M1 Finance and Robinhood provide easy investment options for DIY investors, but they take distinct approaches to their target customers.
These programs can also be used by semi-experienced investors and long-term passive investors for low-cost investment on their own terms.
Robinhood was a key disruptor for mobile investment with the rise of online brokerage platforms and mobile trading apps.
Since 2013, the app has allowed investors to trade stocks, ETFs, and options for free.
The platform targeted millennial investors and newbies searching for a cost-effective and straightforward way to invest and trade stocks and other assets, and it continues to do so.
M1 Finance, which launched shortly after Robinhood made waves in the investment world, was another trading platform that allowed investors to build a portfolio and access automated investing strategies.
Let’s take a brief look at how they compare to one another.
By the end of this article, I hope you’re encouraged to use either one or maybe both!
M1 Finance: The Basics
M1 (previously M1 Finance) is a financial services company established in the United States.
It provides commission-free stock trading and a variety of other investing choices.
M1 Holdings Inc. (with its affiliates, M1 LLC and M1 Spend LLC) was founded in 2015 by Brian Barnes and is popular among investors looking for a broader selection of financial products.
Spending, investing, and borrowing options are all available through the all-in-one personal money management organization.
For the passive investor, the platform offers smart money management and automated investing, making it a comprehensive personal finance tool.
Related Reading: Robinhood Competitors – Check Out The Competitors Here.
How Does M1 Finance Work?
M1 Finance is a reputable money management tool with two account tiers and an investing component.
Because of its fractional-share investing capabilities, you can invest in stocks and ETFs with nearly any amount using its free version.
Investing in fractional shares can make investing more accessible because purchasing a portion of a stock is often less expensive than purchasing the entire stock.
M1 Finance focuses on making investing easier for beginner investors with pre-built portfolios and automatic rebalancing, in addition to making investment more accessible.
M1 gives you the option of choosing a skillfully designed portfolio, referred to as an expert pie, or building your own when you sign up for an account.
The portal also provides instructional materials to assist you in your investment education.
M1 Plus is the company’s upgrade option for investors.
An M1 Plus account is $125 per year and comes with some extra perks.
The rate for borrowing funds to trade on margin with M1 Plus is 2%, which is 1.5% lower than the rate offered by a normal M1 account.
M1 Plus also gives you access to other trading options.
They offer a single trading window with its basic account to keep costs low, while M1 Plus adds a second trading window in the afternoon.
With an upgraded account, you gain extra cash management account perks like 1% cash back on eligible debit card transactions.
Plus, you get an interest-bearing checking account with a 1.00% annual percentage yield.
Robinhood: The Basics
By creating Robinhood — a free stock trading software – in 2013, Vladimir Tenev and Baiju Bhatt revolutionized the way Americans trade stocks.
Interests, order flow, margin lending, rehypothecation, and increased service fees are how the financial services organization makes money instead of collecting commissions on trades.
This user-friendly platform for the US-based broker allows users to trade equities and ETFs on the stock market.
It also allows you to trade options.
Any investor on Robinhood Crypto can participate in the cryptocurrency market.
However, the Robinhood investment site now only lists seven cryptos.
How Does Robinhood Work?
When it first began in 2013, Robinhood was a trailblazer in the field of commission-free stock trading, and several others have since followed in its footsteps.
There are two types of investing accounts offered by Robinhood: free and premium.
You may trade individual stocks, ETFs, options, and cryptocurrencies in real-time using its free edition.
Robinhood, like M1 Finance, offers fractional-share investment, so you don’t need a lot of money to get started.
The ability to trade in real-time makes Robinhood an appealing choice for investors who want to make frequent deals.
Robinhood also provides comprehensive instructional materials to assist you in learning how to invest money, which may be pretty beneficial to beginner investors.
If you upgrade to Robinhood Gold, you have access to additional research tools as well as the option to trade on margin.
It costs $5 each month and gives you access to a $1,000 loan.
Borrowing more than $1,000 entails paying a 2.5% interest rate.
M1 Finance vs Robinhood: A Comparison In Features
Let’s look at how these two contenders fare when they put their features head-to-head!
M1 Finance vs Robinhood: Investment Products
The investing options are straightforward with Robinhood, and you just have one taxed account.
Stocks, ETFs, options, and cryptocurrency are all available for trading.
If investors want to trade cryptocurrencies, Robinhood Crypto allows them to do so using Bitcoin, Bitcoin Cash, Dogecoin, Litecoin, Ethereum, and Ethereum Classic.
M1 Finance offers automated, passive investing by combining the characteristics of a standard brokerage account with a Robo-advisor tool.
You can only trade ETFs and stocks, which M1 refers to as “pies.”
You may personalize a pie to reflect your stock and ETF interests.
The program splits your investments into two categories, MyPies and Expert Pies, using a pie.
Expert Pies gives you access to eight groups based on your investment objectives.
MyPies, on the other hand, provides an easy-to-use interface for creating your own investing strategy, allowing you to select which pie segments to invest in.
With one of the pre-made portfolios, you may personalize your investments. Each pie can include one stock or as many as 100 distinct stocks and ETFs.
It’s the investor’s prerogative to decide which type of pie to invest in.
Some are better suited to reduced salaries, while others are more suited to growth.
Within the pie, you can also purchase fractional shares of a firm.
This means that buyers can buy as little as 1/10,000th of a stock and are not required to pay the full stock price.
M1 Finance offers a variety of account kinds.
With a minimum deposit of $100, you can open a taxable brokerage account, or a regular IRA, SEP IRA, Roth IRA, or Rollover IRA.
A $500 minimum deposit is required for these accounts.
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M1 Finance vs Robinhood: Trading Fees and Commissions
M1 Finance and Robinhood both have no fees for investing.
There are no account fees or trading commissions.
Miscellaneous one-time costs for items like printed statements, outbound account transfers, and so forth are unavoidable.
M1 Finance also offers a $125/year M1 Plus membership that includes a lower margin rate and, if desired, an additional trading window.
Robinhood Gold is a premium service that costs $5 per month ($60 per year) and gives you access to expert research reports, richer market data, and quicker deposits.
M1 Finance vs Robinhood: Account Offerings
The following account types are available from M1 Finance:
- Roth IRA
- SEP IRA
- Custodial (Only for M1 Plus subscribers)
- Taxable Accounts
- Traditional IRA
- Rollover IRA
- Margin Account
- Checking account
At the moment, Robinhood only provides a regular taxable account.
There’s also a Robinhood cash management account and checking account.
There are no joint, trust, custodial, or retirement accounts available. They said they aim to do so in the future.
Neither platform has the following account types:
- Solo 401(k)
- SIMPLE IRA
M1 Finance vs Robinhood: Margin
Margin is a secured loan against your invested assets that allows you to invest or trade with more risk.
To use Robinhood’s margin, you must pay $5 per month for the Margin Gold premium account and have a minimum balance of $2,000.
To use M1 Finance’s margin, you must have a taxable account worth at least $10,000.
Here’s how M1 Finance and Robinhood compare on margin rates:
- M1 Finance – 3.5%
- M1 Plus – 2%
- Robinhood – 5%
M1 Plus is a $125/year premium membership that grants you access to a lower margin rate of 1.5%, as well as a second trading window.
M1 Finance’s margin loan can be used for anything – debt consolidation, significant purchases, unforeseen needs, and so on.
It’s merely a low-interest collateralized loan.
Please remember that trading on margin has additional risks, including the possibility of losing more money than you put in.
Retirement and custodial accounts are not eligible for margin.
M1 Finance vs Robinhood: Educational Offerings
Robinhood lacks a Robo-advisor tool or feature, and its research, analysis, and stock screener features are inferior to those offered by competing brokerages.
However, within the program, you can create candlestick charts and watchlists.
Investors may also look at “People Also Bought” for more stock ideas.
Still, long-term investors will likely conduct their research outside of Robinhood and just utilize the app to trade options without paying a commission.
M1 Finance was created in part as a Robo-advisor tool to assist users in investing in equities and ETFs that are relevant to their goals and interests.
You may store up to 100 different ETFs and equities on M1 Custom pies.
You choose which individual stocks and ETFs you want to invest in, as well as what percentage of your portfolio you want to put into each one.
Your portfolio is automatically rebalanced, and your account is divided up according to your preferences.
On the other hand, passive investors may benefit from the Robo-advisor even more with professional expertise.
With this method, the specialists handle everything.
You may create an expert pie in minutes by deciding when you want to retire and which portfolio style you want to use, such as aggressive, moderate, or cautious.
With hundreds of financial education articles, blogs, and videos, M1 Finance is a clear edge for beginning investors.
There are no other screener tools, charts, or analytic software available.
This is due to M1 Finance’s automated investing strategy for all customers.
M1 Finance vs Robinhood: Mobile App
M1 Finance features a clean, contemporary, and user-friendly iOS and Android app.
For Apple iOS, Robinhood appears to offer a comparable app.
However, Android customers have reported that the Robinhood app is buggy and unsupported.
M1 Finance vs Robinhood: UX and UI
M1 Finance provides a user-friendly, straightforward interface that is suitable for both experienced and beginner investors.
Robinhood has a little less intuitive design because of its more technical analysis and research features, but it’s far from unusable.
M1 Finance vs Robinhood: Security
The Financial Industry Regulatory Authority (FINRA) and The Securities and Exchange Commission (SEC) oversee both Robinhood and M1 Finance.
Client funds are also safeguarded by SIPC, a US investor protection system.
This guarantees that your money is protected in the event that your broker falls bankrupt or insolvent.
SIPC protection has a ceiling of $500,000, with a cash restriction of $250,000.
When it comes to security, Robinhood provides the essentials, such as Face ID and quick verification.
If you log in from a different device, you may face a security issue.
M1 Finance, on the other hand, uses 4096-bit encryption for all data transfers, and you can use your phone to set up two-factor authentication.
M1 Finance vs Robinhood: Customer Service
M1 Finance’s customer service has always been excellent in my experience.
I’ve heard some reports about them being a little slow. I’d like to believe M1 is trying to change that.
Robinhood’s customer support has a reputation for being sluggish or inattentive at times, and the company notably doesn’t even have a phone number.
M1 Finance and Robinhood both provide an FDIC-insured bank account with a debit card as an optional feature, making them more than just investment platforms.
You may get 1% APY and 1% cashback on that checking account with their premium M1 Plus option.
Robinhood provides a 0.30% percentage yield with no cashback.
M1 Finance offers “dynamic rebalancing,” which automatically rebalances your portfolio to its target asset allocation.
It does so by using fresh deposits and fractional shares, which puts every cent to work for you.
Robinhood provides fractional shares as well, but there is no automatic rebalancing.
Being a full-fledged trading platform, Robinhood provides an all-day trading window and order management.
M1 Finance, on the other hand, is designed for long-term buy-and-hold investment and offers only one daily trading opportunity in the morning.
Their M1 Plus membership grants you access to a second trading window in the afternoon.
Robinhood’s posts will be a little more technical in nature when it comes to user education.
Both platforms have a blog where they share helpful hints and instructions.
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M1 Finance vs Robinhood: Features Unique To Each Platform
M1 Finance’s Distinct Features:
M1 Spend is a bank account that comes with a debit card that gives customers rewards on their purchases.
When investors open an M1 Invest account, they usually have access to M1 Spend as well.
M1 Spend allows you to conveniently and rapidly move payments across accounts without fees or a minimum balance.
M1 Borrow is the broker’s portfolio lending service for investors who desire to use margin.
Users of M1 Borrow benefit from some of the industry’s lowest margin rates.
A 3.75% margin rate is available to all users.
M1 Plus members benefit from a 2.25% profit rate.
The M1 Borrow function allows investors to borrow up to 40% of their invested amount.
M1 Plus is a premium account that gives you 1% cash back on purchases and a 1% annual percentage yield on your balance.
Smart Transfers, a feature of M1 Plus, allows investors to make automated financial transfers between M1 Invest and M1 Spend.
M1 Finance provides a low-cost Robo advisor solution that includes financial advice and portfolio management.
Investors can also use it to automate portfolio management.
The way M1 trades stocks, ETFs, and closed-ended funds is one of its distinguishing qualities.
Users may trade pies, which are effectively a collection of securities.
Investors can create their own pies or trade one that the broker has previously created.
Each pie can include up to 100 stock, ETF, and closed-ended fund pieces.
The broker’s strategy, as seen in this M1 summary, is based on three key pillars: borrowing, spending, and investing.
This might make the platform a good solution for investors looking for a personal management broker that does everything.
Robinhood’s Distinct Features:
To trade on margin (at a modest 2.5% margin rate), access special market research, and obtain Level II data, investors can upgrade to a Robinhood Gold account. To be eligible, you must have at least $2,000 in your account.
Robinhood provides low-cost stock trading with no commissions. Investors interested in day trading will appreciate the reduced costs.
One of the reasons novices choose Robinhood is that it provides access to a virtual library.
The library is a valuable resource that covers a wide range of subjects related to options trading and investing in general.
Extended Trading Hours
On the Robinhood trading platform, traders may trade for longer periods of time. Unlike M1 Finance, which does not allow pre-market or after-hours trading, Robinhood does.
Pre-market begins at 9:00 a.m. ET on regular business days, 30 minutes earlier than regular market hours.
After-hours trading closes at 6:00 p.m. ET on ordinary business days, two hours later than regular market hours.
Traders may invest in a variety of asset types, including stocks, ETFs, options, and cryptocurrencies, through Robinhood.
Since it lets investors trade without worrying about exorbitant costs, Robinhood is ideal for newcomers interested in day trading. It could also work well for margin trading.
M1 Finance vs Robinhood: The Pros and Cons
Are you still not sure which platform is better? Take a look at these quick pros and cons for each contender.
M1 Finance Pros
Access To Multiple Accounts
An individual retirement account, joint account, taxable account, or trust can all be opened and invested in by an investor.
Low Margin Rates
With the M1 Borrow function, M1 delivers one of the lowest margin rates in the business.
Your broker can rebalance your portfolio by purchasing underperforming holdings with your new acquisitions.
Supports Multiple Account Types
M1 allows investors to create and invest in a variety of individual retirement accounts, including SEP IRAs, Roth IRAs, and Traditional IRAs, in addition to the bank, margin, and credit card accounts.
M1 Finance Cons
No Bonds, CDs, and Mutual Funds
Because M1 restricts investors to equities and ETFs, having a properly diversified portfolio may be challenging.
Bonds, mutual funds, and CDs are not among the investment alternatives available through the broker.
Only Gives You Partial Control
If you want to invest in individual positions rather than a portfolio, M1 may not be the right broker for you. You may purchase and sell stocks, but only from certain parts of your portfolio.
No Cryptocurrency Trading
M1 does not allow for cryptocurrency trading, making it unsuitable for any investor interested in trading this asset class.
Not Suitable For Active Investors
M1 is designed specifically for passive investors. If you’re interested in short-term trading, it might not be a suitable fit.
No Minimums and Fees
On their trading accounts and Robinhood Gold accounts, Robinhood traders are not required to maintain a minimum amount. Crypto, stocks, options, and ETFs all have no commissions.
The trading interface on the website and the Robinhood app are both simple to comprehend, explore, and utilize. This makes it an excellent alternative for new investors.
Traders can invest in equities, options, and ETFs or trade using Robinhood bitcoin.
Allows Margin Trading
Traders have the ability to trade on margin and invest in fractional shares. Fractional shares for the win! On the Robinhood platform, there are no per-contract options fees.
Restrictive Crypto Options
While Robinhood enables cryptocurrency investing, investors may find the trading platform’s limited crypto alternatives to be restricting.
Fussy Crypto Funds Withdrawal
It is feasible to invest in cryptocurrency, but getting your money out of Robinhood might be difficult.
To withdraw your cryptocurrency funds, you must first sell them to convert them to fiat currency.
No Bonds, Mutual Funds, and Retirement Account Investing
Bonds, mutual funds, and IRAs are not available with Robinhood. If you want to invest in these options, you’ll need to locate another broker.
Related Reading: What Are The Best Financial Goals – Find Them out Here
M1 Finance and Robinhood both provide no commission stock trading.
The general similarities, however, cease there.
M1 Finance is for long-term investors, particularly dividend investors, whereas Robinhood is for aggressive rookie traders.
M1 Finance offers a $100 account minimum or $500 for retirement funds, whereas Robinhood has a $0 account minimum.
M1 Finance and Robinhood both have options for fractional shares.
M1 Finance will appeal to investors searching for retirement accounts, as Robinhood does not presently allow retirement accounts.
Because M1 Finance does not accept alternative assets like cryptocurrency and options, investors will gravitate toward Robinhood.
However, as both sites are free, you could simply register a Robinhood account to acquire these specific assets while keeping your stock and bond investments with M1 Finance.
On an individual stock level, Robinhood enables DRIP or dividend reinvestment.
M1 Finance offers a DRIP at the portfolio level.
If your account balance reaches $25 after dividends, the money is spread across your portfolio according to your selected proportions.
You may stay completely involved in lowering your idle cash, thanks to fractional shares.
Hundreds of long term investors and experts are available from M1 Finance (portfolios).
They don’t charge any fees for investing in these professionally constructed portfolios.
Target-date funds, for example, are excellent for retirement investors.
Robinhood does not provide pre-built portfolios or investment advice.
Finally, when you add or remove money, M1 automatically rebalances your portfolio.
You’ll have to rebalance your portfolio on your own using Robinhood.
At the end of the day, both are entirely free, so you may test both and discover which one tickles your fancy.