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M1 Finance is an investment app that offers expert-built portfolios, recurring investments, dynamic rebalancing and the ability to borrow against your taxable accounts, among many other features.
Its premium option gives access to custodial investment accounts for your kids, a high-yield checking account, crypto trading, margin loans, and a rewards credit card.
I’ve been an M1 Finance customer for more than a year and I think it’s a solid investing app for new investors.
There are quite a few things I like about the app, and some things I think they could do better. I jotted down a few notes on my experience using the app to share with you. Here’s my frank assessment of M1 Finance.
The Short Version
- After using M1 Finance for my Roth IRA for more than a year, I’m very pleased with the app overall.
- The investing pies, recurring investments, access to stocks and funds, dividend tracker, and fractional share investing are all excellent features.
- Where M1 Finance could improve is the limited trade windows, dividend reinvestment and access to custodial accounts.
My Year of Using M1 Finance
After researching and trying out more than a dozen investing apps over the years, I opened a Roth IRA with M1 Finance in 2021 to help automate my investments and give me access to my favorite index funds. The sign-up process was straightforward, and the mobile app walked me through everything.
At first, I only wanted to invest in a single index fund, but I was forced to choose three investments to build my “investing pie” when I started. It was a bit of a hassle to adjust my asset allocation, but this was an excellent way to initially diversify my account.
After that, I could transfer funds with a few clicks, and the app automatically invested the money according to the pie I created. Over the past 12 months, I deposited funds periodically. Though the market isn’t doing great right now (boo!), it’s easy to see my balance, asset allocation, and total return on investment within the app.
Overall, the app is simple to use; I can show my family and friends how to get set up fairly quickly. The quick access to thousands of investment choices is nice, and editing my asset allocation in my investment pie is easier than with any other app I’ve used. So, after more than a year I’m still a fan of the app, though there are a few things I’d like to see improve.
Five M1 Features That I Love
M1 Finance keeps adding features, but here are a few of my favorites:
1. Investing Pies
The investment pies are a great visual representation of the assets in your portfolio. They make it so easy to see how my money is invested. I can quickly add or remove assets from the pie, and then M1 Finance will automatically readjust my portfolio based on my pre-selected asset allocation.
When I created my initial pie M1 Finance wanted to make me invest in three funds (at a minimum). I get why they require this (for diversification), but at the time, trying to create a single-fund pie was a pain. However, since them M1 Finance has updated the feature, and it’s now insanely easy to add or remove a “slice” from your pie.
Overall, this is a fantastic feature that helps beginners to understand their asset allocation.
Read more >>> Asset Allocation: Filling Your Portfolio with the Right Mix
2. Recurring Investments
M1 Finance makes automated investing easy. You can set up a recurring investment on a schedule. You can choose how much you want to deposit and select the frequency, whether it be weekly, bi-weekly, or monthly — or whatever you like.
Since I’m a huge fan of dollar-cost averaging in my investments, this is the best set-it-and-forget-it approach.
And, since M1 Finance has you create a pie beforehand, it will automatically invest your money where it needs to go.
For example, if you set your pie to contain pie 60% in index funds, 30% in bonds, and 10% in stocks, M1 will split up your deposit accordingly. Overall, its a great feature and super easy to set up.
3. Access to Stocks and Funds
Unlike some other robo-advisors and investing apps, M1 Finance gives you access to more than just index funds. With thousands of stocks and hundreds of funds available from all the top companies, M1 Finance is like combining all the best brokers into a single app.
For example, I’m a fan of Vanguard funds, but I also like the zero-fee funds from Fidelity. With M1 Finance I can add whichever funds I like, plus I can pick stocks from a few of my favorite companies, all within the same portfolio. I can even share those pies with friends and family who want to learn more about how I’m managing my money (risky, I know). Overall, the selection is great, and there are no trading fees.
Read more >>> Investment Fees Matter… a Lot!
4. Dividend Tracker
While I haven’t built a sizeable-enough portfolio in the app to enjoy a hefty dividend payout (yet), it’s nice to be able to track all of my dividends in one place. On the app, I can click on my investment pie and swipe over to see the details of my portfolio gains and losses.
The dividend section shows the cumulative dividend payouts for each investment. While I haven’t built a complete dividend portfolio yet, it’s nice to see that my investments create passive income, and its easy to track performance over time.
Read more >>> How to Invest in Dividend Stocks
5. Fractional Share Investing
M1 Finance offers fractional share investing, which means I can invest in my favorite index fund or stock for as little as $1. With other investment apps, I’ve had to buy whole shares. This made it challenging to plan my investments since share prices are ever-changing and sometimes cost hundreds of dollars.
Fractional shares are also ideal for recurring investments; I can transfer small amounts of money to make regular purchases instead of sitting out of the market waiting for more funds to make a single larger purchase.
Note: While you can invest as little as $1 at a time in individual stocks, the minimum Auto-Invest amount is $25.
Three Things I Don’t Love About M1 Finance
M1 Finance is a well-designed app, but there are a few things I don’t like about it:
1. Limited Trade Windows
While M1 Finance offers access to individual stocks and ETFs with no trade fees, you can’t take advantage of a drop in the market during the day because there are limited trade windows when M1 executes trades.
For free users, there is a single trade window at 9:30 am when the market opens. That means if you buy a stock after all the trades execute and the window has closed, the trade won’t execute until 9:30 am the next day. If the stock drops by 10% and recovers during the day, you miss out on some serious gains.
You can access a second trade window with an M1 Plus account (at 3 pm), but this is still very limited compared to other stock trading apps like Robinhood or Webull.
2. Dividend Reinvestment (DRIP) Isn’t Great
M1 Finance offers access to hundreds of stocks and funds that pay out dividends. One of the most powerful investing strategies is to reinvest those dividends by buying more of the same asset. And while most apps can reinvest the dividends automatically, M1 Finance requires you to turn on the “Auto-invest” feature.
This feature automatically invests cash balances in your M1 account into your pie, but there is a minimum limit of $25. This means dividends under $25 will sit in your account unless you manually place the trade. This is annoying, and I wish they would allow me to turn on dividend reinvestment with a single button.
3. You Need M1 Plus To Open a Custodial Account
I have four kids, and I want to help them get a head start by opening a custodial account. Naturally, I checked into M1 to see if I could just open them through the app. Unfortunately, M1 Finance requires an M1 Plus account and limits it to two custodial accounts per customer, so it was a no-go.
These limits are obviously put in place to encourage users to upgrade their accounts to unlock this feature. I couldn’t justify the $125/year cost for only access to two accounts however, it might be worth paying for if you want to keep all your accounts at a single broker. I ended up going with Fidelity, which doesn’t charge anything for unlimited custodial accounts.
The Bottom Line: M1 Finance Is Great for Beginners
M1 Finance is a well-designed app I recommend to family and friends to start their investing journey. With the guided setup that helps users create a diversified portfolio, access to expert pies, recurring investments, and the ability to invest as little as $1, M1 is my go-to app. I will keep funding my Roth IRA passively, but I’ll use another trading app for active investing.
Further reading:
M1 Invest Disclosure: This article is not investment advice. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Brokerage products and services offered by M1 Finance, LLC Member FINRA/SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.
M1 Plus DIsclosure: M1 Plus is a $125 annual subscription offering products and services from M1 Spend LLC and M1 Finance LLC, both wholly-owned, separate but affiliated subsidiaries of M1 Holdings Inc.
