Looking to use M1 Finance or want to step up your investing with M1 Finance? Use this ultimate tutorial on how to use M1 Finance to automate your investing so you can go out and enjoy the finer things in life.
Since launching in 2015, M1 Finance has grown to be one of the most popular investing platforms on the web, with more than $2 billion invested. The commission and fee-free platform was created to help users easily create, manage, and visualize their portfolio.
They provide free stock trades, fractional share investing, and automated investing solutions that make it accessible to new investors. One of the platforms selling points is that by focusing on automation, users don’t have to manually manage their investing constantly.
Another of the features that sets M1 apart from other investing platforms is their use of “pies,” which let users create their own stock groupings, or find professionally curated ones, to make it easy to invest in stocks within a shared industry or with another similarity.
With a lot of easy to use but powerful functionality, M1 promises to make it easy to match your financial goals with your investing profile.
If you are wondering how to use M1 Finance this is the tutorial for you. Let’s dig in.
Table of Contents
How to Use M1 Finance & Build An Automated Portfolio
The first step in getting started with M1 Finance is to create your account by going to their sign-up page and entering your email address and a password.
They’ll send you an email to verify your address, just click on the confirmation email. Once you’ve confirmed your email, you’ll be prompted to create a pie. You can skip below to learn about Pies, but first, let’s walk through finishing your account setup.
After creating your account, you’ll need to verify your phone number. Just put your phone number in when prompted and choose if you want a text emailed to you or an automated call.
After you’ve verified your phone number, you’ll be asked to complete your profile.
Next, you’ll be asked some questions required by the SEC and FINRA about your financial situation and investing style.
You’ll be asked about your annual income, your net worth, liquid net worth, investment experience, risk tolerance, investment horizon, the importance of liquidity, and your social security number.
You’ll also be asked if you are affiliated with a broker-dealer, 10% shareholder or director of a publicly-traded company, or related to a public official.
Most M1 Finance customers will select none of these apply.
You’ll have a chance to review your responses before clicking confirm.
Clicking confirm also means you are acknowledging and consenting with 14 different sets of terms and conditions.
With the account set up, the next step is to transfer money into the account.
Note that M1 does let you explore the platform for free and create pies without adding funds.
Funding Your Account
If you want to invest your money with M1, the next step is to fund your account by transferring funds from your bank.
Just click the Deposit button on the right-hand side and you’ll be given a few choices to fund your account.
To connect automatically, M1 uses Plaid’s financial API to securely link to your bank. Just supply the credentials you use to log into your bank or financial institution. You might need to enter a code texted to your phone.
You can also input your routing and account number manually.
If you want to do a one-time transfer there is a minimum of $100, and transfers are completed by the end of the next business day.
When you make a deposit, your money will automatically flow into pies and individual stocks at the weighting you select when building pies and allocating your portfolio, which we’ll cover shortly.
M1 Finance Pies
To invest your money in the stock market on M1 Finance, you’ll create or find pies created by experts. Note that you can always purchase single stocks and ETFs as well as fractional shares like you can on other investing platforms, but what sets M1 apart is the concept of a pie.
Pies refer to a collection of stocks, e.g. tech stocks or high-dividend stocks. Pies make it easy to invest in entire industries.
Once you create or find pies, you then fund your portfolio with one or more pies (or individual equities).
There are two types of pies in the M1 platform.
- Custom pies are a collection of stocks and funds you group yourself.
- Expert pies have been curated by Chartered Financial Analyst (CFA) and designed to meet specific objectives.
Creating a Pie
M1 Finance pies are the building blocks of your portfolio. They are simply a grouping of stocks. To create your custom investment portfolio you’ll create pies and your portfolio will be comprised of one or more pies.
While you can include any stock or mutual fund in a pie, it’s probably better if you group them thematically (e.g. social media or energy stocks).
To help get you started with pies when you create your account M1 will have you create your first one. You’ll be asked to select at least three stocks you are interested in.
You can use the search bar or browse the popular stocks and funds they display.
Note that as you create pies, you won’t be investing your money with them until you actually add them to your portfolio, so you can create pies and analyze and compare their historic performance, etc. without investing your money.
Weighing stocks in a pie
After selecting your stocks, you’ll be asked to weight their percent of that pie. This is how much each individual stock is weighted within that pie.
M1 will evenly divide the weighting by default, but you can change the weighting if you want more or less of one stock.
Say you want to invest in social media because you think the industry will grow. You think Facebook’s long-term outlook is the best, followed by Twitter, and you don’t think Snapchat or Pinterest have as much room to grow, but you don’t want to write them off completely.
You could weight the pie so that Facebook comprises 50 percent of the pie, Twitter 25 percent, Snapchat 15 percent, and Pinterest 10 percent.
That way, you are investing in social media as an industry, but you are investing more in Facebook than the others.
Pies give you the ability to easily invest in stocks involved in an industry. By how much you weigh them in the pie, you can invest more in stocks that you believe have a better chance at growth.
To create new pies or manage existing ones, click on the research tab, and click on pies.
You’ll see your pies grouped into ones that are invested in your portfolio (used) or not (unused), along with the option to create a new pie.
When you click on create new pie you’ll be taken to the research screen, where you can find the individual stocks and funds to add.
You can use the filters on the right to refine your search.
Filters include market capitalization, P/E ratio, and dividend yield percent, and you can also filter by sector. You can also click on the column headers to sort.
Clicking on the stock will bring you to a profile of that stock with more detailed information.
You can add stocks, ETFs, and expert pies, even your other existing pies, to your current pie. As you add stocks, you’ll see them appear on the bottom of the screen.
When you are ready just click add. See below.
When you create the pie it will be given the default name of New Pie and the date, which you can edit by clicking the edit button.
Editing your pie
In the edit pie screen you’ll be able to make changes to the pie:
- A – The name of the Pie, you probably want to name it something that makes sense to you.
- B – A brief description.
- C – You can add additional securities by clicking the add button (you’ll be taken back to the stock research screen).
- D – Change the weighting of each stock in this pie. As you change the weighting, make sure it adds up to 100%.
- E – Make sure you click save.
In addition to creating your own pies, you can also choose from pies created by professional Chartered Financial Analyst (CFA) on behalf of M1. The pies are created to meet specific investment goals.
In the research tab click expert pies and you’ll be able to choose the type of expert pie you want to browse.
The main categories of expert pies are:
- General Investing
- Plan for Retirement
- Responsible Investing
- Income Earners
- Hedge Fund Followers
- Just Stocks & Bonds
- Other Strategies
Under each of these groupings, you’ll find several expert pies to choose from. Here are the expert pies in the general investing category.
You’ll add the pies to your account the same as pies you create.
Keep in mind that as you browse or create pies, you won’t be investing money until you create and fund your portfolio and add pies to it.
Setting Up a Portfolio
Fortunately, setting up an M1 Finance portfolio is relatively straightforward.
Your M1 Portfolio represents what is actually invested. It can be comprised of pies you created, expert pies as well as individual securities.
To view it, go to the investing tab then the portfolio tab.
You’ll see the components of your portfolio and the value, gain, and the actual vs target allocation percentage.
Just like you weight how much each stock is weighted in the individual pies, you’ll set how much each pie (or individual security) is weighted in your portfolio overall.
This portfolio has a current value of $96.42, which is invested in five pies.
Two of those pies are custom-made (Big Tech and Automotive) and three are expert pies (Ultra Aggressive, Responsible Investing, and Global Dividend).
In this case, each of those pies comprises 20 percent of the overall portfolio, and each of those pies are comprised of the individual stocks or ETFs.
You’ll be able to see your total gain in dollars as well as the money-weighted return.
To make changes to your portfolio click edit, where you’ll be able to change the weighting of each pie or individual stock in your overall portfolio.
If you want to split the allocation equally you can check the select all and then equalize.
M1 Trading Window
To keep costs low, M1 executes trades once a day during their trading window, which starts at 10 a.m. Trades initiated before 10 a.m. will be executed that day, otherwise, they’ll take place during the next trading window.
You can also upgrade to M1 Plus to have a second trading window in the afternoon.
You can also fund your portfolio with auto-invest, which will invest your balance according to the allocation percents you selected.
Just turn on auto-invest on the right-hand of the portfolio view. Any cash deposited into the account will be transferred to your investment portfolio during the next trading window.
Automated investing is one of the most powerful strategies for long-term investing. Once you turn on auto-invest, M1 will automatically invest funds in your cash balance directly into your portfolio.
You can also set a cash minimum that will stay as cash and not be invested.
One of the most powerful ways to grow your investment gradually over time is to set up recurring transfers to your account, which are then automatically invested into your portfolio.
To set up recurring deposits, click the deposit button on the right of your portfolio view and then click “switch to a recurring schedule.”
You’ll be able to choose from monthly deposits, weekly, bi-weekly, or select a date of the month.
If you have a direct deposit set up with your employer, a good strategy to grow your portfolio without feeling it day-to-day is to set the transfer to happen on the day your paycheck is deposited.
The best way to invest is to do it regularly. Even small amounts add up over time.
If you are serious about growing your portfolio, contributing to it regularly is the easiest but most powerful way to grow your portfolio.
An added benefit of making regular smaller contributions is that it allows you to benefit from dollar cost averaging, which helps to even out the day-to-day volatility of the stock market.
See Related: 10+ Ways to Free Stocks
M1 Finance Roth IRA
M1 Finance also offers a free Roth IRA, which allows your money to grow sheltered from taxes. There is a $500 minimum to have a Roth IRA with M1.
To create a Roth IRA on M1, you can select it as an option when you first create your account or create a new retirement account within your investing account.
M1 gives individual investors a powerful strategy to manage and grow their investments.
Pies allow you to purchase partial shares and easily invest in sectors, while recurring deposits and automated investing help you grow your investment profile over time.
M1 Finance Frequently Asked Questions (FAQ)
How does M1 Finance make money?
Because M1 doesn’t charge fees or commissions, you might be wondering how they make money.
Like other financial services companies, they make money from the interest on customer cash they hold (i.e. cash held in your account balance but not invested) as well as interest on margin loans when customers borrow from M1. M1 also offers M1 Plus, which comes with an annual fee.
Is M1 Finance safe?
Yes, M1 Finance is safe. They describe themselves as “a technology-first company that utilizes the latest in information security.” Data on their system is “protected with military-grade 4096-bit encryption.” To increase account security M1 offers two-factor identification to log into the account, which you can activate in the settings tab.
M1 is a registered broker/dealer with FINRA and a member of SIPC, which means securities in M1 Invest accounts are insured up to $500,000 by the SIPC. M1 Spend checking accounts may be insured up to $250,000 by FDIC insurance.
What does M1 Finance cost? What is M1 Finance pricing?
M1 Finance is free to use. You’ll pay no fees or commissions to use the investment platform.
M1 does offer M1 Plus, which costs $125 a year. M1 Plus includes a checking account with an APY (at 1 percent at the time of this writing), 1 percent cash back on purchases, four free ATM fee coverage. M1 Plus also includes an additional trading window in the afternoon.