M1 review: A self-directed brokerage service with low fees
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Updated: July 10, 2024
4.0
4.0
Commissions and fees 5
Customer service3.5
Ease of use4.5
Tools and resources 3.5
Investment options 4.5
Asset allocation 4.5
M1 offers the ability to borrow and spend your money alongside investing tools. Our M1 review covers how all of their features work, pros and cons, and how to ultimately decide if M1 is right for you.
What is M1?
M1 is a versatile financial services company that began in 2015. M1 is not a robo-advisor and only offers self-directed online broker services, with the ability to borrow money and use a credit card. You can customize all pies you create yourself and could mirror a model portfolio and customize it.
Overall, M1 caters to both hands-off and active investors. And with its low minimum balance fee of $50, it's also very beginner-friendly.
M1 pros and cons
Pros
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Doesn't charge broker fees or commissions
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Low $50 minimum balance fee
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Select your own investments and get automated portfolio management
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No fee for buying and selling securities within each Pie
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Maintains your investment allocations using fractional shares thereby fully investing your money
Cons
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Doesn’t recognize certain investments, such as employer-sponsored retirement plans
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Isn't ideal for active traders like day-traders
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No tax-loss harvesting
M1 features
M1 Invest Disclosure: If you choose to transfer your account to another broker-dealer, only the full shares are guaranteed to transfer. Fractional shares may need to be liquidated and transferred as cash.
- Dividends — All dividend income will be reinvested in your portfolio once it reaches at least $10.
1) Add to your portfolio's cash balance. This is the default option for dividend payments. Paid dividends will collect in your cash balance. Just like with a normal deposit, funds in your cash balance will be invested according to your auto-invest settings and minimum cash balance.
2) Reinvest in the security that paid the dividend (Dividend Reinvestment or “DRIP”). Cash dividend payments of at least $1 will be automatically reinvested back into the investments that paid them, regardless of your investments' target percentage allocations. Dividends worth less than $1 will be added to your cash balance as described above.
3) Transfer the payment to an M1 High-Yield Cash Account. Dividend payments of at least $1 will be automatically transferred to a High-Yield Cash Account. - Tax reporting — M1 integrates directly with H&R Block and TurboTax.
- Margin account status — Since M1 doesn’t hold any of your portfolios in cash, your account is established as a margin account if it has a balance of over $2,000. The margin account status enables you to withdraw money quickly from your account without having to liquidate asset positions.
- Free consultation — You can schedule a free consultation with a product specialist who will show you around the platform and discuss how it will benefit you.
- Possible ETFs and stocks used — M1 has over 6,000 ETFs and stocks available for you to choose from, with individual stocks that are available on either the New York Stock Exchange or the Nasdaq (preferred stocks are excluded).
- Account protection — The SIPC covers up to $500,000, including $250,000 in cash, against broker failure.
How does M1 work?
M1 gives you complete control over the investment process in your portfolio. That even includes security selection. M1 manages your ongoing investment flow. But you are in complete control of how your money is invested. You can even make changes after the fact.
M1 investment portfolio templates
M1's automated investing element provides investment portfolio templates, referred to as “Pies.” The Pies are based on Modern Portfolio Theory (MPT). Most robo advisors use MPT in their algorithms, but with M1 self-directed platform, there’s no questionnaire used to determine your investment risk tolerance.
You can invest all of your money in one of these prebuilt templates or customize it in any way that you want. M1 then automatically manages your account by maintaining your allocations within the Pie through rebalancing* and allocating your new contributions.
But M1 works more like a traditional investment brokerage platform in that you can choose your own investments for your Pies. You can even purchase individual stocks and exchange-traded funds (ETFs) within your account — as well as the prebuilt Pies.
*Rebalance: M1 offers powerful rebalancing tools, allowing you to easily rebalance your portfolio with a single click or utilize dynamic rebalancing to automatically buy underweight investments with new deposits to maintain your target allocations over time.
With a manual rebalance, you click the rebalance button on your Invest portfolio page, which will sell overweight holdings and buy underweight holdings to immediately realign your portfolio to your target allocations in one transaction.
In contrast, dynamic rebalancing with auto-invest on gradually rebalances your portfolio over time as new deposits are automatically invested into underweight holdings. This allows your portfolio to balance back towards your targets without selling, avoiding potential tax implications from rebalancing trades.
M1 Pie investing
As mentioned above, “Pies” are the basis of investing with M1. During the signup process, you will be offered a suggested Pie with preselected investment categories. Each Pie is a collection of as many as 100 “slices.” Each slice represents an investment — be it a stock, an ETF or even another pie.
M1 Invest Disclosure: All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products.
The Pie then becomes the tool that you will use to manage your portfolio. M1 has more than 60 pre-built pies for you to choose from. You can customize all pies you create yourself and can mirror a model portfolio and customize it.
Once you've made your Pie selections, M1 will automatically buy your investments in the correct proportions, both when you initially fund your account and when you add additional funds.
Read more: 5 best M1 Pies
Available investment categories
M1 has Pies available from all of the following categories:
- General Investing — a diversified portfolio based on your own risk tolerance
- Plan for Retirement — invest for your target retirement date
- Responsible Investing — options for the socially responsible investor
- Income Earners — builds a portfolio based on dividends and income returns
- Industries and Sectors — enables you to invest in specific sectors
- Just Stocks and Bonds — builds a diversified portfolio with two ETFs, focused on stocks and bonds
- Other Strategies — additional investment strategies to help you find what works best for you
Each of these general Pie categories also offers variations. For example, the Just Stocks & Bonds Pie offers nine different Pies. You can choose a mix of 10% stocks and 90% bonds, 20% stocks and 80% bonds, and all the variations up to and including 90% stocks and 10% bonds.
M1 Invest Disclosure: All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products.
Each Pie listed also includes the dividend yield, historical performance and risk level.
Outlining all of these options helps you pick the Pie composition that best fits your investing goals and level of risk tolerance.
Filling your Pie
You can also customize your Pie. M1 offers nearly 2,000 ETFs that you can use in its construction. You can just check off the fund from the list and add it to your Pie. You can also add individual stocks from a similar display.
I chose the 70/30 Pie, which accounted for 50% of my custom Pie, and then added three stocks and one bond ETF. The Pie looked like this:
Once you have constructed your Pie, you save the changes, and it forms the basis of your investment portfolio going forward. You can also create different Pies for various investment goals. There’s no limit to how many Pies you can own in your account.
More M1 products and services
Automated investing with M1's Pie system is what M1 Finance is known for. However, there are several other banking features you can take advantage of.
Owner's Rewards Card by M1
With the Owner's Rewards Card by M1 you can earn up to 10% cash back on popular brands. The Owner's Card pays a base rate of 1.5% on all eligible purchases
- 10% cash back on Adobe, AMC Theatres, Netflix and Spotify purchases
- 5% cash back on Chewy, Chipolte, Domino's Pizza/ McDonald's, Portillo's, Shake Shack, Starbucks purchases
- 2.5% cash back on Apple, BP. Chevron, DoorDash, Exxon. Home Depot, Lowe's, Lyft, Tagret, Sweetgreen, Uber, Uber Eats Walgreen's purchases
- 1.5% cash back on all other purchases
The main downside of this card is that it caps rewards at $200 per month. But you can automatically reinvest cash back into your M1 portfolio, putting your money to work faster. And you also get perks from Visa, like Visa Zero Liability and access to its Signature Luxury Hotel Collection.
Get started with M1M1 loans
Customers can borrow money against their investments, with a line of credit equal to 50% of portfolio value.
You also get a flexible payment schedule; there isn't a minimum monthly loan repayment amount. You can also create an automated payback schedule to gradually pay off your loan.
Note that M1 Borrow is only available for margin accounts with at least $2,000 invested. It's not available for retirement, custodial, or trust accounts.
Tax minimization
M1 doesn't offer tax-loss harvesting (TLH). But they do offer a new feature called “Tax Minimization” standard on all accounts. This feature enables you to sell asset positions in the most tax-favorable way.
Whenever you sell an investment, M1 prioritizes the sale in a way that will minimize your taxes. The order of assets sold looks like this:
- 1.
Lots that don’t result in a tax liability
- 2.
Lots that result in long-term gains
- 3.
Lots that result in short-term gains
While it’s likely that this strategy will, in fact, minimize your taxes, it doesn’t seem likely to have the same consistent benefit that’s provided by TLH.
Tax burden list from lowest to highest:
- Short-term capital loss, from the biggest loss to the smallest
- Long-term capital loss, from the biggest loss to the smallest
- Short-term zero gain/loss
- Long-term zero gain/loss
- Long-term capital gains, from the smallest gain to the biggest
- Short-term capital gains, from the smallest gain to the biggest
M1 crypto investing
In July 2022, M1 announced that cryptocurrency investing is coming to the platform. If you have a funded M1 Invest account, you can apply sign up for early access to a M1 Crypto account when it becomes available. This account will offer.
- Crypto Model Portfolios: Create M1 Pies based on different strategies like DeFi, Web3, and various large-cap cryptocurrencies. You can also set target percentages for different pies in your M1 Crypto portfolio.
Automated Trading: Since crypto trades 24/7, M1 Crypto users will be able to place their own orders and create automated trading rules to run their portfolio. - Crypto Model Portfolios: Create M1 Pies based on different strategies like DeFi, Web3, and various large-cap cryptocurrencies. You can also set target percentages for different pies in your M1 Crypto portfolio.
- Automated Trading: Since crypto trades 24/7, M1 Crypto users will be able to place their own orders and create automated trading rules to run their portfolio.
- Dynamic Rebalancing: M1 can rebalance your portfolio when you make a deposit to help keep you on target with your goals.
- Commission-Free Trading: M1 Crypto doesn't charge any trading fees. However, Apex Crypto, the custodian that actually securely holds your crypto, charges a 1% or 100 basis points fee to all crypto transactions.
M1 fees
M1 doesn't charge portfolio management fees or trading fees. This is one of its main competitive advantages.
Other potential M1 fees you can encounter include:
- Inactivity Fee: $20 for accounts with up to $20 and no activity for at least 90 days.
- IRA Termination: $100.
- Outgoing Account Transfers: $100.
- Wire Transfer: $25.
Opening an M1 account
To sign up for an account with M1, you first need to create a password. Once you do, you’ll be directed into the first part of a three-step process:
- 1.
Build Portfolio
- 2.
Create Brokerage Account
- 3.
Fund Your Account
The Build Portfolio part introduces you to the M1 Pie concept. At that phase of the signup, you will determine your portfolio as described above. Once you have created your portfolio, you then complete the application process and fund your account.
Top M1 alternatives
We think M1 is one of the best self-directed investing platform on the market because of its lack of fees and the control it gives you to pick your investments.
Here's how M1 stacks up to to Betterment and Empower, two other popular options for investing and building wealth.
| Highlights | Empower | Betterment | M1 Finance |
|---|---|---|---|
| Rating | 4.5/5 | 4.5/5 | 4/5 |
| Minimum to Open Account | $100,000 | $10 | $0 |
| 401(k) Assistance | ✅ | ✅ | ❌ |
| Two-Factor Auth. | ✅ | ✅ | ✅ |
| Advice Options | Automated, Human Assisted | Automated, Human Assisted | Automated |
| Socially Responsible Investing | ✅ | ✅ | ✅ |
| - | Get started | Get started | Get started |
Betterment is an excellent alternative that also offers a variety of investment ETF portfolios at an affordable price. Their portfolios are based on modern portfolio theory and they also offer an SRI portfolio called the Broad Impact portfolio. This portfolio focuses more on companies that meet specific social, environmental and governance goals. Betterment costs 0.25% annually but includes features like tax-loss harvesting.
Read more: Betterment review
As for Empower, it offers professional wealth management services for clients with over $100,000 to invest. If you want human advice and a tailored portfolio, this is your best option. Plus, Empower also has a host of free tools like an investment fee analyzer, retirement planner, and budgeting software.
Read more: Empower review
FAQs
The bottom line
M1 is one of the more interesting of the automated investment platforms that have been coming out in the last few years. You choose the investments that go into your portfolio.
The platform then performs all of the day-to-day management of your account, including regular rebalancing. Plus, it's now free. That's right — there are no longer any broker fees or commissions.
Since you select your own investments (though you could simply default to the pre-built pies), M1 Finance is quite different from a robo-advisor like Betterment that offers a fire-and-forget platform.
M1 is primarily for buy-and-hold investors who prefer to select their own investments. At the same time, it can enable you to have control over your investments, without having the day-to-day responsibility of managing the portfolio.
If M1 allowed investment in mutual funds, offered tax-loss harvesting, and retirement planning tools, we’d be giving this platform a higher rating. But apart from those three missing pieces, M1 is very much worthy of consideration.
Invest with M1M1 Invest Disclosures: The opinions expressed are solely those of the authors and do not reflect the views of M1. They are for informational purposes only and are not a recommendation of an investment strategy or to buy or sell any security in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. Prior to making any investment decision, you are encouraged to consult your personal investment, legal, and tax advisors.
M1 Finance, LLC does not charge commission, trading, or management fees for self-directed brokerage accounts. You may still be charged other fees such as M1’s platform fee, regulatory fees, account closure fees, or ADR fees. For a complete list of fees M1 may charge visit M1 Fee Schedule.
A $3 monthly platform fee will apply to clients with less than $10,000 in M1 assets or without an active Personal Loan. The fee will be waived if your opened M1 Invest or Earn accounts settled aggregate balance equals or exceeds $10,000 for at least one day during the 30 days prior to program launch. The monthly platform fee will be waived for all clients with an active M1 Personal Loan, regardless of their M1 Invest or Earn balances.
Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.
The Owner's Rewards Card by M1 Disclosure - Credit Card not available for US Territory Residents. Review Cardholder Agreement and Rewards Terms for important information about the Owner’s Rewards Card by M1. The Owner’s Rewards Card by M1 is Powered by Deserve and issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC. All Standard Reward purchases receive 1.5% cash back. Owners Rewards and Standard Rewards are subject to a maximum of $200 cash back in aggregate per calendar month. Exclusions may apply. See Rewards Terms for additional information and exclusions.
The Owner's Rewards Card by M1 Disclosure - To review the current list of Cash Back brands and tiers, please visit https://m1.com/owners-rewards.
Investing in cryptocurrency comes with significant risk and may not be suitable for everyone. Based on your specific situation and financial condition, carefully consider whether investing in cryptocurrencies is suitable for you. For relevant disclosures and risks, visit m1.com/crypto-disclosures. As a customer of both M1 and Apex, you have a brokerage account held at Apex Clearing Corporation to hold your securities and cash and an account at Apex Crypto to hold your cryptocurrencies. M1 Digital LLC is a wholly separate affiliate of M1 Finance LLC, and neither are involved with the execution or custody of cryptocurrencies. Cryptocurrencies are not FDIC or SIPC insured.
† Participate in both trade windows when you have $25,000 or more equity to comply with pattern-day trading regulations.
Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com.
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