M1 Finance Review: Pros And Cons (2024)

The single most popular trend in investing today is passive investing. Most people associate passive investing with low cost, broad based index funds like those you can purchase at Vanguard. But can you be a passive investor with a more complex strategy? M1 Financethinks you can.

Their innovative investing platform brings together the best of “behavioral alpha” and low cost brokerages to help users invest with confidence. If your investment strategy includes individual shares and low cost ETFs, you’ll be hard pressed to find a better investment tool than M1 Finance.

In fact, we've had M1 Finance "Honorable Mentions" onour list of the best brokers to invest at this year. They're also consistently mentioned by our readers as one of the best places to invest. Here's our review.

M1 Finance is a brokerage firm that was founded in 2015 by Brian Barnes. In his book Nudge, behavioral economist Richard Thaler, “people have a strong tendency to go along with the status quo or default option.”

Humans need a good default option, or we’ll make bad decisions. This is especially true in investing. It’s easy to have great investing intentions, but fail to follow through on them.

M1 Finance addresses this concern. Their low cost investing platform allows you to set up your ideal portfolio, and automate contributions to the portfolio. Once your default is set, you don’t have to think about it again.

Today, they have over 1 million users and have over $8 billion in assets on their platform.

M1 Finance sets itself apart by letting you create your own custom investment allocation and then automatically invest and rebalance into it.

They also offer a variety of banking services, including a great savings rate on their cash account.

Plus, you can borrow against your investments with M1 Borrow. Combined - all of these low cost services make M1 a compelling choice to invest.

Try M1 Finance today!

M1 Crypto

Yes, it's true! M1 launched crypto and you can start researching crypto and building crypto Pies. What's great is that you can create a balanced crypto portfolio in the same way you would with other assets.

The company says it's just one part of an ongoing process to offer new asset classes, products, and ways to invest.

The advantages of adding crypto are plenty, as you can:

• Integrate popular M1 features into Crypto Accounts to keep target allocations on track
  
• Invest in up to 10 coins, including Bitcoin (BTC), Ethereum (ETH), and other large-cap liquid crypto assets
• Stay aligned with dynamic rebalancing
  
• Set up an investing schedule using recurring deposits
  
• Automate trades with auto-invest

Low Price Includes Fractional Shares

What are fractional shares? Imagine that Amazon stock $AMZN is $800, but you only want to own $200 worth of stock. Traditionally, you could buy no less than 1 full share of stock. Fractional shares allow you to own just $200 worth of $AMZN or 0.25 shares. Low cost brokerages have allowed investors to employ fractional shares for years. But M1 Finance is among the first self-directed automated investment platforms that allows you to invest in fractional shares.

This means that investors can invest in particular stocks in part of their portfolio and in index fund ETFs in the other part. It should be noted, though, that M1 Finance doesn't currently support mutual fund investments.

M1 Finance does more than automate investing. It automates efficient rebalancing. Rebalancing involves buying the asset class that is underweight and selling that class that is overweight. “Buy low, sell high” is a shorthand way of saying rebalance your portfolio.

M1 Finance does that for you automatically. First, you set your ideal portfolio structure, which M1 Finance calls "pie investing." Then every time you add money to your portfolio, M1 Finance automatically buys the most underweight asset. Every time you sell, they automatically sell the most overweight asset.

M1 Savings

M1 recently launched the M1 High-Yield Savings Account, which currently offers a whopping 5.00% APY. The account has no minimum balance requirement.

If you're already using M1 for other features - like Borrow - it could make sense. Otherwise, you might be better off in a traditional high-yield savings account that doesn't have a monthly fee involved.

Smart Transfers

Smart Transfers allows you to make transfers from your Invest to Spend account, or from your Spend to Invest account, based on rules you setup.

While you can always make one-time transfers, Smart Transfers allow you to setup rules. This has great potential as it allows you to deploy your cash based on rules you set.

Vice versa, if you're trying to build or replenish an emergency fund, you can setup your Invest account to transfer all of your cash from things like dividends back into your Spend account.

M1 Borrow

M1 Finance also recently announced a unique feature called M1 Borrow. Using M1, people can invest in exactly what they want. But doing so automatically opens up a portfolio line of credit at one of the lowest interest rates on the market. It is significantly easier to access, more flexible on terms, and lower cost than any other method of borrowing money that we've seen, whether it’s a mortgage, HELOC, auto loan, or personal loan.

This type ofborrowinghas historically only been available to the ultra-wealthy, who use it extensively due to the flexibility and low rates.M1Borrowmakes this even easier and less expensive, and opens it up to a much larger audience.

To qualify, users must have a taxable M1 brokerage account with an account balance of $5,000 or more. IRAs do not qualify. Your credit score isn't impacted** and M1 Finance doesn't do a credit check since it uses your portfolio as collateral.

You can borrow up to 35% of your account's equity balance out as a loan. The interest rate for standard accounts is 7.25% which is low when compared to the margin rates of other brokers.

The really interesting thing is there is no set payment schedule. You can pay this back as you see fit, simply realizing interest every month on your outstanding balance.

There are three main risks with using M1 Borrow: interest rates rise, the portfolio value declines and forces a maintenance call, or losses are magnified due to leverage. Make sure you're aware of these risks if you take advantage of this feature.

Custodial Accounts

M1 Finance users get access to custodial accounts - where you can setup an account for your children to invest for the long term. This account is a UGMA or UTMA account that you hold and make contributions to on behalf of a child.

You (the custodian) can manage the account, but the child is the beneficiary of the account and the owner of the assets in the account. Each deposit is considered an irrevocable gift, and there is no maximum amount that can be contributed.

It's important to remember that this type of account can have implications for financial aid. If you're considering using this account to save for college, we recommend you use a 529 plan instead.

M1 Finance launched the Owner's Rewards Card and it is an awesome rewards card that can deposit cash back into your M1 Finance account.

The card offers a flat, *1.5% cash back and 2.5%, 5%, and even 10% cash back at certain popular brands.

Unlike other rewards cards, the cash back that you earn with the Owner's Rewards Card can be automatically reinvested into your M1 Invest portfolio. And this card has no annual fee.

Check out the Owner's Rewards Card by M1 here >>

M1 Finance is currently offering a bonus offers for opening a new account with enough cash.

New users who open and deposit $10,000 or more within two weeks of opening your new M1 Brokerage Account and get a cash bonus of $75 – $500 deposited to that account. Here's how much you can earn with this bonus:

• $10,000 - $29,999: $75 Bonus
• $30,000 - $49,999: $150 Bonus
• $50,000 - $99,999: $250 Bonus
• $100,000+: $500 Bonus

Get started here >>

In November 2023, M1 announced an expanded integration with Plaid. Plaid is a fintech platform that allows financial apps to communicate with one another. In fact, Plaid connects more than 8,000 fintech apps and financial institutions.

One of the knocks against M1 in the past has been the lack of connectivity to other fintech platforms, such as Empower, YNAB, or Copilot. With this enhancement, you'll now be able to integrate your M1 account with many other financial apps, including payment systems, budgeting apps, etc. You will also be able to connect your bank to your M1 account.

For security purposes, your login credentials will remain with M1, even if Plaid is being used to integrate your data with a third-party.

There are no commissions to when placing trades with M1. There is, however, a $3 monthly fee, for all users who don't meet M1 Finance's monthly program requirements. The fee is waived if any of the following apply:

• Your M1 Invest or Earn account balance equals or exceeds $10,000 for at least one day during the billing cycle.
• You have an active M1 Finance personal loan.
• One of the account holders of a joint Cash account has an active M1 Personal Loan or their M1 Invest or Earn accounts have a balance of $10,000 or more for at least one day during the billing cycle.
• You have an Owner's Rewards Card and no other M1 accounts.

Not that M1 Finance used to be free for all users who weren't signed up with M1 Plus. However, M1 Plus has been discontinued, as of May 15, 2024, and the new monthly pricing model applies to all users. Fortunately, all clients now benefit from the same features that M1 Plus users previously enjoyed. This includes enhanced cash back rewards, more in-depth investing tools, and preferred Margin Loan rates.

There are also a few miscellaneous accounts that you'll want to be aware of. For example, you'll be charged a $20 inactivity fee if you don't log into your account for 90 days and $25 for wire transfers. Trades will also incur SEC and TAF regulatory fees that are generally only a few cents. See M1's full fee schedule here.

Try M1 Finance today.

How Does M1 Finance Compare?

M1 Finance is one of our top picks for places to invest because it offers great tools and features. It's an honorable mention in our Best Places To Invest list.

Check out this quick comparison here:

You visit the M1 Finance website to start your application.

You should receive an email within a day to let you know if your account's been approved. However, in some cases, M1 may ask you to submit identity verification documents. The following types of accounts can be opened with M1:

• Individual accounts
• Joint accounts
• IRAs (Traditional, Roth, SEP)
• Trust accounts
• Custodial accounts (M1 Plus users only)

M1 Finance will allow users to open multiple accounts under the same login. Currently, the limit per individual login is five accounts.

Yes, M1 Finance uses military-grade 4096-bit encryption on its sites and offers two-factor authentication (2FA) for account logins. Investment accounts are protected by SIPC insurance up to $500,000 and cash accounts are FDIC-insured up to $250,000.

The company also gets high marks for its app. It currently has 4.7 stars on AppStore and 4.5 stars on Google Play.

You can contact M1's support team by chatting live on their website or submitting a request using this contact form. It also provides a robust set of articles and tips inside its Help Center.

You won't find a customer service phone number or email address on M1's support page. However, we were able to find it on a separate legal page. To contact M1 by phone, you'll want to call 312-600-2883. Or if you prefer to reach out via email, you can do so at [email protected].

Why Should You Trust Us?

I have been writing about and reviewing investment firms and brokerages since 2009, and havereviewed almost every US-based investment firm open to individual investors. I have seen this space evolve from high cost to low cost options, and have seen the amount of investment tools grow for individuals. Plus, we've tested and tried M1 Finance's banking and brokerage platforms.

Furthermore, we have beenpolling our audience for yearsto find out which investment firms they trust and use, and that's how we put together our annual rankings of the best investment companies.

Finally, we have our compliance team that regularly checks and updates the facts on our reviews.

Who Is This For And Is It Worth It?

As with all investing platforms, M1 Financeisn’t for everyone. If you're looking for robo-advisor portfolios instead of a self-directed investing platform, you might want to considerCharles Schwab's Intelligent Portfolios and SoFi Invest.

Anyone who subscribes to a “technical analysis” investing philosophy should avoid M1 Finance too. You’ll spend too much time manipulating your portfolio. Instead, you'll want to choose a trader-focused broker like Thinkorswim or Ally Invest.

M1 Finance offers real value to investors:

• Automated Deposits
• Completely Automated Portfolio Management (completely customizable)
• Fractional Shares
• One Touch Rebalances
• Low Margin Rates
• M1 Crypto

One thing that you should note. All of M1 Finance’s portfolio dashboards consider your M1 Finance portfolio. If you’ve got significant assets in your work 401k or an outside account, you’ll need an overall portfolio balancing strategy. Consider Empower to get total portfolio statistics.

Honestly, M1 is a great choice, and as they continue to add more features and support, we're excited by what they are doing. Check out M1 here.