M1 Finance Vs Robinhood - Bitter to Richer (2024)

M1 Finance and Robinhood are both marketed as affordable options for beginner investors to start their portfolio. These two options seem to share a lot of similarities, but they are actually quite different.

I will start by saying that there are innumerable tools at your disposal when it comes to investing, now more than ever, and M1 Finance and Robinhood are not your only options by any stretch of the imagination. However, both have their merits and I believe you’ll find that at least one of them will appeal to your current situation and needs.

They both offer commission-free trading options, but they have different focuses. Robinhood is more about individual investments and trades whereas M1 Finance helps you build a portfolio to consistently invest in. Unlike many standard brokerages, you can invest in fractional shares which is also known as microinvesting. To put it simply, you don’t have to pay for the full price of a stock if you want to invest in a company (some stocks can cost thousands for a single share), you can instead own a percentage of a share.

At the core, Robinhood is good for people who want to trade individual stocks, ETFs, and some cryptocurrencies. M1 Finance is centered around long-term investing that is easier to set up and automate. If you’ve been reading my blog you probably already have an idea of which one I prefer, especially for investors who are just starting out.

M1 Finance

Fees? Just expense ratios!

M1 Finance helps you set up your own custom portfolio of ETFs and index funds – you can even include individual stocks in your portfolio if you’d like. If you’re not ready to take part in the customization of your portfolio, you can also select from a list of portfolios – they divide them into categories based on your overarching goal (retirement, general investing, dividends and income, etc.). On top of all that, M1 Finance makes it easy to set up automatic transfers into your portfolio.

Pros

• M1 Finance will rebalance your portfolio using your new transfers to supplement funds you’re below the mark in – for example, assume you have a portfolio with two funds that are set to each be 50% of the total. If one fund sees large growth and becomes 70% of the portfolio overnight, new investments will go to the other fund to keep them each at 50% of your total.
• You have TONS of premade portfolio options for beginners.
• Multiple account types – standard taxable, joint, IRA, and trust.
• M1 Finance only requires a $100 minimum balance, which is more expensive than Robinhood, but still very affordable compared to most options.
• Portfolios can hold a large number of different ETFs and index funds (and even individual stocks).

Cons

• The platform doesn’t lend itself as well to investments in individual stocks.
• M1 Finance isn’t perfect for people who like very minute control.
• There are limited trading windows.

Robinhood

The popularity of commission-free trading is thanks in large part to Robinhood. While Robinhood offers individual stocks and ETFs, they also offer several cryptocurrencies – if that is something which strikes your fancy. Robinhood is definitely a great help for beginners who are learning how to invest, but it isn’t quite as simple as M1 Finance makes it – you do have to pick all your own investments. Additionally, Robinhood doesn’t have many of the tools other platforms offer.

So what makes Robinhood standout? Well, as I’ve already mentioned, Robinhood is a very cheap option. Unlike some other brokerages, they don’t institute exorbitant fees. Robinhood also has a very good setup for investing in individual stocks and day trading. I generally recommend most people, especially beginners, focus on investing in low-fee ETFs and index funds, but I won’t naysay investing in individual stocks (especially for people more accustomed to the stock market).

If you’re interested in learning about more about the stock market and want to focus on specific stocks, Robinhood is definitely a great pick. First, set aside some amount of money you want to invest but can afford to lose in its entirety. Next, invest in about 6-12 individual stocks you think will perform well. Over time, by seeing the performance of your choices, you’ll definitely learn a thing or two. Once you get comfortable enough to no longer call yourself a “beginner” it may be okay to try out trading or investing larger sums into individual stocks.

Remember, always know and understand what you’re investing in. Don’t invest in something solely because you’re afraid of missing out on the next big thing. Also, especially as far as trading is concerned, making sure you understand the tax advantages and disadvantages of different investment options is crucial.

Pros

• You have access to several cryptocurrencies.
• No minimum balance required – making it even easier to start.
• One of the simplest and most straightforward platforms for beginners.
• Robinhood offers some great features for trading.
• You get a free stock when you sign up (less than $10).

Cons

• It doesn’t have built in features for portfolios or easy rebalancing.
• There are very limited account types available.
• Encourages short-term investing rather than long-term investing.
• It lacks many advanced features and research tools that traders and investors may want and can find in other platforms.

Conclusion

With these platforms you’re not getting some sort of miracle solution. Even though both are great for beginners (and serious investors), in order to see good long-term gains, you still need to invest consistently and with purpose.

I know this article was doing a lot of comparing and contrasting between the two platforms, but it is probably best to think of them as similar tools with different purposes. M1 Finance is for automation and long-term investing into a portfolio. Robinhood is for investing in individual stocks and trading.

Which one you prefer is a very personal decision, and one that depends on your goals and current comfort-level with investing. I will note, if you like M1 Finance more, but your sole reason to use Robinhood instead is because of cryptocurrency – just use M1 Finance and check out other platforms for cryptocurrency. Likewise, if you don’t intend to invest a lot into a portfolio of index funds and ETFs, pass on M1 Finance in favor of Robinhood.

Still having a hard time choosing one? If you want to take a more passive approach to investing, go with M1 Finance. If you want to be more active and involved with your investments, and want to try your hand at trading, go with Robinhood.

Feel like I missed an important feature of M1 Finance or Robinhood? Let me know in the comments below, as well as what platform(s) you use for investing. For more content like this, and a free budgeting template and financial goals worksheet, be sure tosign upfor the Bitter to Richer newsletter.