors who want access to both self-directed and automated investing features.
A downside to M1 Finance is that you’ll need a minimum of $500 to open an IRA. You can access automated IRAs without any minimums with Betterment.
M1 Finance vs. Wealthfront
Wealthfront InvestingM1 Finance and have many commonalities. Both offer ETFs and crypto exposure.
M1 Finance is better for active traders who want to trade stocks, ETFs, and cryptocurrencies. Wealthfront only offers crypto trusts, which give investors a more indirect exposure to the crypto market. You can only allocate up to 10% of your portfolio to crypto trusts with Wealthfront. But unlike M1 Finance, Wealthfront offers 529 plans.
Methodology: How We Reviewed M1 Finance
We examined M1 Finance investing using Business Insider’s rating methodology for investing platforms to compare and examine account types, pricing, investment options, and overall customer experience when reviewing investing platforms. Platforms are given a rating between 0 to 5.
Investment platforms usually offer multiple assets, trading tools, fees, and other resources. Some platforms are better for more advanced investors or active investors, while others may better suit beginner and passive investors. M1 Finance was evaluated, focusing on how it performs in each category.
Business Insider’s Overall M1 Finance Rating
M1 Finance Frequently Asked Questions (FAQs)
M1 Finance is a comprehensive money-managing and investment app combining automated portfolio management with the flexibility of self-directed trading. You can access banking, investing, and loan services under one roof with M1 Finance. The platform also stands out with its unique “pie” investment model so investors can more easily invest in a larger selection of assets called “slices.”
M1 Finance is a commission-free trading platform offering a range of stocks, ETFs, fractional shares, and cryptocurrencies. No account management fees make it an appealing platform for fee-conscious investors. However, there is a $3 monthly fee to access premium features like extended trading hours, but the fee is waived for accounts of $10,000 or more.
M1 Finance is suitable for beginner investors who want the convenience of automated portfolio management with the flexibility to hand-pick the assets in their portfolio. The platform also offers pre-built Model portfolios aligned with various investment goals and risk tolerances. M1 Finance is also fairly low-cost, offering thousands of fractional shares called “slices” and commission-free stocks, ETFs, and cryptocurrencies.
Advanced investors can benefit from M1 Finance’s customizing capabilities integrated with automated portfolio management. Sophisticated traders can utilize the platform’s robust stock and ETF selection, dividend reinvesting features, and tax minimization strategies. However, M1 Finance doesn’t offer advanced charting tools or market data.
Beyond Investing, M1 Finance offers banking and borrowing services. You can open an M1 Spend checking account for cashback, integrated interest-earning capabilities, or a high-yield individual or joint savings account. M1 Borrow is the platform’s loan service, offering margin and personal loans at competitive rates.