M1 Finance is a one-stop-shop for any person looking to leverage the benefits of automated investing and someone looking to start investing. The online investing platform offers a combination of Robo-advisor functionalities and advanced trading features for scavenging opportunities in the capital markets.
Last year M1 Finance was a winner of the “Best Robo-Advisors” award by Investopedia. This is a big deal for any trading platform, let alone a new app/broker like M1 Finance. I recently downloaded the platform and really love it. It isn’t the be all trading platform, but does cover many things.
The platform strives to provide curated investment portfolios designed to meet the needs of novice and experienced traders as well as investors.
In addition, the platform offers a wide array of taxable trust and retirement accounts geared towards different investment portfolios and risk tolerance.
Three Reasons Why M1 Finance is the Best Trading Platform
M1 Finance is an ideal investment partner on the fact that it charges no fee when it comes to portfolio management. With as little as $100, one can invest and start generating returns from prebuilt pies at no additional cost. Customizable portfolios should appeal to experienced investors who could wish to build their own investment portfolios from scratch.
Likewise, you can select your own stocks and funds based on your risk tolerance. Being a Robo advisor, M1 Finance also leverages the Dynamic Rebalancing method to rebalance investment portfolios as investors deposit and withdraw cash.
In case if you are like me and just want the basic facts.
- Free Trading. I love the FREE Trading and being able to purchase fractional shares. This is a very cool feature for people that are wanting to invest, but don’t have enough money to purchase an expensive stock. Obviously you could purchase an ETF, but if I wanted to purchase Amazon Stock (NASDAQ: AMZN) it is currently over $2,000 per share. With factual shares, I can pick my favorite stocks and slowly build my own stock portfolio.
- Borrow Money. You can easily and quickly borrow against your portfolio without a credit check or any major inconvenience. Investors should have savings before investing, but sometimes life happens and you need extra cash for an emergency. It is comfortable feeling knowing I can access some of my investment funds.
- Spend Money. This is a new feature that M1 Finance rolled out that allows you to access your funds in a checking/cash management account. The current Annual Percentage Yield (APY) is 1.5% which is approximately 25 TIMES national checking rate. In case you wondered, yes this blows away CD rates. You can also get 1% cash back on all debit purchases without any limits.
How Does M1 Finance Work?
M1 Finance offers investors investment portfolio templates referred to as ‘pies,’ based on Modern Portfolio Theory. Conversely, Investors can invest in any one of these prebuilt templates or customize them to fit their needs.
Investors can choose investments from a pool of over 2,000 ETFs as well as individual stocks trading in the New York Stock Exchange and NASDAQ. Once investments are selected in the investment portfolio, M1 Finance assumes the role of managing the account within the pie through re-balancing and allocation.
The online investment platform has no minimum requirement when it comes to the amount of money an investor can invest in the pies. Likewise, the investment portfolio comes with zero fees, which ensures investors walk away with optimum returns.
Similarly, investors can monitor and tweak their investments every day as long as the markets are opened. All dividend income generated is reinvested in the portfolio once it reaches at least $10. Interested in dividend stocks? Read our recent article on “Top 10 Dividend Stocks For 2020. Should You Invest in Dividend Stocks?”
M1 Finance Investment Categories
M1 Finance offers a wide array of investment pies that investors can use to invest their capital. Some of the pies include
- General Investing: An investment pie that comes with a diversified portfolio based on investors risk tolerance
- Plan For retirement: An investment pie that allows investors to invest for a specific retirement date
- Responsible investing: An investment product that targets socially responsible investors
- Income Earners: A pie for income-focused investors based on dividends and income returns
- Hedge Fund Followers: An investment portfolio that mimics hedge funds investment strategies
- Industries Sectors: Investment portfolio geared towards specific industries and sectors
Who can use M1 Finance
M1 Finance is open to anyone regardless of trading or investing experience. As experienced investors build their own investment portfolio in the ‘pies,’ novice investors can rely on already built investment portfolios.
M1 Finance Drawbacks
Too much freedom when it comes to the selection of investments in investment portfolios can pose a significant danger to novice traders. Failure to do research on various investments could expose investors to unwarranted risk that could result in an account being wiped out.
Similarly, M1 Finance is not an ideal trading platform for investors looking to engage in aggressive day trading. The platform allows traders to place trades just once every day. Consequently, the platform won’t work well with traders looking to capitalize on daily stock price fluctuations.
M1 Finance comes with all the necessary features and protections needed for a successful investment career in the capital markets. The platform should appeal to both experienced and beginner investors given the investment products on offer, as well as the ability to customize investment portfolios.
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