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M1 Finance Review 2021: Is It Worth It?

M1 Finance Review 2021

I am personally very excited to bring you Wall Street Survivor's M1 Finance review.

I have my own Roth IRA on M1 Finance and would highly recommend it for many investors.

In this M1 Finance review, you will learn about:

What Is M1 Finance?

M1 Finance is a financial services company that offers investment accounts, a cash management program, and margin trading.

The platform uses a unique portfolio construction system centered around “pies” that gives you total control of how your portfolio looks.

Let's take a look at M1 Finance and see if it's the right investment platform for you.

What Account Types Are Offered on M1 Finance?

M1 offers several different account types that all serve different purposes.

Taxable Investment Accounts

M1 Finance offers both individual and joint investment accounts.

These are your typical, taxable brokerage accounts. You'll pay capital gains tax and you'll be making your contributions with after-tax dollars.

Retirement Accounts

M1 Finance offers Traditional, Roth, and SEP IRAs.

Traditional IRAs allow you to receive a deduction to your taxable income when you contribute.

Roth IRA contributions are made with after-tax dollars, but you don't have to pay any taxes when you withdraw your contributions and earnings in retirement.

Simplified Employee Pension (SEP) plans allow employers to contribute to their employees' traditional IRAs (even if you're self-employed).

You can also rollover your 401(k) from a previous employer to M1 Finance.

Trust Accounts

If you want to set up a trust or you're the beneficiary of a trust, M1 Finance supports trust accounts on its platform.

Custodial Accounts

You can use M1 Finance to set up a custodial account for your child or another minor, which you will transfer to them when they become an adult. Custodial accounts are only available to M1 Plus members.

So, What Are “Pies?”

A “pie” is M1 Finance's name for mini-portfolios you can create and add to your main portfolio.

You can create and name your own pies, or choose from M1 Finance's selection of Expert Pies.

The Expert Pies include everything from saving for retirement, to socially responsible investing (SRI), to mimicking a hedge fund's investments at a fraction of the cost.

For example, let's say I wanted to create a portfolio on M1 Finance that's made up of 50% tech stocks and 50% Berkshire Hathaway.

I would first create my own pie comprised of my favorite tech stocks, weighting them any way I like.

Then, I would select the Berkshire Hathaway pie from the Hedge Fund Followers section of the Expert Pies.

Then, I would add these two pies to my main portfolio and give them each a 50% weight, and boom! I have my desired portfolio.

Trading Windows

M1 Finance only lets you place trades during certain windows of time.

As a standard M1 user, you can place trades during the 9:30am window.

If you sign up for M1 Plus, you also get access to the 3:00pm window.

This feature is not ideal for day traders or investors who want to place short-term trades at specific times of the day.

But for buy-and-hold investors, it shouldn't be an issue, since you can just submit your trade ahead of time and know that it will go through during the next trading window.

M1 Borrow

M1 Borrow is M1 Finance’s margin program.

To be eligible to borrow money, your portfolio must be worth at least $5000.

You can borrow up to 35% of the value of your portfolio at a 2% interest rate.

If you’re a member of M1 Plus, your interest rate is 2%.

Keep in mind that while trading on margin can help you increase your overall return, it can also exacerbate your losses.

If you need a refresher on how margin works, check out our article on How to Use Debt to Your Advantage.

M1 Spend

Spend Checking

The M1 Spend Checking account is a cash management program that allows you to open a free checking account and link it to your M1 Spend and M1 Borrow accounts.

There is no minimum balance for the checking account, no monthly fee, and no foreign transaction fees.

You can set up direct deposit and automatic transfers, and you even get instant transfers between your M1 accounts so you can have quicker access to your money.

When you sign up for Spend Checking, you get a debit card you can use for everyday purchases.

While M1 does not have a dedicated ATM network, you can use your debit card at any ATM to withdraw money.

M1 will reimburse you for one ATM fee per month (four per month for M1 Plus members).

M1 Plus members will also receive interest at a 1% APY for the money deposited in their Spend Checking account and 1% cash back on purchases.

The M1 Spend Checking account deposits your money with Lincoln Savings Bank, M1 Finance’s partner bank.

The Owner’s Rewards Card

The Owner’s Rewards Card is a credit card from M1 that uses a unique cash back program: you earn cash back when you spend money at companies you invest in!

The card is named the Owner’s Rewards Card because holding stock in a company makes you a partial owner of the company.

The cash back program for the credit card has a tiered system that lets you earn more cash back depending on which company you’re buying products or services from.

There is a 2.5% cash back tier, a 5% cash back tier, and a 10% cash back tier.

Click here to see a list of the companies in each tier.

For purchases at companies not in those tiers, cardholders will earn 1.5% cash back everywhere else.

You can earn a maximum of $200 cash back per month.

There is an annual fee of $95 for the Owner’s Rewards Card, but that fee is waived for M1 Plus members.

At the moment, only M1 Plus members are invited to apply for the Owner’s Rewards Card, but M1 is expected to open applications to standard M1 users in the future.

M1 Plus

M1 Plus is M1 Finance’s premium subscription for users who want to get more out of the M1 experience. Here are the features you get with M1 Plus:

  • Smart Transfers
  • 2% interest for M1 Borrow (vs. 3% with standard membership)
  • 1% APY for your M1 Spend Checking account balance
  • Custodial accounts
  • 1% cash back on purchases made with your M1 Spend debit card
  • Four ATM fee reimbursements per month on M1 Spend Checking (vs. one with standard membership)
  • Afternoon trading window (vs. only morning with standard membership)
  • Checks for M1 Spend Checking
  • Apply for the Owner’s Rewards Card

A subscription to M1 Plus costs $125 per year, but you can get your first year for free when you sign up now!

Is M1 Finance Safe?

Yes. M1 Finance has been in business since 2015 and has over half a million users who have invested more than $4.5 billion on their platform.

They are a member of both the SIPC and FINRA, meaning that they are regulated just as much as any other broker-dealer and your invested cash is insured (against M1 losing your money, not against the stocks in your portfolio going down in price).

M1’s partner banks are FDIC insured, so you won’t have to worry about the money in your M1 Spend Checking account being lost, either.

Is M1 Finance Free?

M1 Finance is absolutely free, if you want it to be.

There are no commissions on trades and no monthly fees on M1 Spend Checking.

As long as you keep at least $20 in your bank account and avoid terminating your accounts or doing wire transfers, your experience will be free.

Of course, if you decide to sign up for the Owner’s Rewards Card , you’ll have to pay the annual fee.

And if you want to subscribe to M1 Plus, you’ll pay the annual fee for that, too.

But you can get your first year of M1 Plus for free AND waive your Owner’s Rewards card annual fee if you sign up for M1 Plus now!

Who is M1 Finance For?

M1 Finance is for:

Experienced investors. M1 assumes that you know what you’re doing and gives you the freedom and control to build and manage your portfolio the way you want.

Investors with a long-term focus. M1 is built for investors who want to keep their money invested for a long time.

As long as you don't need to be able to make trades at a moment's notice, you'll be good to go with M1 Finance.

M1 Finance is NOT for:

Beginners. If you’re looking for a beginner platform that will guide you through your trades and give you advice on your portfolio, you may want to look elsewhere.

While M1 Finance does offer Expert Pies that are already created for you, you won’t get any tips on how to balance your portfolio or tools to help you plan for retirement.

There are research tools and simple screeners to help you narrow down your stock search, but M1 doesn't have financial advisors on staff to give you advice.

If you want a service that will allow you to talk on the phone with financial advisors or tailor a portfolio to your specific needs, you'll want to use a different platform.

Day Traders. The way M1 orchestrates your trading during designated trading windows means you can’t always buy or sell a stock at the exact second you want to do it.

The platform is best for those investors who are planning on holding their investments for many years and don’t care about the time of day during which they’re making trades.

Final Thoughts

As you can see, M1 Finance is a spectacular investing platform, but that doesn't mean that it's right for everyone.

Experienced investors will find a great home for their investments at M1 Finance due to the amount of control they have over their portfolios.

But beginner investors might want to get started with a beginner broker before stepping up to a hands-on platform like M1.