M1 Finance is a comprehensive financial platform that provides investment, cash management, and borrowing services without imposing fees. Despite its strengths, it has some notable limitations, including the absence of human advisor support and tax-loss harvesting. However, M1 Finance does include a tax minimization feature designed to reduce investors’ tax liabilities.
Overview of M1 Finance
M1 Finance is an easy-to-use platform for building wealth that facilitates automated investing with personalized portfolios. It is considered one of the top investment apps for streamlining portfolio diversification through fractional share investing.
Tailored for long-term investing, M1 Finance offers a range of accounts, including individual brokerage accounts, IRAs, a crypto-trading account, and trust accounts suited to both passive and active traders. Margin trading and commission-free trades are also available.
In lieu of tax-loss harvesting, M1 Finance offers a tax minimization feature targeted at lessening investors’ tax obligations. This feature achieves tax reduction by prioritizing the sale of investment securities with the lowest tax burden, including short-term and long-term capital losses.
Investment Options with M1 Finance
Individual and Joint Brokerage Accounts
M1 Finance serves as a hybrid investment platform that combines self-directed trading with automated management. The app utilizes pie-based models that enable users to select stocks, ETFs, or portfolios and allocate funds for each investment.
Users also have the option to invest in M1’s Model Portfolios, which are themed investment portfolios aligned with varying objectives, such as socially responsible investing or retirement planning.
On the self-directed side, the M1 app enables users to trade individual securities or slices of their pie portfolio. Features such as fractional shares, auto-invest settings, dollar-cost averaging, portfolio rebalancing, and tax minimization enhance the investing experience. Margin trading is available for accounts with balances exceeding $2,000 at a competitive 7.25% rate.
Retirement Accounts
M1 Finance offers a variety of automated retirement account options, including Traditional IRAs, Roth IRAs, SEP IRAs, and Rollover IRAs. These accounts allow users to select stocks and ETFs, choose professional portfolios, purchase fractional shares, and reinvest dividends automatically.
Custodial Accounts
M1 Finance provides UTMA/UGMA custodial account options for parents or guardians to invest on behalf of their children. However, once the beneficiary reaches the age of majority in their state, trading activity on the account is restricted. The beneficiary can choose to withdraw the funds or transfer them to another taxable investment account upon reaching the age of majority.
Crypto Account
The M1 Crypto account enables users to invest in commission-free cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. Users can create customized “pies” and establish target percentages for each portfolio. Automated trading is also available for cryptocurrencies, along with access to crypto-related ETFs and trusts.
Trust Accounts
Users considering setting up a trust account with M1 Finance must meet a minimum requirement of $5,000. Both revocable and irrevocable trusts are supported, and users are advised to consult with an estate planning or family attorney before opening a trust account.
Investment Options and Fees
M1 Finance offers commission-free stocks, ETFs, fractional shares, and cryptocurrencies. For investors interested in socially conscious options, the platform provides pre-made ESG ETF pies.
A standard individual or joint brokerage or crypto account requires a minimum deposit of $100, while IRAs require a $500 minimum. Trust accounts necessitate a minimum deposit of $5,000. Additionally, there is a $3 monthly fee for accounts under $10,000, along with a $50 inactivity fee for accounts with no activity for over 90 days.
Assessing M1 Finance
While M1 Finance offers various investment options, including crypto and trusts, it does not support mutual funds, futures, or options trading. Furthermore, the platform lacks advanced features such as tax-loss harvesting.
In terms of reliability, M1 Finance received an F rating from the Better Business Bureau due to the number of complaints filed against the business. Additionally, the Financial Industry Regulatory Authority (FINRA) fined M1 Finance $850,000 for the promotion of misleading information by influencers working on the company’s behalf.
Comparing M1 Finance to Other Platforms
When comparing M1 Finance to Betterment and Wealthfront, it’s important to consider factors such as fees, features, and account options. While M1 Finance offers a blend of self-directed and automated investing features, Betterment may be a more suitable option for automated investing without minimum requirements. On the other hand, Wealthfront caters to active traders and offers 529 plans, unlike M1 Finance.
Evaluation Criteria and Ratings
Business Insider’s rating of M1 Finance assessed features such as fees, investment selection, access, ethics, and customer service. The platform received an overall rating of 4.24 out of 5, reflecting its competitive performance in various categories.