Investing, Personal Finance Blog, Retirement, Saving

Review: The M1 Finance (FREE) Investing Platform

M1 Finance, Robo-advisor, ETFs  M1 Finance Review

I’ve been a Vanguard advocate for quite a while, and I am a huge fan of low-cost index funds and investments (those with low fees and low expense ratios).  Shortly before I started the Black Sheep Millionaire blog, I also began experimenting with Betterment so I could decide whether the ‘added value’ of a robo-advisor was worth the added incremental costs.  In this post I’ll give you my review of a newer robo-advisor, called M1 Finance.

I liked that many of these companies were helping make investing, diversification, and rebalancing easier for people, but I didn’t like that they took away most of the control in the process.  The downside to most of the original robo-advisors was that they only gave investors the option to pick from a group of pre-built portfolios (which, for example, may or may not include the Vanguard ETFs that I would like to include in my own portfolio).

A few months ago, we also started testing the waters with M1 Finance, a newer robo-advisor, with a much-needed twist.  Right off the bat, I loved the fact that M1 let me choose my own investments, in addition to being able to pick from their pre-built portfolios.  With M1 we can be as passive, or as hands-on as we wanna be. Here’s the best part:

This week, M1 announced that they would be offering their investment platform TOTALLY FREE from now on.

Why This is a Big Deal

  • Because the M1 Finance platform offers the best of both worlds:
    • The automation of a robo-advisor, and
    • The flexibility and control of a full-service online brokerage
  • At no additional cost to us
    • We won’t pay any extra robo-advisor fees (typically an additional .25% – .40% +) – you only pay the ETF fees
    • M1 doesn’t charge commissions on stock/ETF purchases or sales

Why Do Fees Matter?

Even if you don’t need the added control/flexibility to choose your own investments, you can still select one of M1 Finance’s ‘easy’ pre-built portfolios and eliminate the additional fees (that other rob-advisors typically charge) completely.

You wouldn’t think that paying an extra 0.19% would add up to much, BUT over 30 years that could mean tens of thousands (or more) EXTRA DOLLA$ in your pockets!

M1 Finance Review - Do Expense Ratios Matter?

How Does M1 Finance Work?

A) You can select one of M1’s pre-built portfolios

M1 calls them ‘pies’ – for example, a target retirement fund, just like most employer-sponsored 401Ks offer:

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Or, there are tons of others you can choose from – like a pre-built portfolio (‘pie’) to match that of Berkshire Hathaway’s holdings and allocations. In case you didn’t know, that is Warren Buffet’s company… and if you don’t know who Warren Buffet is (or if you think he might be Jimmy Buffet’s brother), you need to find out with the quickness.  

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B) You can build your own

You can also create custom pies from scratch, selecting any securities from the NYSE, NASDAQ or BATS.  Pick your favorite investments and every contribution you make will be automatically and intelligently invested as you choose.

*Ours is Currently made up of Vanguard ETFs (Vanguard Total Stock Market ETF, Vanguard Value ETF, Vanguard Total Bond Market ETF)

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Here’s a quick video to give you a bit more visualization into how this all works:

C) You can create a mixture of both

Invest in some of their pre-built portfolios, and create your own – You can connect your pies in M1 Finance as building blocks to create the ideal long-term investing portfolio for you.

What Other Features Does M1 Finance Offer?

Rebalancing Your Portfolio:

  • Automatic Rebalancing – Each time you contribute (through either new contributions or dividends you receive), M1 directs them to underweighted slices of your portfolio.
  • One-click Rebalancing – If you stop regularly contributing to your portfolio/pie, your original allocations may get a bit out of whack. M1 makes it easy to bring your portfolio back to its original allocations (the percentages you want invested in each of your holdings)

Tax Minimization:

M1 Finance believes this can be more beneficial to their customers than Tax Loss Harvesting.  Their Tax Minimization feature uses a lot allocation strategy when you sell securities to help reduce your amount owed on taxes automatically.  It works like this:

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M1 Finance offers investors the best of both worlds: the automation of a robo-advisor with the flexibility of a full-service online brokerage.  For me, the best part about using M1 Finance is that I can continue investing in low-cost Vanguard ETFs AND have the automation of a robo-advisor at no additional cost.

This is also where we keep our Cash Back Credit Card Experiment investments (see also: Credit Card Experiment: Cash Back – Free Money Hack)


*The Black Sheep Millionaire Blog is an M1 Finance affiliate. As always, that does NOT influence the products or services that I recommend to you in any way.  I will only recommend products or services that I have either used myself, or that I believe would benefit you as a reader. Disclaimer & Disclosure

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