M1 Finance vs Robinhood

M1 Finance and Robinhood are two online brokers that allow you to make commission-free trades on stocks and other securities. M1 has advantages in terms of robo-advised, algorithmic investing. Robinhood is superior when it comes to the variety of securities available to self-directed investors.

M1 Finance is Better for:Robinhood is Better for:
Passive InvestorsActive Investors
Automated DiversificationSecurities Research
Retirement AccountsCrypto Investing
Custodial AccountsIPOs
Pre-Built PortfoliosLow Fees
Length of Free PremiumNo Account Minimums
Checking and Credit CardsMargin Investing
Low Risk InvestingInstant Access to Deposits

M1 Finance and Robinhood are online brokerages that occupy their own niches in modern investing. Which service is better for you depends on whether you are looking for passive, tax-advantaged accounts or active trading with near-term returns.

Let’s look at some comparisons:

M1 Finance robinhood
Management Fees (AUM)

0

0

Premium Subscription

$125 annual fee for M1 Plus

$5 per month for Robinhood Gold

Other Fees

Paper statements, inactivity, some account transfers, IRA termination, mutual fund sales, foreign exchanges, rights exercise, wire transfer, check request, regulatory fees

Regulatory fees, paper statements

Security Types

Stocks, ETFs

Stocks, ETFs, options, crypto, IPOs

Active or Passive

Passive

Active

Automated Portfolio Investing?

Yes

No

Fractional Shares?

Yes

Yes

Minimum Opening Balance

$100. Retirement accounts require $500.

No

Supported Accounts

Traditional, Roth, SEP IRAs Individual taxable accounts Joint taxable accounts Trust accounts Custodial Accounts (M1 Plus) M1 Spend Checking Account M1 Spend Credit Card

Taxable investment accounts

Earned APY on Cash Accounts

0% (1% with M1 Plus)

(0.30% on cash management)

Crypto Investing

No

Yes

Best Use

Tax-advantaged accounts

Trading Individual Securities

Current Promotion

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Modest Money Overall Rating
5.0 rating based on 5 ratings
5.0 rating based on 5 ratings

M1 Finance vs Robinhood: Determining Factors?

M1 Finance and Robinhood are interesting to compare because they are both 5-star platforms at the top of the segment they occupy. While they are both online brokerages with no trading commissions, the similarities end there.

Modest Money perceives a slight overall advantage with M1 Finance over Robinhood, but this is mainly due to our preference for diversified investment based on modern portfolio theory.

There is no better way to be diversified than to have a computer algorithm investing in multiple securities and periodically rebalancing your account to meet your target allocations. This is where M1 Finance shines.

On the other hand, Robinhood is appropriate for investors who want to trade individual securities and crypto in a taxable account.

The appropriate platform for you depends on your preferred investing style.

Factor 1: Investment Fees

The thing about M1 Finance and Robinhood is that though their platforms are very different, they both have cheap fees.

Robinhood is Superior to M1 Finance for Fees

  • M1 Finance does not charge management fees
  • Robinhood is also free of management/investing fees
  • M1 Finance has more extra fees, giving Robinhood the edge

M1 Finance Fees

Unlike other automated portfolio managers, M1 Finance does not charge a management fee. There are also no fees associated with trading, although there are fees associated with some optional transactions.

For M1 Invest accounts, you get hit with fees for requesting paper copies and having them mailed to you. Depending on how you manage your account, you will also have to pay certain account maintenance fees like inactivity fees. You may also be subject to wire transfer fees, termination fees, and fees associated with paper checks.

M1 Finance’s fees are mostly structured around optional account transactions, so this should not necessarily deter you from getting an account. The good news is that M1 Finance is transparent about these extra account fees and lists them all in one place on their page.

And the best news is that, unlike most managed portfolios, M1 Finance does not charge you an Assets Under Management (AUM) fee. M1 Finance also does not charge commission or trading fees, although certain mandated regulatory fees are passed on to investors.

These fees are extremely low and can be calculated with the following formula:

  • SEC (Securities Exchange Commission) Fee = Transaction price x $5.10 / $1 million
  • TAF (Trading Activity Fee) Fee = shares sold x $0.000119 up to $5.95

So, on a $10,000 trade involving 100 shares, the SEC fee would be $0.05 and the TAF fee would be $0.01. 

Click here to open an M1 Finance-managed automated portfolio account without paying management fees. You can also get up to $500 free when you deposit $1000 or more in the first 14 days.

Robinhood Fees

Robinhood does not have portfolio management options, so we will look at the fees associated with maintaining an account and actively trading securities on the platform.

Robinhood states on its website that stock investing is commission-free “now and forever.” There are no fees associated with opening, maintaining, or transferring funds to your account.

Like M1 Finance, Robinhood will charge fees associated with certain optional actions you may undertake with your account. For instance, paper confirmations and statements will cost you the same as they do with M1 Finance, $2 and $5 respectively.

But you won’t have to pay for wire transfers or inactivity fees. Robinhood charges for fewer extra account actions than M1 Finance and are equally transparent in the fees they do charge.

When it comes to regulatory fees, the calculation is the same, but Robinhood does not pass these fees along to investors trading small amounts. There is no SEC fee for trades of $500 and less and no TAF fee for trading less than 50 shares.

Robinhood also offers fee-free cryptocurrency purchasing.

You can click here to open a low-fee Robinhood account.

Robinhood Has the Cheapest Fees

Both M1 Finance and Robinhood have cheap fees, but Robinhood’s fees are slightly lower.
A second factor to look at when evaluating whether M1 Finance or Robinhood is better for you are the variety of securities available at each. With Robinhood, you can buy more asset classes than you can with M1 Finance. 

Depending on your investing style, this is not necessarily better, however. For people who are interested in less risky, robo-managed portfolios, having access to crypto and options does not create more value. 

Robinhood Beats M1 Finance in Security Variety

  • M1 Finance has stocks and ETFs
  • Robinhood has stocks, ETFs, options, gold, crypto, IPOs
  • Robinhood has more asset classes available to investors than M1 Finance

M1 Finance Securities

M1 Finance offers its investors access to more than 6,000 stocks and exchange-traded funds (ETF). This offers plenty of opportunities for diversified investing.

While two asset classes may not seem like a lot compared to other brokerages, you can easily build a well-hedged position with stocks and ETFs. The fact that M1 Finance offers stocks at all is unique compared to other robo-managed accounts, many of which only offer access to ETFs. 

Robinhood

With Robinhood, you can invest in more than 5,000 U.S.-listed stocks and ETFs, options contracts, and 650 American Deposit Receipts (ADR) for foreign-listed stocks. 

You can also set up a crypto account with Robinhood, where you can trade Bitcoin, Ethereum, Dogecoin, Litecoin, Ethereum Classic, Bitcoin Cash, and Bitcoin SV. Unlike virtually every other crypto exchange, including Coinbase, your crypto trades with Robinhood are fee free.

Robinhood will also allow you to participate in Initial Public Offerings (IPO). Robinhood uses a random allocation process to sell available IPO shares.

Robinhood Has More Available Securities

With its cryptocurrency and options, Robinhood offers investors more asset classes.

Factor 3: Account Types

Different account types allow you to take advantage of different tax breaks. For most investors, it is advantageous to have both taxable and retirement accounts.

M1 Finance Has More Account Types Than Robinhood

  • M1 Finance allows retirement and custodial accounts
  • Robinhood only has individual taxable accounts
  • M1 Finance’s tax-advantaged accounts create more value

M1 Account Types

M1 Finance offers individual and joint brokerage accounts, plus traditional, Roth, and SEP IRAs. You can also set up trust accounts with M1 Finance, as well as custodial accounts if you sign up for their premium service.

With these accounts, you can manage your portfolio by going with their fully automated robo-managed options or by customizing your investment “pies.” You can also choose from a selection of expert-created pies. You can read more about how M1 Finance pies work here

M1 Finance also makes cash accounts available to investors in the form of its M1 Spend checking account. Money deposited into this account does not earn an annual percentage yield (APY) unless you sign up for a premium account. 

Robinhood Account Types

Robinhood only has taxable investment accounts. Robinhood doesn’t offer retirement or other tax-advantaged accounts.

Robinhood does not have specific cash accounts, but you can add the cash management feature to your brokerage account. With this feature, Robinhood will temporarily “sweep” any non-invested cash from your brokerage account into partner banks, where it will be protected by FDIC insurance and earn an 0.30% APY.

With the cash management option, you can get a debit card to withdraw cash from your account as you need it. Even though the cash is technically “swept” into a partner bank, Robinhood has controls in place to make sure you don’t inadvertently overdraft your account.

M1 Finance Beats Robinhood in Account Types

M1 Finance has more account types than Robinhood, making them the preferred choice for people who need more than individual taxable investment accounts. And that’s pretty much everyone. 

Factor 4: Account Minimums

When trying a new platform for the first time, many people don’t want to lock up a lot of their money at first. Additionally, beginning investors might not have that much money to sink into an account in the first place. 

Robinhood Tops M1 Finance in Account Minimums

  • M1 Finance requires $100 to start investing, $500 for retirement accounts
  • Robinhood does not require account minimums
  • Robinhood is better for people who want to start small

M1 Finance Account Minimums

You can begin investing in M1 Finance for as little as $100. You will need to start with $500 for retirement investing. 

Robinhood Account Minimums

Robinhood does not have minimum deposit requirements for its accounts. As they note on their website, “You only need 1 cent to start earning interest.”

Robinhood’s crypto accounts also have no minimums. You don’t have to buy whole coins either. You can start investing in cryptocurrency for as little as $1.

Robinhood is Better for Account Minimums

With its no minimum balances, Robinhood is better for people who don’t want to start investing with a lot of money.

Factor 5: Premium Options

An emerging feature with many robo-advisors is they usually offer premium options and subscriptions. This allows them to keep the cost of basic accounts low while preserving the option for investors to add more advanced features as they become more confident.

M1 Finance and Robinhood are no exceptions. M1 Finance has M1 Plus, while with Robinhood you can enroll in Robinhood gold. 

Robinhood Has Better Premium Options Than M1 Finance

  • M1 Plus focuses on better loan rates, cash-back, APY on cash deposits
  • Robinhood Gold supports investors with research and margin
  • Robinhood Gold has better premiums more geared towards their investors

M1 Plus

M1 Plus offers AM and PM trading windows for investors, as well as a better rate on borrowing funds against your investments (2% vs 3.5%). 

For M1 Spend, you get considerably better terms on your checking account with a 1% APY and 1% cashback on purchases. If you get the M1 Spend credit card along with your checking account, having M1 Plus will waive your $95 annual fee and you will earn 1.5%-10% cashback on purchases.

Best of all, if you click here, you can get the first year for free. After that, it will cost you $125 annually.

Robinhood Gold

Robinhood’s premium service is known as Robinhood Gold.

With Robinhood Gold, you will be able to access up to $50,000 of your deposits as soon as you make them, without waiting for them to clear or post to your account. You will also have access to professional Morningstar research on more than 1,700 stocks and Nasdaq Level II market data, which can help you understand which way the market for a particular security might move next.

Robinhood Gold will also give you access to margin investing, which will allow you to leverage your securities purchases to achieve greater gains (or losses).

Robinhood Gold costs $5 per month, but if you click here, you can get the first month free. 

Robinhood Beats M1 Finance for Premium Services

M1 Plus is no slouch when it comes to the overall usefulness of their premium service to the average person, but Robinhood’s suite of features for active investors cannot be beaten. Apples to apples, M1 Plus costs $125 annually while Robinhood will cost you $60.

M1 Finance vs Robinhood: The Bottom Line

Modest Money rarely gets to compare two 5-star platforms. M1 Finance and Robinhood are both worthy investing platforms.

Even though Robinhood leads M1 Finance in four of the five categories we evaluated, Modest Money still recommends M1 Finance over Robinhood for most investors. With its retirement accounts and automated diversification, M1 Finance has features that every investor needs. 

No matter how good their platform is, not everyone needs or wants to trade individual securities with a platform like Robinhood. Though if they do, Robinhood is one of the best.

M1 Finance is Better for:Robinhood is Better for:
Passive InvestorsActive Investors
Automated DiversificationSecurities Research
Retirement AccountsCrypto Investing
Custodial AccountsIPOs
Pre-Built PortfoliosLow Fees
Length of Free PremiumNo Account Minimums
Checking and Credit CardsMargin Investing
Low Risk InvestingInstant Access to Deposits

M1 Finance

M1 Finance is a category-leading robo-advisor with excellent automated portfolio choices. 

Unlike many robo-advisors, it does allow a significant level of customization when it comes to choosing which “pies” will make up your portfolio. You can choose fully automated, self-customization, or allocate all or part of your portfolio to expert pies.

M1 Finance also allows you to create tax-advantaged retirement and custodial accounts, which can save you tens of thousands of tax dollars over the lifetime of your investments.

Every investor needs a service like M1 Finance that allows you to combine tax-advantaged accounts with low-risk portfolio investing. 

To open an account with a top-tier robo-investor that has multiple account options, click here. You can also sign up for a year of M1 Plus for free.

Robinhood

No matter how much we follow modern portfolio theory and try to diversify our investments with managed accounts, there will always be those of us who want to allocate at least part of our net worth to investing in individual stocks and other securities.

Robinhood is also ideal if you want to invest in cryptocurrency. Robinhood’s no fee crypto trading structure helps it beat out virtually every other crypto exchange.

Robinhood is also your best choice for access to premium research, including Morningstar and advanced Nasdaq data.

If these advantages sound good to you, click here to open a Robinhood account.

And if you, like many investors, fall into both categories, you should consider opening accounts with both M1 Finance and Robinhood. The services they offer don’t overlap in any kind of meaningful way, and you could cover all your investing bases by having these two accounts.

Both are stellar offerings at the top of their respective classes.

Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.