Investing Simple is affiliated with M1 Finance. This relationship does not influence our opinion of this platform.
M1 Finance is a new brokerage account that allows you to automate your investments and invest for free. M1 Finance offers investors flexibility in being able to select custom investments to hold in your portfolio or the ability to invest in portfolios that are built by financial experts. You can choose from thousands of stocks and ETFs that fit your investment goals. M1’s platform is easy to use and completely free with no commissions or stock price markups. For this reason, M1 Finance has taken the brokerage industry by storm!
As a beginner, it is important that you understand some of the basics of using the M1 Finance platform. We will cover those now!
M1 Finance refers to your portfolio as a pie. You build your pie using a variety of stocks and/or ETFs that you would like to hold in your account. Once your pie is built, you can fund your account and begin investing in the companies and ETFs you choose.
Unlike traditional brokerage accounts, in M1 Finance your cash is always being invested and working for you. M1 Finance invests your cash into the investments you decided on and rebalances your portfolio as you go. When you would like to withdraw your funds, M1 Finance will sell off equal portions of your pie so it will remain balanced. You can create your own custom Pie or choose from a variety of expert pies offered for free on M1’s platform.
Many of us struggle with the similar issue of being too busy to manage all the things going on in our daily lives. M1’s goal is to make your life easier by making investing free and simple. M1 Finance is a modern platform that offers a variety of low cost ETFs and as well as commission free trading. M1 Finance lets you set your investments and forget about them, knowing that your cash is always being reinvested in your pie. This allows you to live your busy day to day life without having to constantly manage your investments. M1 Finance offers a variety of additional features such as:
- Automated Rebalancing: M1 Finance automatically rebalances your portfolio by investing the excess cash in your account. If you make a withdrawal, M1 Finance will make sure all your positions stay equally balanced.
- Recurring Investments: Automate deposits from your bank and allow your funds to be invested without any manual input.
- Built in Tax Efficiency: M1 Finance is designed to sell positions in tax lots most favorable to the investor.
- Fractional Shares: With M1 Finance, you can have a truly diversified portfolio with fractional shares. M1 Finance allows you to buy 1/10,000th of a share of any company.
Opening An M1 Finance Account
Step 1: When you sign up, you will be guided to build your portfolio or pie. You may choose to create a custom pie from a variety of ETFs and stocks offered on M1’s platform. You can also choose from a variety of expert pies that are designed by M1 Finance that offer templates for ideal pie creations. Your pie may contain 1 stock or up to 100.
Step 2: Once your account is open, you will be guided to create your brokerage account. This is where you will put in your personal information and decide which type of investment account you are going to open up (individual brokerage account, retirement account, etc.). You may open up multiple types of accounts if you’d like.
Step 3: After you have set up your M1 Finance account, you will be able to link a bank account and begin funding your account. M1 Finance requires a minimum deposit of $100 ($500 for retirement accounts) to begin investing.
If you are new to M1 Finance, you may want to consider a steady entry into the market. In the investment community, we call this dollar cost averaging. This is simply investing your money into your portfolio over a period of time rather than all at once.
Say you have $100,000 to invest. You may want to invest just $10,000 into the market every month for 10 months. This way you lower your risk of investing into an overheated market. When you invest over time using dollar cost averaging, you have less risk in getting in at the top of the market. However, the disadvantage to dollar cost averaging is that you may miss out on exceptional market performance by not being fully invested during that period of time.