M1 Finance Review: Automated Robo Advisor Test & Comparison

M1 Finance – Best for Investors Seeking Commission Free & Automated Portfolios Based On Their Risk Profile

M1 Finance Review Summary

Overall the M1 approach to allowing you to have granular control over your portfolio or take advantage of the M1 expert portfolios (Pies) is an excellent approach.  M1, like the industry, is growing fast, and they offer a full suite of services, including checking accounts and borrowing.  But when it comes to automated investment, M1 is clearly one of the leaders of the pack and the only one offering Automated Investing for Free with Zero Commissions.

M1 Automated Advisor Service Details

M1 Finance is the only Robo Advisory service in our review that offers commission-free trading for their customers.  This means your account will have no management fee whatsoever.

This is very positive for the service, but the question is, how do they make money?  They mostly make money from short-term lending of any available cash funds to the overnight inter-bank market, if you utilize their borrowing facility or if you invest in an M1 Plus account.  Finally, they will receive some small rebates from liquidity providers for their order flow.  This is all quite normal and used throughout the industry.

Another great bonus of this mature service from M1 is that tax-loss harvesting is automatically integrated into the account.  This means that when you choose to withdraw funds from your account, the algorithms will consider which securities to sell, giving priority to those that are incurring losses so that they can offset future gains, clever.

On top of this, M1 promotes the purchase of fractional shares as a unique selling point; this means that if the portfolio you are invested in dictates a purchase of a stock with a high price, you can still be fully invested with a purchase of a fraction of the share.

Another excellent addition is that there is an integrated checking account, M1 Plus, which includes a Visa card so you can access your funds quickly.

The M1 Investing Methodology

M1’s investing approach is based on expertly curated portfolios.  Each portfolio is called a “Pie”; each pie is made up of multiple stocks with specific weightings based on what risk or exposure you seek.

There are close to 100 expert pies to choose from with varying levels of return and past performance.  You can select an expert pie or even build your own.  The great thing is that when you send funds to your account, the money is then automatically fully invested into your pie based on your allocation rules, and because there are no fees, this will not impact your account’s bottom line.

M1 Investing Performance

M1 provides so many different expert portfolios to choose from and depending on when you open an account and decide to invest, the returns on your investment can vary.  Suffice to say, M1 claims that, on average, their expert portfolios (pies) are within or slightly above the underlying market return. Of the 20 Robo Advisors we researched, M1 appeared to have the best returns: typically within or above the underlying index by 1-2%.

Portfolio Management

Managing your portfolio with M1 is a breeze.  Once your account is set up, you can select to invest your money in one or more expert portfolios or choose the stocks or ETF’s you want to invest in.

I particularly like the fact M1 are also providing pre-selected socially responsible investment portfolios, not many Robo Advisor platforms do this.

M1 is an Automated Advisor or Robo Advisor that helps you construct a portfolio based on your risk/reward goals and investing preferences such as growth, income, or even ethical investing style. M1 Finance will also perform the buying, selling, balancing, and tax loss harvesting for you automatically.  And the best thing is, the stock trades are free.

The M1 Portfolio Dashboard

Controllability, visibility, and insight into your investments are the key advantages Robo Advisor or Automated Investing services bring to the independent investor.

Here you can easily see your portfolio’s value, gain, and return.

M1 Finance Smart Money Management Apps

Often what lets a company down is the quality of its Mobile / Smartphone apps.  A poor app experience can be extremely frustrating to customers, especially the younger generations who seemingly do everything on their mobiles.  The M1 mobile app has excellent ratings on the apps stores, ensuring that your experience will be first-class.

• M1 Finance Smart Money Management App – Apple Store – Rating 4.7 Stars with 9,600 ratings
• M1 Finance Smart Money Management App – Rating 4.6 Stars with 4,200 ratings

Dividend Services

Essential to any automated investment service is the ability to harvest and reinvest any dividends earned from stocks or ETF’s in your portfolio.  M1 offers a Dividend Reinvestment Plans (DRIPS) service, and you can decide whether to reinvest the earned dividends in buying more stock or have the income added to your account balance for spending.

Portfolio Rebalancing

The ability to rebalance your portfolio is essential, as M1 says:

“Rebalancing restores an investment portfolio to its original target allocations. As prices of securities change over time, a user’s initial target allocations will drift.  This may result in a portfolio that no longer aligns with your risk profile or investing style.  Rebalancing allows you to reallocate funds to keep your portfolio in line with your accepted risk tolerance and financial goals.  Please keep in mind that any time you rebalance your portfolio, you will generally be initiating a series of buy and sell transactions.  Usually, every sale of a security has a tax effect, which may be a gain or a loss.”

Fractional Share Purchase

This is useful as it means all of your investment dollars can be put to work.  For example, let us imagine you have decided to invest in Berkshire Hathaway (Ticker: BRK.B), you have $150 uninvested in your portfolio, but the BRK.B stock is $200 per share. M1’s fractional share purchase would allow you to buy a 3/4 fraction of that stock, meaning you can still take advantage of any price gains without having the full stock purchase amount.  A service like this is unavailable to retail investors with traditional stock brokerage houses.

Berkshire Hathaway Buffett Portfolio Pie

Another thing I like is the Berkshire Hathway portfolio, which seeks to mimic the world’s most successful investor, Warren Buffett. Buffett is the CEO and chief stock picker at Berkshire Hathaway.  Through this company, he owns many companies outright but is also invested in many public companies currently floated on stock exchanges.  It is these companies that the Berkshire Hathaway Portfolio is targeting.

• Related Article: 20 Insights Into Warren Buffett Stocks + Full Portfolio Analysis

M1 Retirement Portfolios

Finally, M1 also allows you to select when you are planning to retire and suggests portfolios based on Modern Portfolio Theory, the industry standard for allocating funds based on risk profile.

M1 Finance Review Summary

Overall the M1 approach to allowing you to have granular control over your portfolio or take advantage of the M1 expert portfolios (Pies) is an excellent approach.  M1, like the industry, is growing fast, and they offer a full suite of services, including checking account and borrowing.  But when it comes to automated investment, M1 is clearly one of the leaders of the pack and the only one offering Automated Investing for Free with Zero Commissions.

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