When comparing M1 Finance vs. Robinhood, are both good options for new investors, albeit for different reasons. But despite their difference, both have seen a rise in popularity due to the "app-ification" of investing.
M1 Finance and Robinhood are both are commission-free investing apps, too.
While this is a trend mostly popular with younger investors for now, it isn't likely to change as we live in an increasingly digital world. These investing apps are beautiful and easy to use. And although they lack some advanced features, they still get the job done for those who want something simple.
The same shifting tide gave rise to both of these apps, but they are still quite different. Thus, this post will take a look at how they compare and help you decide which one works best for you.
M1 Finance Overview
M1 Finance is an investing app that enables you to partly or entirely automate your investing strategy. You can invest in individual stocks and ETFs, or select from one of M1's expert pies, which are already diversified portfolios.
The nice thing about M1 is that it makes it so easy to manage your portfolio, making it great for beginner investors. For example, if you have a portfolio of 10 different ETFs or 30 different stocks, rebalancing can be a pain.
When you want to rebalance your portfolio on M1, all you have to do is click "rebalance" and it does the rest for you. No more manually selling and buying shares!
For those investing for the long haul, M1 is great if you don't want to spend much time in the mobile app. Once you set it up, you can just pop in for a minute or two to check things and maybe rebalance.
Otherwise, there's not much to do once you decide your investing strategy; maintaining a healthy asset allocation is a breeze.
M1 Finance Details
0.25% (Digital); 0.40% (Premium)
IRA, SEP IRA, Brokerage, Trusts, Checking
Exchange-Traded Funds (ETFs)
M1 Finance is free trading app and robo-advisor. M1 gives you more control over your investments than robo-advisors like Betterment, but it's best for those who don't trade actively.
The reason is that it only has one trading window (two for M1 Plus members), meaning you are limited in how frequently you can trade. Any changes you make to your M1 Finance portfolio will go through during the next available trade window.
Expert pies available on M1 include:
M1 Finance also has dividend reinvestment, also known as DRIP, so you can fully automate your strategy.
M1 Finance offers brokerage accounts and IRAs. In addition, it supports also supports trust accounts. There are some account types you won't find on M1 though, such as custodial accounts or 401(k) plans. For those, you may want to consider blooom.
Compared to Robinhood, M1 Finance doesn't let you trade as often, but it's great for passive investors. If you simply want to invest in a taxable account or IRA for the long run, M1 is a great option.
M1 Borrow lets you borrow up to 35% of your portfolio balance at a rate as low as 3.5% (2% for M1 Plus members). You must have a balance of at least $10,000 to use this feature.
M1 Spend is a checking account available to all M1 Finance members. Even if you have a free account, you can open this free checking account. It includes a debit card and one ATM reimbursement per month (four for M1 plus members).
Plus, it integrates with your portfolio. As a result, you can instantly move money between your M1 Spend account and your stock portfolio. Normally, these transfers would take two to three business days.
There are no fees to use the M1 unless you sign up for M1 Plus ($125/year). Other than the additional trading window, M1 Plus gives you 1% APY on its checking account 1% cash-back on debit card purchases. It also includes a $50,000 daily ACH limit.
M1 Plus can be worth it depending on your needs. However, you will have to work out the numbers to know for sure.
M1 Finance Fees
When it comes to fees for M1 Finance, there isn't much to report. As mentioned, there are no fees to use the service unless you sign up for M1 Plus. Other than that, you will pay expense ratios on ETFs if you invest in those.
However, the expense ratios on the ETFs M1 offers are quite reasonable, too. For example, the Ultra Aggressive expert pie has fees of 0.07%. All told, fees are essentially a non-issue with M1.
M1 Finance Pros
M1 Finance Cons
Why Choose M1 Finance?
M1 is great for passive investors who want a customizable portfolio. Whereas something like Betterment is good for complete beginners, M1 gives you more control. It can work like a robo-advisor if you invest in expert pies, such as its target-date funds.
Plus, its automatic makes it easy to stay on track with your investment account. When it comes to taxable accounts, M1 Finance is a great choice.
Robinhood is a simple trading app with a beautiful interface, and day trading is possible on this app, unlike M1 Finance. It launched in 2013 with commission-free trading, but had a surge in popularity when people were stuck at home due to the COVID-19 pandemic.
Like many trading and investing apps these days, it has no account minimum or monthly fees, further helping its rise to popularity. Although Robinhood has been shrouded in controversy during the pandemic, it remains a simple trading app that does what it does well.
Also, you can get a free stock when you sign up for a Robinhood account. The stock you get is random but could be valued at over $200.
Stocks, options, ETFs, cryptocurrency
Robinhood offers stocks, ETFs, options, and cryptocurrency. Part of what helped Robinhood gain notoriety is how simple the app is. It doesn't have the advanced charting or analysis tools you see with brokers such as Fidelity or TD Ameritrade.
This can be seen as both a blessing and a curse; it makes new traders less likely to be overwhelmed by the whole experience, but can leave something to be desired for experienced traders.
Also, Robinhood recently introduced fractional shares, which makes the barrier to entry much lower. With Google stock over $2,000, it's hard for many investors to imagine spending that much on a single share.
With no monthly fees, no commissions, and an easy-to-use interface, it's easy to see why Robinhood has gained so much popularity. Plus, it now supports automatic investments, allowing you to passively invest in your favorite securities. Another feature Robinhood offers is Robinhood Cash Management, which has a decent APY for your uninvested cash.
That being said, it only supports brokerage accounts, so those who want to manage their retirement accounts should look into M1 Finance or blooom. Robinhood does not offer retirement accounts at all.
Like M1, Robinhood doesn't much to speak of in the way of fees. It charges $75 for outgoing wires, which is common for most brokers. Otherwise, there are no monthly fees for a basic Robinhood account.
The only other fee Robinhood charges is $5 per month for Robinhood Gold, which adds features such as Level II market data, $1,000 of margin trading, and instant transfers to your portfolio.
Why Choose Robinhood?
Robinhood is a simple trading app with a beautiful interface. It appeals to beginners with its commission-free trading and minimalistic design.
But more importantly, Robinhood doesn't have the same limitations as M1 in terms of intraday trading. Free account users can only trade once on M1, whereas Robinhood as no such limits.
Thus, Robinhood can appeal to day traders. In addition, Robinhood supports options trading, another feature M1 Finance lacks.
M1 Finance vs. Robinhood: Comparison
$0 or $125/year (M1 Plus)
$0 or $5/mo (Robinhood Gold)
IRA, SEP IRA, Brokerage, Trusts, Checking
Robinhood vs M1 Finance: Which One is Right For You?
When considering M1 Finance vs Robinhood, either can be good choices for your investment accounts depending on your needs. Both are beautifully designed and are extremely easy to use. It's unlikely you will feel lost or completely overwhelmed using either one.
However, which one is better depends on what you hope to accomplish. For example, M1 can't be used for day trading since it only has one daily trading window; you can't trade more often than that. You can increase it to two trading windows with a two with an M1 Plus membership, but that's as high as it will go. So if day trading is what you're after, Robinhood is what you want.
But Robinhood can't do it all, either. It doesn't support mutual funds, bonds, or any kind of retirement account, for that matter. Anyone who needs support for tax-advantaged accounts should consider M1 rather than Robinhood.
As you can see, which app is better for you depends upon your needs. For active traders, Robinhood is your choice, but for those who want to trade passively or invest in retirement accounts, M1 Finance is the better option.