M1 Finance and Robinhood are kings in the commission-free micro-investing world. Below I compare M1 Finance to Robinhood to determine which one is better for you.
What is better between M1 Finance and Robinhood? Let’s find out.
Prior to the creation of these trading apps, investing had a high bar for entry. Investors were often required to sink heaps of money into accounts and accounts managers while having to wait a long time for profits to generate.
This discouraged a younger generation with more shallow pockets from making lucrative investments.
Thanks to millennial investment and micro-investing startups, the game has been changed completely.
Instead of having to open an investment account with a hired broker for thousands and thousands of dollars, anyone who can afford a cup of coffee can make an investment – and all from the comfort of your mobile phone.
Today, hundreds of smaller, app-based investment companies have sprouted, all hustling for a share of the younger, more technologically-advanced market by offering zero fees, smaller stock-specific portfolios, and lower entry costs.
Robinhood and M1 Finance are two of the most popular companies in this space – and they’re capturing the younger, mobile-savvy crowd in different ways.
If you’re wondering which app to use, this M1 Finance vs Robinhood comparison review offers a comprehensive analysis of these two companies to help you choose a stock investment partner that reflects your mission and financial goals.
Table of Contents
What is M1 Finance?
Founder Brian Barnes first started investing in fifth grade, when, in a mock-investing project, his parents gave him a small amount of money to invest in real markets. Fresh from his first job as an adult, Barnes sought out ways to easily invest the money he had earned, but to his disappointment, the investment platforms currently available lacked the features he wanted.
As a solution, Barnes decided to create his own. He launched M1 Finance in 2016 with a variety of features: easy withdrawal of funds, automated monthly deposits, and the ability to maintain a preset portfolio allocation.
One of the platform’s goals is to keep the costs of investing low. Though it initially charged a fee of .25% for investing, it was waived in December 2017. This simple change doubled its user base within two months.
M1 Finance offers all of the things millennial investors are looking for: low costs, convenience, and automation.
The platform has won a variety of awards including the Best for Socially Responsible Investing and Best for Sophisticated Investors distinctions from Investopedia’s 2019 Best Robo-Advisor Awards. It was also included in ChicagoInno 2019’s “50 on Fire”.
M1 Finance has over 250,000 funded accounts with over $500 million in client assets.
Investment Options and Fees
Similar to Robinhood, M1 Finance offers ETFs and NYSE and Nasdaq stocks, but the platform also allows its users to trade on BATS.
Dividends earned through investment options in M1 Finance are automatically reinvested into your stocks, which means that you cannot short your stocks on the platform.
M1 Finance also offers fractional shares, which means you can spend less on part of a stock without having to purchase all of it.
For example, even if one stock is worth $500 a share, you can still choose to invest just $100 in that stock.
The platform doesn’t charge its users commissions or for asset management, but users who want to get more out of the platform may choose to pay a fee for its premium services. More on this below.
The M1 Borrow account allows users to get a line of credit or a loan against their securities with a variable interest rate.
The M1 Spend account offers checking and debit that aligns with your investment account.
You’ll be able to open taxable accounts in M1 Finance for just $100. Apart from taxable accounts, the platform also offers Roth and SEP IRAs, traditional accounts, and joint trusts.
The M1 Plus account allows users to get access to a second trading window for more control over their investments. The Plus account also offers 1% cashback on qualifying debit card purchases, 2% loans through M1 Borrow, and an afternoon trade window, among other perks.
M1 Finance Pros and Cons
In the M1 Finance vs Robinhood battle, M1 Finance blows Robinhood out of the water when it comes to its wealth of features, but pales in comparison to Robinhood’s user-friendliness.
Here’s everything you need to know about the platform’s pros and cons.
M1 Finance Pros
- If you’re planning on opening an IRA, M1 Finance is spectacular for long-term growth-dividend investors.
- Similar to Robinhood, M1 Finance offers $0 commission, free trades, and zero maintenance fees.
- Auto invest, re-occurring deposits, and fractional shares make M1 Finance a great set-it-and-forget-it platform for passive investors. All you need to do is to put in money and the platform takes care of the rest.
- More active investors will like the freedom M1 Finance offers for constructing various portfolios from the ground up. Users may be even split-test multiple account types.
M1 Finance Cons
- Traders and investors who are into swing trading, day trading, or other such options will find M1 Finance useless.
- M1 Finance is incredibly focused on just one thing: investment automation and improving your investing potential through a continuous investment cycle. This means that its other features might pale in comparison to others.
- Unlike Robinhood that’s completely free, there’s a $100 start-up cost to begin investing with M1 Finance.
How to sign up for M1 Finance
After signing up, you must deposit a minimum of $500 for an IRA account or $100 for a taxable account. If you make the initial qualifying deposit within 90 days of signing up, you’ll get your $10 bonus credit.
During the signup process, you will be asked to select some investment options you’re interested in. The platform allows you to invest by creating customized “pies,” which are M1 Finance’s version of investment portfolios.
These pies are created based on your goals, risk tolerance, and other factors. Users are advised to select three or more investment options to create their own “pie,” while also setting the percentage for each of the pie slices.
After setting up your pie, you can fund your account. Your initial deposit will be distributed among your pie slices according to your preferences.
See Related: 10 Best Dividend Income Trackers
What is Robinhood?
Standford roommates Vlad Tenev and Baiju Bhatt came up with the idea for Robinhood in 2014 when, after realizing that while the average American pays up to $10 per stock trade, giant Wall Street firms pay virtually nothing.
In addition, the various fees involved in trading stocks often discourage young traders from entering the stock market.
The duo wanted to create a product that would offer anyone the capacity to make their own financial decisions. By streamlining the process and eliminating fees, the app opened up trading to a whole new demographic.
Robinhood puts prime value in individual participation, superb systems, and simplicity. The team gave much thought to the app’s interface, using a great team of engineers and designers to create a platform that anyone can use.
Robinhood is the first finance app to be awarded an Apple Design Award. It is also the fastest-growing brokerage in history. The app has over 1 million users and is headquartered in Palo Alto, California.
Investment Options and Fees
Robinhood allows you to invest in ETFs and stocks listed on the US stock exchange. You may also acquire options contracts for ETFs and stocks that are US-listed and trade in around 250 global companies with American depository receipts.
Modern investors will be happy to know that Robinhood also allows its users to invest in cryptocurrency, particularly Ethereum and Bitcoin. While only available in select states, the platform is a great way to begin investing in crypto without the need to navigate the e-currency world alone.
Robinhood has a $0 account minimum, and will not charge you a commission on trades. However, you’ll have to pay a standard sell order fee as well as fees for wire transfers and account transfers.
International transfers cost $50, while domestic wire transfers cost $25.
If at some point during your experience you plan to move your money to somewhere other than Robinhood, you will also have to shell out $75.
See Related: Alternative Investments 101
The Robinhood basic account has no entry price and zero fees, but the platform offers a paid subscription called Robinhood Gold which costs $5 a month.
Robinhood Gold offers a number of premium features for its subscribers including early and late trading. Subscribers can begin trading 30 minutes before the market opens and continue trading two hours after the market closes.
The premium subscription also offers margin trading.
Here, subscribers can borrow double the amount of money available in their account if they have a balance of at least $2,000. Subscribers also have the privilege of not having to wait long periods for reinvestment and ACH transfers, allowing them to invest right away.
Robinhood Pros and Cons
This M1 Finance vs Robinhood comparison would not be complete without a thorough rundown of each platform’s pros and cons. Here are the good bits and the not-so-good bits about Robinhood.
- A sleek and smooth, user-friendly design that allows users to easily find prices and companies. Robinhood is design-centered, so you won’t experience any of the inconveniences that usually come with a clunky design.
- Robinhood offers free zero-commission trades with a $0 account minimum. The platform was designed to attract young investors who don’t have the financial capability to start investing otherwise.
- If you’re a modern investor interested in cryptocurrency, Robinhood is the better choice as M1 Finance doesn’t have this option.
- You’ll get free stocks when you sign up.
- If you’re actively trading volatile stocks, Robinhood’s lagging or slow prices and poor executions can be frustrating.
- Robinhood web and mobile platforms lack features that are standard for most brokerages.
- One of the biggest complaints I’ve discovered about Robinhood is its lack of customer support. Users found that Robinhood has slow and often unresponsive customer service.
- The platform lacks real technical analysis and research tools, so users must be prepared to go outside of the platform for comprehensive research about the stocks they’re interested in.
- When it comes to the M1 Finance vs Robinhood battle, Robinhood is trumped by M1 Finance’s options for retirement accounts. This means that your investment accounts won’t be growing with tax benefits.
See Related: 11 Best Robinhood Alternatives
How to sign up for Robinhood
Signing up for Robinhood is easy: all you need to do to open an account is to register with your name, email, address. Users who wish to fund their accounts immediately will need to register their bank account and routing numbers.
The platform is currently offering two free stocks for new users, valued at $5 to $500 and offered randomly from Robinhood’s inventory. The first free stock is offered immediately upon sign up, while the second free stock is offered if you fund your account with at least $10.
Users who refer their friends and family to the platform will receive even more free stock worth the same amount. Sign up and get free stock here.
M1 Finance vs Robinhood: Which is better for you?
For users who don’t like damaging their bank account or taking huge risks, Robinhood is a great choice. The platform allows you to try out ETFs, stocks, crypto, and options for cheap. Swing traders will also find Robinhood to be a better platform than M1 Finance.
If you’re a new player in the investing game and you’ve never tried buying shares before, you’ll want to begin with Robinhood. The capability to trade more stocks any time you want for a low entry price makes Robinhood the perfect app for neophyte investors.
On the other hand, users who have more familiarity with the market and are interested in investing in larger companies will find M1 Finance to be the better broker.
M1 Finance’s retirement options that offer tax-free accounts will also allow users to invest without having to pay capital gains taxes.
This makes M1 Finance the better option for investors looking for a long-term option.
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