- So in this video here
we're going to be doing a comprehensive review
of the investing app, or investing platform known as M1 Finance. It is by far the most
requested platform I've had, in terms of people
looking for me to review an investing platform and talk
about the pros and the cons, and whether or not I think
this is a good platform. And the reason for that
is because this platform is extremely disruptive in my opinion, as far as the services and
features they are offering. And the good thing is as
these other investing accounts out there are looking to
compete with each other, the offerings for the end user, the individual retail
investor like yourself, are gonna get better and better. And in my opinion,
looking at the different investing accounts out there, M1 Finance has the best package to offer. In terms of what they're
offering the investor and so that's what we're
gonna get into in this video. Explain what I like about M1 Finance, who I recommend it to, and
maybe who it's not so much for. And just kinda get into more
of an in depth dive here on the M1 Finance investing platform. Now if you are interested
in opening up an account with M1 Finance I do have a link down in the description below,
it is an affiliate link and you do not have to
use it, but if you do, understand that it helps
to support my channel here. It helps to support my work and allows me to make more videos like this. So if you are interested
in using that link, it's down in the description below, but you do not have to use it. So moving on here, what
I'm gonna do is as always break this review up into a
couple of different sections. So if you're looking to skip
ahead and check out one section only of this review, there's
gonna be a pinned comment with all those timestamps below. But first of all, let's go ahead and talk about what is M1 Finance? M1 Finance is a hybrid
platform, it's a blend between a traditional stockbroker
as well as Robo-adviser with the automated investing. So really M1 Finance covers
two different categories here, it's similar to these
Robo-advisors where they have plans that you can invest in where you say, okay I want to invest
in a growth portfolio, and they have prebuilt plans, or pies that you can invest in. Or if you want to be more
active and you wanna pick stocks you want to invest in you can say, okay, I'm gonna set up my portfolio,
I'm gonna set up my Pie or my percentages and I'm
going to allocate more money into this investment plan. So the way M1 Finance would
work is you're gonna pick the stocks or ETFs you
want in your portfolio, you're gonna set up
your allocation in terms of your percentages, and
then you're gonna continue to add more money into that account. So let's go ahead and go
over an example of this. Let's say you wanted to
build a portfolio where 20% of your money was going
in the Tesla stock, 10% was going into Apple,
10% was going into Walmart, and the other 50% was going
into the Vanguard 500 ETF. Well traditionally you would
run into a problem here. That's the fact that all of these stocks are going to be trading at a drastically different share price, and in order to get that correct balance
there of your portfolio and having those numbers
where they should be, you're gonna have to have a lot of money to make sure that exactly 20%
of your money is in Tesla. Or 50% is in that Vanguard 500 ETF. Well that is essentially
the niche that M1 Finance has fallen into, they're allowing you to buy fractional shares
up to 1/10,000th of a share of each of these stocks, that way you can have a well-balanced
portfolio from the get-go. Think about some of these
stocks out there like Amazon for example or Google that
trade over $1,000 per share if you wanted to have a 10%
stake in a stock like Google, you would need to have
well over 10 or $15,000 in that portfolio because of the fact that that share price is so high. But with M1 Finance you
can buy a fractional share of Google or a fractional share of Amazon and get that correct
allocation you are looking for with a much lower barrier to entry in terms of the amount in
your entire stock portfolio. So that is essentially the process here, you either start with a
prebuilt M1 Finance portfolio, or you build your own portfolio. You can start with a very
small amount of money because they allow you
to use fractional shares, and then as you add money they
are going to be automatically buying low, so let's say for
example, in your portfolio your Tesla stock is going through the roof and all of a sudden you're
overweight in Tesla. Well when you add more
money to that portfolio you're not going to be
buying more Tesla stock, you're gonna be buying more Apple stock or buying more Walmart,or whatever it is that you are low in at that point in time. Now that exact same thing
is true when you are selling from that account they're gonna sell what you're overweight
in not underweight in. And we're gonna also
talk about this later on, they're also going to sell
what is going to be the most tax-efficient based on the
investments that you are holding. So moving on here what
are the actual investments that you can buy with the M1 Finance app? Well you can buy over
6,000 listed securities that are both traded on the NASDAQ, the New York Stock Exchange
and then the BATS exchange. And the BATS is just a
global Stock Exchange, so there are over 6,000
publicly traded investments that you can invest in
through the M1 Finance app. This also includes ETFs and
there are almost 2,000 ETFs or exchange-traded funds
that you can invest in through M1 Finance. So what that means of course
is there are no penny stocks on M1 Finance and there
are no mutual funds. So if you were looking
to pick a penny stock out there that trades on an
over-the-counter exchange and you wanted to allocate money into that through the M1 Finance app, you would not be able to do that. The same thing is true
with the mutual funds, you cannot be allocating
money into mutual funds through the M1 Finance app. But if you are using M1 Financed my guess, is you're not a fan of
mutual funds anyway. You want to be a DIY or active investor and you don't want to be paying someone to manage your money. So I don't think many people
would be honestly interested in buying mutual funds through M1 Finance. And then like I said
earlier you have two options when it comes to investing in M1 Finance. Number one you can build
your own portfolio or Pie and you can also have
multiple different Pies within your portfolio,
and then option number two if you don't want to be
active with your investments you can utilize the prebuilt
pies, or portfolios, that M1 Finance offers completely free. And the main advantage here that we're going to get into is that when you're
investing traditionally with a Robo-advisor, if you're investing and you are following their plans, where they're allocating
that money for you, they're going to charge an annual fee. And the best part about M1 Finance is there are no fees, no fees to trade. There are no annual
management fees of any kind, and M1 Finance says it's
going to remain this way. They're gonna make money
by offering borrowing, so if you want to buy on margin, you can do that through M1 Finance. That's pretty much how
they're making money, it's kinda similar to
Robinhood where they have the RobinHood Gold package
for certain members, but that free plan is
always going to be that way. Okay moving on now, what
are the requirements to have a M1 Finance account? You have to be a United States
investor, age 18 and up. Now there is no minimum
balance to open an account, but if you want to begin investing you have to have a $100 minimum balance. And if this is a retirement account, you have to have a $500
minimum balance to get started. Moving on now, what are the
fees associated with M1 Finance? There are absolutely
no fees, like we said, commission free trading,
there are no fees, no limits on the amount of rebalancing you are doing with your portfolio. And there is no kind of management fee like you would see with
Wealthfront or Betterment. So as you guys know, we
covered a full review here of Betterment, I'll link it
up in the description below. And M1 Finance is similar to Betterment because they offer those
prebuilt portfolios. However M1 Finance has a
0% fee, they don't charge anything for that, while
Betterment has a 0.25% fee. Now I will say this, Betterment
is going to be more tailored to your specific needs because
they are using an algorithm. They're actually asking
you direct questions about your goals, your
objectives, your savings. Everything like that, so they
are gonna be more tailored to you, and so for some people that might be worth that 0.25% annual fee. Okay, moving on now, what are the pros of
investing in M1 Finance? First of all, it is a
100% free Robo-advisor, or automated investing platform. So if you're looking for an alternative to Wealthfront or Betterment, this might be an option you
would consider looking into. Second of all, you have
100% complete flexibility with this account, if you invest in Betterment or Wealthfront, you don't have much flexibility in terms of what you're
actually investing in. You're solely going to
be investing in ETFs. With M1 Finance you can pick exactly what you're investing in,
build your own portfolio, build your own pies, and decide exactly where your money is going to be going. However that can be an
issue for some people, if you're completely new to
the stock market and investing that is a lot of power
to be put in your hands, and I just encourage you
guys to educate yourself before you start investing a lot of money into some portfolio or
plan, when you really don't know much about
what you're investing in. Another pro is that M1 Finance offers those fractional shares where you can buy as little as 1/10,000th of a share. And that significantly lowers the barriers to entry for stocks
like Berkshire Hathaway, or Amazon, or Google,
or some of these stocks that trade at a very high share price. You can have a better
diversified portfolio with M1 Finance by
buying fractional shares. So like I said, for example,
if you wanted to buy Google, or Amazon and you
only had two or $3,000. You would be very heavily
weighted in those stocks because the share price would take up most of the amount of the
money you have to invest. But with M1 Finance, you
could have a well-balanced portfolio because you could say, I only wanna invest $50 in
Amazon, or $50 in Google stock. Another pro for M1 Finance is the fact that this takes the emotions
out of your investments. And what I mean by that is
you build your portfolio, you tell them what
percentage of your portfolio you want in each asset, and
you continue to add money, and you're really not
thinking about this process. And like we said before, M1
Finance is going to rebalance your portfolio by buying
what you are underweight in. So let's say for example, one
of your stocks goes way up and another stock starts to fall. You would be overweight
in that stock that went up and underweight in that
stock that went down. Well you would automatically
be buying shares of that stock that went down,
also known as buying low. And as I'm sure you guys
know, the best strategy when it comes to investing
in the stock market, is buying low and selling high. Now as good as that sounds, it's often a little bit more difficult to do that because you're buying shares
as that share price is falling and you're averaging down. So it's a little bit
more difficult to do this when you are doing it yourself,
and buying shares low. But when this is happening
behind the scenes, you're really not worrying about it and it might be a little bit less emotionally involved for you. But again, like I said, make
sure you know what it is that you're investing in
because if a stock is falling at a rapid pace it's most
likely falling for a reason, and you wanna make sure you
have long term confidence in that investment, otherwise
you're gonna wanna consider why it is that stock is falling. And if you may have possibly made a very bad choice
with your investment. And again, that is kind
of what I said earlier. M1 Finance and apps like Robinhood put a lot of power in your hands, the ability to go out
there and buy thousands of different stocks,
do your due diligence. Learn about investing in the stock market before you start dabbling
around with individual stocks. And like I said, as a beginner
I would start off with ETFs, and stocks, the Dow
Jones Industrial Average or other blue chip companies out there. Another advantage to M1
Finance is that they do offer retirement accounts, so if
you wanna take advantage of that tax savings, you can
do so through M1 Finance. And then finally, you
can automate deposits from your bank accounts,
so let's say for example, you've built your portfolio,
you've funded the account with $2,000 and then you
want to invest $50 a week. Well you can have that
automatically go out of your account and be invested in your M1 Finance account without even doing anything,
and the other advantage to that is that by doing this, you
are dollar-cost averaging, regularly accumulating shares
over a long period of time. And as a result you're gonna
be paying the market average for those shares, so it
really helps you to do two of the best strategies out there. Number one, that is buying
low and selling high. And number two, that is
dollar-cost averaging regularly accumulating shares
over a long span of time. Okay, moving on now, what are the cons of investing in M1 Finance? Well one of the major
advantages of Wealthfront and Betterment is that they
offer tax loss harvesting, and we talked about that in
that review of Betterment. So if you guys wanna jump
over, check that out, it's gonna have more details
about tax loss harvesting. But it's essentially a way for
to cut down on your tax bill and your exposure to capital gains. But instead M1 Finance
offers tax minimization, where they're looking to
lower the amount of taxes and they're to sell your investments in the most efficient way possible when you're looking to
withdraw from your account. So the first investments
they will sell are those that you are overweight in
that have no tax liability. After that they will sell
ones where you have long-term capital gains tax, and
then third and finally, they sell ones where
you're gonna be exposed to short-term capital
gains, the highest tax rate you will pay as an investor. But if you are looking
to have that advantage of tax loss harvesting, or if you're looking
to have direct indexing through Wealthfront, you're
not gonna have that available to you through M1 Finance and you're going to want to
consider those alternatives. Another con is that for obvious reasons M1 Finance is not for day
traders, or short-term traders. But again, I don't think
anybody who's interested in day trading is looking
at the M1 Finance platform, it is simply not built for that. Another con is the fact that
there are no mutual funds with M1 Finance, but like I said earlier, I think M1 Finance is
really geared towards that do it yourself investor,
and that type of investor is not really interested in mutual funds, or active money management. So I don't really see that as a con. But some people may say that and I believe it is worth mentioning. And then finally something else that some would consider to be a con,
is that you are fully invested at all times with M1 Finance. So any money going into
that account above $10 is going to be invested
across your portfolio. So if you wanna keep cash on the side, you have to keep that money outside of your M1 Finance account. They will not hold a cash
balance within that account. Okay, so finally, who would
I recommend M1 Finance to? And who is it not for? This is for intermediate,
or experienced investors, you've been involved in the stock market for maybe a year or two, you know what it is that you're doing. And you're looking to be
investing in maybe some ETFs as well as some individual stocks and you wanna be more
active with your selections. But you also don't wanna worry about rebalancing your
portfolio, and being overweight, or underweight in certain stocks. And you wanna automate the
process of dollar-cost averaging. That is pretty much
exactly what M1 Finance is going to do for you and it's perfect for this type of investor. M1 Finance is also great for
the cost-sensitive investor, if you're somebody who's
looking to cut down on your fees that you're
paying for a financial advisor, or for a Robo-advisor,
or for your mutual funds. M1 Finance is honestly
your best choice here, having a 0% fee of any kind,
no fees at all with M1 Finance. Now you are doing a lot
of the work yourself in terms of building your portfolio, or selecting that portfolio on your own. But you could always go talk
to a fee-only financial advisor pay them for a consultation, ask them what you should
be doing with your money, and then build that
exactly with an M1 Finance. That way you do have some
sense, and some ideas as to what you should be
doing with your money, and what your asset allocation should be. So that way, instead of paying
them a fee every single year, you pay that one time fee,
and then maybe once a year you sit down again with
that financial advisor, that fee-only financial advisor, and you have them take a
look at your allocations and determine if anything
needs to be changed. Based on your life events,
or your goals, or objectives. So that again is a great
option here with M1 Finance to get some financial
advice from a third party outside of M1 Finance and
then build that portfolio within M1 Finance and avoid
any kind of management fee or expense ration, or annual fees. Now the one thing I do want to mention is that when you are investing in ETF there is an expense ratio, it
is usually very inexpensive if you look at the EFTs
that Vanguard offers. You do pay an expensive
ratio and you are still obviously going to pay
that by investing in ETF through M1 Finance, but that money is not going to M1 Finance at all. That remains with Vanguard, or whoever is operating that ETF. Okay, so who is M1 Finance not for? I don't think it's great for beginners, just because it puts a lot
of power in your hands. Now if you are a beginner, you
could invest with M1 Finance, but I just wanna make sure you
are doing your due diligence and making sure you know what it is that you're investing in, and knowing that you want to be involved in this stock or this investment for
the next couple of years. Now if you go ahead and start a portfolio and you invest in a low fee S&P 500 ETF and maybe some blue chip stocks, or if you use one of the prebuilt
portfolios, not a problem. I think you could do that as a beginner. But if you were to do
your own stock portfolio without having much experience and then start putting a
massive amount of money into your M1 Finance account, that is where I would be concerned just because a lot of the time,
beginners don't necessarily know what it is that they're looking for when they're picking stocks,
and so I would recommend getting a little bit more
experience under your belt before automating this whole
process of funneling money into your investing account
and buying stocks individually. It's also not for day
traders, as we discussed, and short-term investors, it
is just not built for that. There are other platforms out there for short-term investors and day traders. Anyways guys that's gonna
wrap up this video here reviewing M1 Finance, if
you guys are using this app drop me a comment down below, and let me know what
you think of M1 Finance. And like I said, if you guys
are looking to open an account with M1 Finance, I have a link for them down in the description
below, it's an affiliate link but you of course do not have to use it. I certainly appreciate it if you do, 'cause it does help me out
and support my channel here, and allows me to make
more videos like this. If you guys have any
other accounts out there you want me to review, let
me know with a comment below. But thank you guys so much
for watching this video, and I hope you have a
great rest of your day. If you are interested in
learning more about investing in the stock market, I've
created a free course just for you, the link is
in the description below. Here are a few other videos
you might enjoy as well. (lively music)
