M1 Finance – An Honest User Review

What is M1 finance?

To give a brief overview of M1 for those who are familiar with many investing platforms M1 finance would be somewhat of a hybrid between Betterment and Robinhood. Unfortunately I feel that it takes a few qualities from each of those platforms without giving you the utility of either one. When starting out you select a “PIE” to invest in. This is a pie chart breakdown of companies that you would like to invest in. From that point forward any money you invest is invested as needed to hit those percentages down to the penny via fractional shares. Below is an example of an “expert pie” from M1’s website to show the “PIE” in action.

Screen Shot 2018-03-01 at 9.40.21 PM.png

The product is as simple as that. You select what percentage of your invested cash you want to go toward what, and M1 invests it that way, for free. Straightforward.

Pros

1. Can’t beat the price

M1, as of a few months prior to the publishing of this post, has gone completely free! Since the price is literally impossible to beat, tough not to make it the number one “pro” on the list.

2. They offer fractional shares

The beauty of fractional shares is that it allows you to get into the stock of companies with big sticker prices. If you’re one of the people who are convinced that Jeff Bezos is taking over the world… which is certainly on the table, but you’re a beginning investor, you may not have the $1200 or so dollars it takes to get even one share of Amazon to go along for that ride. By engaging in buying fractional shares via M1 finance you can get in on the percentage gains of companies with stock prices that make them inaccessible to a lot of people just getting started.

3. Easy to use

The software is extremely simple to use. The process of selecting your investments I find easy and intuitive, and M1 does all of the hard work by automatically balancing all invested cash exactly as you’ve allocated it.

Cons

1. Limited uses

The “Expert PIES” that they offer seem to be a good option, but if you’re going to give up the selection of the individual investments I see no reason why you wouldn’t simply go with a different robo-advisor like Betterment or Wealthfront that are infinitely more robust. If you’re interested in buying equities that you can afford shares of, Robinhood can offer that service for free as well. There are simply other products that are better at those tasks at similar price points.

2. No Tax-Loss Harvesting

In terms of taxable investments, one of the biggest sellers for a service like Wealthfront is the addition of tax-loss harvesting. This is something that M1 doesn’t, and by nature will never be able to, offer on accounts concentrated in individual equities. For those unfamiliar with tax-loss harvesting it is simpler than it sounds.
Say you have a series of index funds as your portfolio on a robo-advisor that offers tax-loss harvesting. If for a period of time a specific asset class is underperforming and has lost value, the robo-advisor will actually sell this at a loss thereby “capturing” that loss to balance it against any “gains” you may book. Immediately upon selling that asset the robo-advisor will purchase a fund that tracks a similar but not identical index to keep you at your desired exposure to the underlying asset class.

3. Not so nimble

I’m no day-trader but the somewhat cumbersome nature of waiting on M1 to “rebalance” for you after you’ve made a change at what feels like arbitrary times can be extremely frustrating. You have no control over the exact time or price when a specific equity is sold or bought. For those of us who fancy ourselves a bit of a control freak this can be a serious problem.

Who is M1 Finance right for?

In my opinion, there is a perfect situation where M1 finance makes sense, albeit rather niche. This is for the investor who wants to slowly dollar cost average into a specific equity, or for the investor who has the classic “wine taste and beer budget” when it comes to investing and simply can’t afford to buy whole shares of the equities that he or she is interested in.

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