Are you looking for an M1 Finance review? But you may wonder if it is a scam.
M1 Finance’s automated investing and comprehensive portfolio customization, along with its borrowing and lending capabilities, make for a fascinating combination. Choose from over sixty pre-built portfolios or “pies” (a nod to portfolio pie charts), or create your own.
Experienced investors can benefit from this portfolio management tool because it can be tailored to their own needs in terms of risk tolerance, return expectations, and other important factors.
In addition, M1’s minimal overall costs are a big plus, as there are no management or trading fees.
As a disclaimer, I’m not affiliated with M1 Finance. It means I’m not paid to write this review. So you can rest assured that you will get an honest and unbiased review from me.
At the end of this review, I’ll also tell you the best alternative to M1 Finance that has enabled me to make a full-time passive income online.
What Is M1 Finance?
M1 Finance is an all-in-one robo-advisor and financial platform that combines the best of the competition.
The company was founded in 2015 and is headquartered in Chicago. M1 Holdings Inc. serves as the parent company. M1 now manages more than $3 billion in assets.
CEO Brian Barnes believed the financial services industry was due for a shakeup and founded M1 to bring about that change.
Barnes then developed a very innovative product. M1 is a good entry point into the stock market if you’ve never looked into it before.
M1 Finance allows you to invest automatically. However, unlike competing robo-advisors, you have the freedom to choose your investments yourself.
As with other robo-advisors, the client is referred to a questionnaire that helps them assess their risk level.
M1 uses this questionnaire to recommend different portfolios, while other robo-advisors only use it to create your stock/bond allocation.
People who are less risk-averse tend to put more money into bonds, while those who are more risk-averse put more money into stocks and exchange-traded funds (ETFs).
Please keep in mind, however, that these are only suggestions. You still have the option to create a portfolio that is tailored to your exact needs.
M1 Financial Services is a FINRA-affiliated firm. Each investment account is protected up to a maximum value of $500,000 by the SIPC.
In addition, FDIC insurance covers deposits at M1 Spend up to $250,000. There are also no trading fees, which sets the company apart from popular apps like Robinhood.
How Does M1 Finance Work?
Through M1 Finance’s traditional online brokerage, you can invest in stocks and ETFs individually and commission-free, and you can use the free robo-advisor to help you allocate your assets wisely based on your goals and risk tolerance.
M1 Finance is unique among robo-advisors in that it does not charge its clients for managing their assets.
In contrast, many robo-advisors charge as little as a quarter of a percent. The average annual fee charged by a financial advisor is one percent.
To facilitate trading in stocks and exchange-traded funds (ETFs), M1 Finance offers brokerage services (though not for cryptocurrencies). There are no commissions for trading stocks and ETFs.
At M1, you can not only select individual stocks and ETFs, but also create your own “custom pie” or choose from one of the pre-made “expert pies”
The “pie” investment strategy offered by M1 is very similar to mutual funds in that it allows you to diversify your portfolio by allocating portions of it to other investments.
You have the option to invest in either custom cakes that you make yourself or “expert cakes” that are curated by professionals (e.g., a cake made of cakes).
Once your available balance at M1 Finance reaches $10, your money will be invested.
M1 Invest: Building Your Portfolio
M1’s investment pies are the main selling point over other platforms.
Pie investing allows you to create a customized, user-friendly investment profile. Plus, by buying fractional shares, investing can be both profitable and enjoyable.
What Exactly Are Investment Pies?
Investment tarts allow investors to create “tarts” in which each asset represents a single piece. These pieces can consist of bonds, stocks, or ETFs.
M1 automatically rebalances your investments after each purchase to ensure they are optimally distributed.
These pies consist of individual “slices” of specific stocks, bonds or low-cost exchange-traded funds (ETFs). In addition, they can be adjusted to meet any uncertainty.
When you sign up, you must select three individual investments (either stocks, funds, or expert pies).
You can also do a search if you wish.
You can easily find the stocks, ETFs and shares you want to invest in among the thousands on M1 Finance’s website, which are traded on the New York Stock Exchange and Nasdaq.
On the other hand, M1 Finance does not offer mutual funds to its clients.
Funding Your Account
When registering, you’ll not be asked to deposit money beforehand. You can invest on the platform with a minimum deposit of $100.
The first deposit to a retirement account must be at least $500.
Remember that a minimum of $10 is required for each deposit if you want to set up automatic deposits.
Adding a Plaid-enabled bank account is a required step in the setup process. If your bank is not yet displayed, you can search for it here.
You can also add a bank manually by providing the required routing and account information.
Account Types & Services
You can open a Roth IRA, a traditional IRA, a combined IRA or a custodial IRA with M1 Invest.
Alternatively, you can open a traditional IRA, a rollover IRA or SEP-IRA to invest your money.
M1 Finance’s M1 Invest platform offers a wide range of investment pie charts.
These include people investing in the stock market, retirement accounts, income securities and even hedge funds. In addition, M1 offers tools to make investments with a positive social or environmental impact at SRI.
In October 2020, M1 launched a brand-new service called Smart Transfers.
M1 Finance offers the usual IRA options as well as Roth, Traditional and Rollover IRAs, plus taxable and joint accounts.
A retirement account can be opened with as little as $500. You have the freedom to choose the investments for each retirement account.
It’s great that the Impact Investors program allows you to use pie portfolios. Fortunately, investing with a focus on social impact is not a fad.
Most of the best robo-advisors offer ESG options for their clients.
What are the Disadvantages of M1 Finance?
Two things struck me: First, there is no way to invest in mutual funds, and second, there is no mechanism for tax absorption of losses. You do not have to choose a single investment option, because you can buy a fraction of a share in stocks or an exchange-traded fund (ETF).
If you would like to borrow against your M1 Invest balance, you can do so through the low-interest M1 Borrow loan.
If your deposit balance is at least $5,000, you may borrow up to 35% of that balance at a prime rate of 3.5%.
This line of credit provides flexibility because it can be used in a variety of ways, such as an emergency fund, for a major purchase, or to pay off multiple high-interest debts at the same time. Those who participate in M1 Plus have access to a low prime rate of 2.0% when borrowing.
As with a margin account, borrowed funds can be used and reinvested multiple times.
Margin accounts carry some additional risks, but the goal is to invest the money and earn more than the interest rate at which you borrow it (often between 2% and 3.5%).
In mid-2019, M1 Finance launched the M1 Spend account, a free checking account that integrates seamlessly with all other M1 services.
This checking account is FDIC-insured up to $250,000, with no minimum balance, no monthly fees, and no annual fees.
M1 Spend is a great choice if you prefer to shop all of your financial information in one place.
The M1 Spend, Invest and Borrow accounts are all linked together so you can move funds freely between them. You can make purchases and use ATMs with the Visa debit card you receive from M1.
In addition, M1 Plus reimburses you for ATM fees and offers cash rebates for purchases made with the debit card.
The M1 Plus membership level is M1 Finance’s most exclusive service. For your annual membership fee of $125, you receive the following services:
- The balance in your M1 Spend checking account earns 1% APY interest.
- 1% discount on all purchases made with your M1 Spend card
- M1 Spend’s Metal Tungsten Debit Card
- M1 Invest account now offers more trading options.
- 1.5% discount on the interest rate of the M1 Borrow loan
Is M1 Finance Trustworthy?
To answer your question, M1 is a safe and trustworthy firm. M1 is a FINRA registered broker-dealer and all cash deposits are protected by the FDIC. Financial assets are also backed by SIPC insurance.
Therefore, you can rest assured that your funds are safe with M1 Finance.
Although M1 has only been around for a short time, there is little to worry about. Moreover, M1 is not a faraway foreign company, but an American company headquartered in Chicago, Illinois.
Is M1 Finance Good For Beginners?
For new investors or for those who do not want to manage their portfolio themselves, M1 Finance is an excellent free robo-advisor.
Excellent features that make investing on the site easy include commission-free trading, fractional shares, and straightforward asset allocation.
Why Is M1 Finance Bad?
If you take out a loan through M1 and the value of your assets goes down, you may get a maintenance call on your account.
Sometimes it’s not good to have many options open to you. It’s good to have a variety of investment options to choose from, but complexity isn’t necessarily an advantage.
What I Like About M1 Finance
- There are no trading or asset management fees.
- Portfolios that are customizable
- Portfolios with socially responsible investments
What I Don’t Like About M1 Finance
- No tax-loss harvesting is possible.
- Active traders should refrain from using automated services.
- Customer service is limited.
Can You Lose Money In M1 Finance?
The money you put into an investment can be lost. Past results do not allow conclusions about the future.
Users should be aware of the possible consequences of borrowing through the M1 Borrow margin account. It is highly recommended to consult an expert when making decisions about your personal finances and cash handling.
What Is The Minimum Deposit For M1 Finance?
Below are the initial deposit minimums:
Individual accounts: Minimum of $100.
Retirement accounts: Minimum of $500.
After the initial deposit, you can deposit any amount greater than $10.
Is M1 Finance FDIC Insured?
The Securities Investor Protection Corporation (SIPC) protects client assets, including cash and stock, in the event of a loss.
Cash is limited to $250,000, while total SIPC protection can be up to $500,000.
If the value of your shares declines, you’ll not receive compensation from the Securities Investor Protection Corporation (SIPC). Apex Clearing, the company’s clearing provider, also has additional insurance in case the SIPC’s limits are reached.
Accounts at M1 Spend and M1 Plus are guaranteed by the FDIC and Lincoln Savings Bank up to $250,000.
Is M1 Finance Legit?
M1 Finance is a real business.
if you really want to start investing, you can find something much better than M1 Finance.
To be clear: I am not compensated in any way for recommending the software I am evaluating. Stock investing is a fantastic way to do business, but you risk losing a lot of money if you are not careful.
Can You Make Money With M1 Finance?
The M1 finance app does enable financial gains.
Many people find investing in stocks complicated because of the many factors involved.
It’s certainly possible to profit from stock investing, but if you put in the tedious effort required to succeed in this industry (and believe me, it’s not easy), you can also make some money while you learn the ropes.
Is M1 Finance A Scam?
M1 Finance is not a scam. Of course it is possible to make money with it, but it is not as easy as they make it seem.
With finance, you should know that you are taking a significant risk.
Even if you make it to the big leagues and retire to a winery, getting there is so dangerous that it could cost you ten years of your life. And once you are there, if.
One of my close friends is a copywriter for a world leader in television advertising for financial shows. I am sorry to tell you this, but the “great” statistics they present in their commercials and landing sites are exaggerated at best.
They gloss over the many losing bets and trades that preceded the big win.
Well, most people can not endure three months of consecutive defeats before (ideally) experiencing a big win.
Best Alternative of M1 Finance to Make Passive Income
If you want to make a stable and secure stream of passive income, I would suggest you start an affiliate marketing business online.
Affiliate Marketing is perfect for anyone who is new to online business.
In fact, of all the online business models I’ve tried, affiliate marketing is the easiest and most rewarding so far.
In affiliate marketing, you can actually run your business almost with zero cost and achieve a steady and sustainable passive income to pay for your bills. You don’t need any initial capital and can even do it as a side hustle.
And if you really want to learn affiliate marketing and build a business from scratch, I’d recommend you to get started with the most reputable platform for affiliate marketing: Wealthy Affiliate.
Wealthy Affiliate is an all-in-one platform for building your affiliate marketing business from scratch. It offers you a free account (including a free website) with comprehensive training on SEO (free traffic methods), which enables you to get started with affiliate marketing right away without paying a penny.
But How Much Can You Earn with Wealthy Affiliate?
A 21-year old student from Wealthy Affiliate was able to earn $7,395 in just 1 week, which means he made more than $1k a day…all while using free traffic methods.
Wealthy Affiliate has existed for 15 years and there are many success stories in the past decade.
To give you more examples, here are some of the other inspiring success stories of Wealthy Affiliate members.
Where to Join Wealthy Affiliate?
Wealthy Affiliate has a very simple pricing scheme. It has free and premium membership.
If you want to feel about Wealthy Affiliate, you can sign up for the free starter membership here (no credit card required). You can select to be a free member with no time limit.
And as a starter member, you can get instant access to the community, live chat, over 500 training modules, 2 classrooms, networking, commenting, 1 free website, access to the keyword tool.
You can enjoy all these values without paying a penny.
So I strongly recommend you to register a free account and see it yourself.