Wouldn’t it be nice to have the ability to create your own “Mutual Fund” and have complete control over which investments go into your fund? A new cutting edge brokerage firm is now giving investors this capability!!

M1 Finance is a brokerage firm that offers its investors a unique way to invest in the stock market. The brokerage account allows you to basically build your own “Mutual Fund” or pool of investments which they call a “Pie”. They also offer many pre built Pies that are geared toward a particular investment strategy and objective. Pies are also automatically rebalanced so that your investment allocations are kept in line with your set objectives. You are also allowed edit and change your pies at any time which means you can change allocations and remove/add investments to your pie.

A great feature that M1 Finance offers to its investors is that it allows them to own fractional shares of stocks and ETFs. This means that investors can achieve great diversification in their portfolios.

For example:

An investor that opens a new account with the minimum of $100 can diversify their $100 into 100 different stocks and ETFs as M1 allows you to own fractional shares. This level of diversification would not be possible with many brokerage accounts as they do not allow fractional share ownership.

M1 Finance’s strategy of allowing fractional share ownership gives investors with just $100 to invest the ability to diversify that $100 into many investment vehicles. If that same investor opened a brokerage account that did not allow fractional share ownership they would not have the ability to diversify because most brokerages only allow you to invest in single share increments.

For example:

An investor with $100 to invest would not even be able to buy one share of Google in a brokerage account that did not offer fractional share ownership. If this investor used M1 finance they would be able to build a portfolio of stocks called a pie with up to 100 investments in each pie. This would allow the investor to allocate part of their portfolio to Google which they could not even buy otherwise.

M1 Finance also allows you to open up to 10 different accounts under a single login! This means you can have multiple portfolios with different strategies. Also you can have different account types such as a regular taxable investment account in one and an IRA in another.

M1 Finance also offers tax minimization when you sell assets, which means that they prioritize your sell orders so that the assets are sold in the following order:

1. Lots that do not result in a tax liability

2. Lots that produce long-term capital gains as they are taxed at lower rates

3. Last lots that produce short-term capital gains as these are taxed at higher rates

One important item to note is that M1 Finance is not for active traders as any buy/sell orders are filled in the specified trading window which is 9 AM each day. This means that you are not able to buy and sell during intraday timeframes. If you are a long term investor this will not matter to you but if you wanted to day trade or swing trade this is not the platform for you as you will not be able to exit a position anytime but the specified trading window above.

So what are the fees associated with an M1 brokerage account?

See below for a list of some of the common fees or lack of fees:

1. Platform fee – No fees are charged to use the platform

2. Trade fee (commissions) – No commissions are charged for buying and selling securities by M1 Finance but the SEC and FINRA Trading Activity Fees (TAF) still apply. These fees are mandatory but are miniscule. An example shown on M1’s website shows what the fees would be if you sold 10 shares of Apple stock at $150. The fees in this case according to M1 would only be 4 cents on a transaction with total proceeds of $1,500. The basic takeaway is that these fees are very immaterial and much less than any traditional brokerage.

3. Asset management fee – No asset management fees are charged

4. There are some additional fees that will not apply unless you request actions to be performed such as wire transfers or transfers of investments to another brokerage account. If you use your M1 account normally no fees should apply. Visit the M1 website for a complete list of these potential actions that would require additional fees.

M1 Finance is a great way for an investor who does not have a large amount of money to invest to achieve a large degree of diversification that would not otherwise be possible. Also the lack of traditional fees and commissions charged by most brokerages is also a great benefit.

I have invested using M1 Finance and built 3 different portfolios. One portfolio is meant to track the performance of major hedge funds, the second portfolio is a mix of vanguard funds and the third is a portfolio of Cannabis related investments. So far I have been happy with the service and it really does offer complete customization of your portfolios and great diversification for small portfolios.

I started all three portfolios with a $100 initial investment. My hedge fund portfolio has 138 different securities, my vanguard portfolio has 82 securities and my cannabis portfolio has 11 securities. As you can see my $300 investment is diversified across 231 different stocks and ETFs. This level of diversification and control over your investments would not be able to be achieved at a traditional brokerage account with a $300 investment.

If you are interested in M1 Finance please use my referral link below as we will both receive a referral credit of $10! Why not deposit $100 to invest and get an instant $10 return on your funds?

Referral Link Below:

https://mbsy.co/s9D22

M1 Finance doesn’t just offer the brokerage services I discuss above, they also offer a variety of other useful services that I have not used yet but will be looking into in the future.

M1 Borrow is a feature that is available to investors that have an account balance of $10,000 or more and it allows you to borrow against your account at a low rate. The current rate is advertised at 4.25% which is a very low rate to borrow money and could be used to reduce higher rate debt that you have or to fund home improvements etc. at a low cost. M1 lets your borrow up to 35% of your balance which would be $3,500 if your balance is $10,000.

Another feature offered is M1 spend which is a checking account that comes with a Visa card. The free version of this called M1 Standard does not cost anything but also does not offer cash back or interest on the amounts in your account. If you sign up for M1 plus you pay a $50 fee for the first year and $125 for years after that. This fee gets you 1% cash back on all purchases made and pays your interest of 1.5% on your balance. Depending on how much you plan on spending with the card and the balance you have in your account this may be worth looking into. As of now the M1 Spend option is not available but it will be coming soon.

As you can see M1 Finance offers a very unique brokerage account and some potentially useful additional services to its customers.

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Disclaimer

This article is for information purposes only and should not be considered investment, financial, legal or tax advice. Please consult your own advisor.

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