Earlier this month, an online review piqued my interest in a investment trading platform called M1Finance. After some initial research, I decided to give it a shot to experience some of the unique (at least from the investment platforms I have used) features that M1Finance has to offer. At this stage in my life, I have been a basic investor for several years. I wouldn’t call myself a savvy day trader nor do I get too involved with options or even shorting a company. I fit more in with the buy and hold approach, but definitely take some risks when I think there is a value play. You can track my current portfolio at the Portfolio (upcoming) link at the top. Considering my investing strategy, M1Finance has several appealing qualities that you may want to investigate. At a high level, this platform puts you in the chair of acting as a fund manager who has the final say in what stocks should be included in your portfolio. To a novice or noob potentially nervous about entering the market at all, this may seem like a position that you would not want to put yourself in… but I say wait a minute and read on! I will alleviate those concerns and discuss some of the features that M1Finance has to offer that would appeal to both rookie and seasoned investors alike.
Partial Stock Shares
On the same note, as I am not typically in a position to make stock purchases of several thousand dollars so in some instances it feels like stocks with high individual share price seem out of reach. Amazon is a stock that that I have historically looked at and though stupidly, avoided investing in because it was near $1000 a share. Today it is down a few percent and sits over $1900 a share. The price dissuaded me and I know dissuades many other investors also.
This is where the best feature for M1Finance rolls in. Their business model is to purchase and divide out percentages of shares between the amount an investor wants to purchase. For example, a new account that deposits $100 into a regular taxable brokerage account can divide their $100 between stocks of the investors choice. Keep in mind that these are going to be stocks traded on major US exchanges and not including foreign stock markets or OTC trading. This is not really a problem for the typical investor that would be interested in M1Finance, but in reading suggestions for the site, I have seen the call for adding the ability to integrate with foreign exchanges to add stocks like Heineken or Nintendo. If these are essentials for your portfolio, you may now want to jump on the bandwagon at this point.
M1Finance drew me in originally due to the commission free policy, which is something that every investor can appreciate. I don’t consider myself to be a large dollar investor so the option to invest without commissions eating into realized gains is something that I find a lot of value in. To someone investing a total of $100, many platforms offering cheap trades advertise $4.95 a trade. That’s taking 4.95% of the total investment to make the trade and then that commission will be taken on the back end as well after the stock is sold. That alone can and should put off someone from investing until they are able to commit with a larger lump sum. This isn’t an issue using M1Finance.
The User Interface on M1Finance is rock solid. It’s very easy to navigate the platform to add investments or track insights of your portfolio. Fairly easily, you can track your returns and dividends received during the financial period that is being looked at. In addition to it’s functionality, the screens are generally visually pleasing by adding company symbols to the investment pages. For those not familiar with stock markets, it allows the user to feel comfortable in understanding how their investments are performing. This is an example of how your pie is visible along with performance. As you can see, it hasn’t been too friendly to me so far.
One of the areas that I would consider a GREAT feature of M1Finance is the ability to take out loans once you have contributed a target sum of dollars. Though not recommended to be used to buy a new computer or Christmas presents, there have been plenty of times when life hits me like a hurricane and having the ability to easily take out some money to cover the unexpected monthly expenses beyond what you have saved is a true luxury. Of course you can always sell your investments, but what if the market just took an epic dump and now you are selling out at a loss vs taking out a quick loan that you can repay the following month. If you use this function, use it responsibly and leverage debt where it makes sense. The loan interest rates are far smaller than credit cards so they can also be used a method to consolidate high interest debts. I believe in order to pull out the loans, you have to have at least $10,000 invested, which is where M1Finance gains it’s collateral.
For my original experience this week, I created my account which only took a matter of minutes and setup a link to a checking account so that I can make ACH deposits and potentially withdrawals. The deposit requirement was $100 for a new brokerage account, which is the type of account I created. The initial deposit is $500 if creating an IRA, but my personal opinion is that IRA’s should be housed at Vanguard because in my financial life the IRA and brokerage account are put into very different strategies. The $100 deposit was received and available in my account for trading the next day and while it is nice for these transfers to be instant I expect that they will be available instantly in the future once I have an established balance in the account. Overall, now problems with funding the account.
M1Finance currently offers both an IRA and taxable brokerage account for their users. They also offer some incentives to sign up on the platform by rolling over an IRA or account with another provider/service. Choosing how to proceed and use M1Finance really comes down to personal preference. For me, the bulk of my retirement savings in housed in Vanguard Mutual Funds and ETFs. I like utilizing Vanguard and their platform. M1Finance will allow you to invest in the same Vanguard funds as well. My problem and what will keep me from moving the bulk of my investments to M1Finance is that I do not want to have multiple M1Finance accounts created for each PIE that I want to invest in. I also really enjoy Vanguard’s reputation and platform. My goal in using M1Finance is to open myself to more direct exposure to some expensive tech stocks on a smaller scale than investing my entire retirement savings in those stocks. For someone who wants to have some additional flexibility with their retirement savings where they can set an allocation and forget it by auto investing, you will have the ability to customize your PIE however you see fit and M1Finance might be up your alley.
M1Finance is looking to add to its user base and has some rolling promotions that are advantageous to sign up using a referral. Both parties gain a $10-$20 bonus to their account if the new party signs up with the referral link. I will include my referral link here, which currently offers you a $20 bonus for signing up and I would receive the same.
One area of M1Finance that I have found to be semi-frustrating is that trades are not necessarily executed immediately, but the reasoning for that is understandable. Imagine you have a PIE setup with 100 stocks and have split allocation evenly at 1% per stock. That’s a complicated trade to make where you are needing to be assigned 1% of 100 different stocks. In order for that to take place, the trades must be executed in whole shares and then divided out between all of the users of M1Finance who are purchasing partial shares. For individuals like me who like to see instantaneous results and updates to my portfolios, this can be a little bit of a drag to potentially have to wait until the end of the market’s trading to see your orders executed. In the grand scheme of things, this is not a deal breaker by any stretch, but it would be nicer if trades were guaranteed to execute right away.
M1Finance currently offers a referral bonus of $20 to the referrer and referee if a new user signs up with the referral link. As of this post, the requirements are to load $100 into a taxable account in order to receive the bonus.