M1 Finance App Review FREE

Summary

A trade free investing app that allows investors from beginners to experts to customize their portfolio and invest for free. M1 Finance is one of the few options that allow fractional share investing.  Choose from a wide range of stocks and ETF's to create your own portfolio, or use a pre made expert portfolio (called “Pies”).

Overall
4.5
  • User-friendliness
    (4)
  • Portfolio Options
    (5)
  • Customer Service
    (5)
  • Portfolio Reports / Charts
    (3.5)
  • Price
    (5)
Comments Rating 0 (0 reviews)

The growth of investing apps is radical to say the least, and M1 Finance is another choice among some of the top investing apps today. Their app allows it's users to invest in the stock market for free and with as little as $5. Many who don't have a lot of money to invest need alternative solutions to invest in “fractional shares”, and M1 Finance is one of the few who make this easy and automatic. This M1 Finance Review will cover the features and benefits of the app, the pros and cons, as well as the type of investor that would best be suited using M1Finance for investing automatically.

An Overview of The M1 Finance Investing App

Product Description: M1 Finance is an investing app that allows users to invest in the stock market for free. They also enable users to borrow against their account with minimal requirements. M1 Spend is a new feature that enables users to get cashback on spending with an M1 Spend account.

Features & Benefits: The ability to invest in the stock market for free and with little money is attractive to anyone on a budget. M1 Finance is one of the few investing apps that allow users to invest in fractional shares of stock. Their borrowing feature makes it easy for consumers to get access to quick cash without having to withdrawal their investments.

Fees: The M1 Finance platform doesn't charge any fees for investing. However, if you invest in any ETF's offered, the ETF may have a small fee (this is not charged by M1, and is universal to the ETF wherever it is purchased). M1 Borrow has an interest rate on the amount borrowed, which is a variable rate that tracks the Federal Funds Rate. M1 Spend has an annual fee of $125 per year.

How Does The M1 Finance Investing App Work?

Traditional investment accounts have multiple hurdles for users to meet before you can open an account. Often times, you have to deposit a minimum amount to open the account, and in some cases you're required to maintain a minimum balance. Furthermore, traditional brokerage investment accounts charge trade commissions every time you purchase stock in the stock market.

M1 Finance allows users to invest in the stock market completely free of charge. After setting up your free account, you can begin transferring money and investing in almost any publicly traded stock company available without any trade commissions.

Your investment account is built of investment “Pies” or a portfolio of stocks. You may choose to select pre-made expert pies with a mix of companies selected based on different investing objectives, or you can choose to create your own pie with the companies you wish to include. Each pie is split up by percentage, and each investment you make will be allocated among the companies within your pies according to the percentage set for each company.

Benefits Of The M1 Finance Investing App

What makes M1 Finance different than other investment options? First of all, they allow you to save a lot of money on otherwise what would be high trade commissions. Most brokerages charge a $4.99 + commission every time you want to buy shares of a company, but with M1 Finance you invest in the stock market completely free of charge (unless the fund has a small management fee, which is not charged by M1 Finance, or the brokerage used to invest). Other major benefits of using M1 Finance are:

Customized Investment “Pies”

Within each investment account, are either one or multiple investment pies. These investment pies are mini portfolios of companies split up by percentage. Here's how your investment account is broken down:

M1 Finance Investment Pies
Each investment account is broken up in to investment pies; each investment pie is broken up into individual stocks and/or ETF funds.

Each investment account can be made up of 1, 2, 5 or even 10+ pies. If you don't feel confident in building your own investment pie, you can select one or multiple pies created by M1 Finance experts. It's the best of both worlds: create your own portfolio and/or use the expert made portfolios.

Monitor & Adjust Asset Allocations Automatically

Naturally, your investment pies will become somewhat off balance from the percentages you originally set for each pie. Most companies will do automatic re-balancing every quarter, semi annually or annually. The problem with this is it has the potential to create tax burdens from the buys and sells of your assets.

With M1 Finance, rather than re-balancing your portfolio, each time you add money to your investments, it gets allocated to the under-performing assets to bring them back up to the target allocation. Why is this beneficial?

  1. It avoids the potential tax burdens of buying and selling to re-balance your portfolio.
  2. It adds to your under-performing assets, which if you still believe them to be great investments, your just buying up more assets at a discounted price!
Each new investment deposit is allocated to the under-performing assets first to bring them back to their target weight. This avoids potential tax burdens, and allocates your money to purchase shares “on sale.”

Purchase Fractional Shares of Stock

Many people don't invest in the stock market because they don't have enough money. Furthermore, some companies have high priced shares with prices being hundreds of dollars of even thousands of dollars to purchase just one share.

Traditional brokerage accounts only let you purchase shares in hole number amounts, making it difficult for many to invest in their favorite companies due to the high share price. M1 Finance allows you to purchase almost any company that's publicly listed with as little as just a few bucks, regardless of the share price.

M1 Borrow Review

M1 Borrow allows users to borrow money against their portfolio without the strict requirements for approval that traditional banks follow. Borrowing money against your portfolio means that you can borrow a certain amount of money based on your portfolio balance, with your investments as collateral for the loan. If you don't pay the loan back, M1 would just deduct it from your investment portfolio.

The basic requirements to participate in M1 Borrow is a portfolio balance of at least $10,000. After that, you simply apply for an M1 line of credit which will be issued to you up to 35% of your total portfolio balance. If your balance is $10,000, you can borrow up to $3,500.

Your interest rate is variable and based on the Federal Funds Rate which is currently set at 4%. If the Federal Funds Rate changes, chances are it will be a fraction of a percent up or down, based on economic outlooks.

Why Use M1 Borrow Over A Bank Loan?

Banks will require a credit check and often have strict debt to income levels that are required to meet. For example, if you make $10,000 per month and your monthly debt obligations are $4,000, chances are it will be difficult to get approved by a bank since most banks have debt to income maximums around 40% – 45%.

Furthermore, traditional banks often have lengthy processes in obtaining your loan, and have major fees associated with setting the loan up to begin with.

The benefit of using M1 Borrow over a traditional bank is that you surpass all the strict requirements mentioned above. The main requirements are that you just have a minimum portfolio balance of $10,000 and you can borrow up to 35% of your portfolio balance.

M1 Spend Review

M1 Spend is a new product offered by M1 Finance that allows users to use a checking account that:

  • Provides 1.5% APY on your account balance
  • 1% cash back on all purchases without any limits
  • $0 minimum account balance

The M1 Spend debit card has two account levels. The first is M1 Plus, which provides all the benefits listed above for an annual fee of $125. The second option is the M1 Standard account, which is a basic checking account with a debit card, without the above benefits. The M1 Standard account has no annual fee.

Is The M1 Finance App Worth It?

When all is said and done, I'm a big believer of M1 Finance because of it's unique benefits that allow anyone to begin investing in the stock market for free and with just a few bucks. You also get the luxury of investing in your favorite companies should you choose, or pick from expert created portfolios. Their unique re-balancing technique is very enticing in my opinion, because when I purchase stocks, I do my due diligence first, and if their price is down, it means i'm getting shares at a discounted price. This only increases my overall rate of return.

If you want to start investing for free, and don't have much money, and perhaps aren't sure whether you prefer a hands on approach or some expert help, then M1 Finance is hands down one of the best options available.