Robinhood, a popular trading app with no fees, is taking on the finance industry. M1 Finance, another app offering free trades, has been around since 2013 and has raised $150 million in funding.
The M1 Finance vs. Robinhood 2021 is a question that has been asked many times before. Which investing app is best?
M1 Finance is a company that specializes in financial services is a company that specializes in financial services is a company that specializes in financial services is a company that specializes in financial services is a company that specializes in financial services is a company that specializes in financial services is a company that specializes in financial services is a company that specializes in financial services is a company that specializes in financial services and Robinhood are two financial technology firms that caused a stir when they first launched. Both companies provide user-friendly platforms and services that allow US customers to participate in the stock market.
Investors may depend on M1 Finance, a conventional robo-advisor that helps customers create and manage their portfolios in minutes. Robinhood is geared at active investors and traders who wish to take use of the company’s services.
We’ll take a detailed look at the two unique businesses in this study, focusing on their major features, investing and account choices, price, and pros and drawbacks. As a result, you’ll be able to make an educated choice about which investment app is ideal for you.
M1 Finance vs. Robinhood: What’s the Difference?
M1 Finance and Robinhood are both relatively new businesses in the financial world. The latter began operations in 2013 and revolutionized the market by being the first to provide commission-free transactions. M1 Finance was established in 2015 to provide automated investing services to clients.
M1 Finance is a company that specializes in finance.
M1 Finance’s hybrid solution combines the finest aspects of brokerage and robo-advisory. Because both passive and active investors may be as hands-on as they like, the business appeals to all types of investors. Passive, long-term investors may use professional portfolios that have already been created, while active investors can start from scratch.
In 2017, the investment platform followed in the footsteps of Robinhood and reduced its costs to zero. M1 Finance was able to grow its assets under management to more than $2 billion as a result of this move. In our M1 Finance review, we go over everything you need to know about the company.
M1 Finance is the source of this information.
Because it was the first to provide commission-free trading, Robinhood is arguably the most widely used free self-directed trading platform on the market. Through its unique service offers, it promoted trading among younger generations (millennials).
Free trades on different asset classes, including alternative investments like cryptocurrency, fractional shares, and other features we’ll discuss in the major features area, are among the low-cost offers. For additional details, see our complete Robinhood review.
Main Differences Between M1 Finance and Robinhood
The features of M1 Finance and Robinhood are tailored to their particular consumers. Robinhood aims to improve the trading experience by offering commission-free trading across a variety of asset classes. M1 Finance, on the other hand, is a passive investment platform for investors who seldom trade their assets and want a hands-off approach.
M1 Finance’s most notable feature is its robo-advisory service, which invests, maintains, and rebalances an investor’s portfolio automatically (called a pie). The robo-advisor distributes money based on the investor’s risk tolerance and financial objectives using an algorithm. There are around 80 distinct pre-designed expert portfolios to choose from.
Experienced investors, on the other hand, may create tailored portfolios without the help of an adviser. They may also swap their assets without paying commissions during one or two trading periods each day. Furthermore, fractional shares are accessible for thousands of companies and ETFs traded in the United States.
M1 Finance’s Dividend Reinvestment Plan is ideal for dividend investors (DRIP). Once the dividends have reached the $25 cash level in the brokerage account, they will be automatically re-invested. This is, however, a portfolio-level DRIP. This implies that reinvestments flow back into your whole portfolio, not just the issuing stock, depending on your allocations.
For taxable accounts, a minimum investment of $100 is required, whereas for retirement accounts, a minimum investment of $500 is required. Contributions may be made in any quantity over $10 after the account is opened, and investors can set up automatic deposits to help them meet their financial objectives.
M1 Finance also provides its customers with the M1 borrow and M1 spend programs.
Investors who use the M1 borrow program may borrow up to 35 percent of the value of their portfolio without having to fill out any paperwork and get the lowest possible interest rate on their credit line. Depending on the plan, these loans have interest rates ranging from 2% to 3.5 percent. Margin is available to all accounts with a balance of more than $2,000 automatically.
M1 Finance’s M1 Spend program includes a debit card (linked to a checking account). The checking account and the investing account are linked, allowing you to transfer money to invest the same day. M1 Plus customers may also get a 1% annual percentage return and 1% cash back through M1 Spend.
Investors may join up for the M1 Plus Account, which provides a second trading window each day as well as access to the M1 Borrow program’s lowest interest rates. The annual fee for the M1 Plus Account is $125.
Overview of the Main Features
- M1 Finance’s robo-advisor enables customers to create portfolios based on their financial objectives and risk profile in minutes for free.
- Expert portfolios that have been pre-built: The site has approximately 80 portfolios that have been pre-designed for various investor types.
- Active investors may buy fractional shares (a part of a stock) to build a diverse portfolio with a little investment.
- Dividend Reinvestment Plan at the Portfolio Level: The platform reinvests dividends into the portfolio so that investors may receive compound interest.
- Users may borrow up to 35 percent of their portfolio value via the M1 Borrow Program, with yearly interest rates as low as 2% or 3.5 percent, depending on their plan.
- M1 Spend: This is a no-fee checking account that works in tandem with your M1 Investment account. Additionally, customers get a 1% APY and 1% cash back on purchases made with the associated debit card.
- M1 Plus: M1 Plus is M1 Finance’s premium account, which comes with a $125 yearly charge. Users may borrow money at the lowest possible interest rate and trade in a separate window.
Robinhood provides zero-commission trading on US-listed equities, exchange-traded funds (ETFs), American Depositary Receipts (ADRs), options, and cryptocurrencies, among other asset classes.
Investors with tiny account balances may purchase and sell fractional shares, exposing their portfolios to expensive assets.
Investors may make these transactions on Robinhood throughout regular and extended market hours, and quick deposits enable them to utilize their cash instantly once they have been processed.
Robinhood also caters to dividend investors by providing a dividend reinvestment option. Dividends may be automatically reinvested back into the issuing securities from which they were received. Unlike M1 Finance, the DRIP is based on individual stocks rather than a portfolio.
In addition, for $5 per month, investors may gain access to premium services including Morningstar’s expert research and Level II market data from Nasdaq TotalView, which includes more than just bid and ask prices, margin, and bigger rapid transfers up to portfolio value.
Investors may also use Robinhood to establish a margin account. Users that have at least $2,000 in their account may then borrow money from the broker to enhance their purchasing leverage. When you borrow money from Robinhood, you’ll be charged a fixed cost of 2.5 percent each year. The first $1,000 is margin-free and included in the monthly $5 cost.
When looking at Robinhood’s self-directed trading platforms, it’s clear that the company’s target market is new investors. The user-friendly interface is simple to use, intuitive, and straightforward to explore. As a result, it lacks the more sophisticated features that active investors need.
Finally, Robinhood customers may establish a cash management account, which pays an above-average annual percentage yield (APY) of 0.30 percent on uninvested funds. The bundle also includes a Sutton Bank debit card. Your funds are transferred to Robinhood’s network of program banks and are protected up to $1.25 million by the FDIC. Goldman Sachs, Citibank, and Wells Fargo are among the financial organizations that provide this partner account.
Overview of the Main Features
- Zero-commission trades: Robinhood customers may trade a broad range of assets for no fee, including US-listed stocks, ETFs, ADRs, options, and cryptocurrency.
- Small-budget investors may trade fractional shares and avoid having to wait until they have enough money to buy entire shares.
- Instant deposits: This option enables investors to put their money to work right away.
- Dividend reinvestment plan (DRIP): Dividend investors may use a DRIP to automatically reinvest their dividends in assets, allowing them to achieve their objectives quicker.
- Professional Morningstar research and larger immediate deposits are among the advanced features available to Robinhood Gold customers. Investors may use Robinhood Gold and cash management to provide margin for day-to-day spending.
- Level II market data is available in real time and comes directly from the Nasdaq stock exchange. It displays the volume of buy and sell orders as well as their corresponding bid/ask prices.
- Margin trading: Investors who trade on margin benefit from Robinhood since the first $1,000 in margin is interest-free (for Gold accounts only), and subsequent borrowing has a competitive flat yearly interest rate of 2.5 percent.
- Easy-to-use platform: Despite the absence of more sophisticated trading capabilities on Robinhood’s platform, investors may still enjoy a user-friendly trading platform.
Robinhood is the source of this information.
Investment Options: M1 Finance vs. Robinhood
Both of the highlighted businesses provide a free investment platform, but their target demographics are very different. M1 Finance is mainly an automated passive investment platform that uses robo-advisors, as opposed to Robinhood, which is better suited for active investors and traders.
Users of M1 Finance and Robinhood may trade stocks and ETFs for free. The Robinhood platform, on the other hand, allows investors to trade options and cryptocurrency. Both businesses do not support other asset types.
Users may select from one (or more) pre-built expert pies (portfolios) or create their own. Target-date funds (TDFs) are included in pre-built portfolios, which are ideal for retirement investors. M1 Finance’s pie portfolios may contain up to 100 stocks, while ETFs and over 6,000 exchange-listed securities, including those traded on the NYSE, NASDAQ, and BAT, are also accessible.
For all of their accessible assets, M1 Finance also provides fractional shares. Beginner investors with little funds may build a portfolio of more costly companies without having to wait until they are able to purchase a whole share.
Robinhood provides active investors zero-commission trading and doesn’t charge any fees for purchases or sells on the site. Stocks, ETFs, options, ADRs, and cryptocurrencies are currently accessible assets.
Mutual funds, bonds, currencies, futures, and penny stocks aren’t supported, unfortunately. Furthermore, only assets that are listed on a US market may be exchanged.
On Robinhood, fractional shares are also accessible for free. Investors may opt to trade depending on the number of shares or the amount of money, and the value must be equal to or more than $1.
Account Types in M1 Finance vs. Robinhood
M1 Finance provides a diverse range of accounts (including retirement accounts) to meet the requirements of its investors, while Robinhood exclusively offers taxable and margin accounts.
M1 Finance offers a variety of account options for customers to invest in, as well as the ability to roll over an existing 401(k) or IRA account to M1 Finance.
- Individual brokerage account that is taxed
- taxable brokerage account for a couple
- Account for personal retirement (traditional IRA, Roth IRA, and SEP IRA)
- Account with a joint trust
- Savings account (through M1 Spend)
At the moment, Robinhood exclusively provides individual taxable investing accounts to its customers. There are no joint accounts, trusts, or retirement plans offered.
There are three kinds of accounts inside this account to meet the requirements of investors. These accounts provide you access to a variety of Robinhood services, including:
- Robinhood Instant: This is the account that most people start with. Traders with a taxable margin account get access to the quick deposit option as well as extended trading hours.
- Robinhood Gold: This is Robinhood’s premium account (similar to an immediate account), which includes enhanced research, Level II market data, a bigger margin balance, and larger instant deposits.
- Robinhood Cash is the most basic account that Robinhood has to offer. It enables consumers to trade all of the firm’s goods throughout normal and extended market hours. This account, on the other hand, does not allow for margin transactions or quick deposits.
M1 Finance and Robinhood both provide sign-up incentives and referral programs to encourage customers to join up for their platforms and invite their friends to do the same.
M1 Finance presently has two mutually exclusive promotions: customers get a $30 incentive when they recommend a friend to the platform, and the friend receives a $30 bonus for joining up as well. The second offer is for new customers who make a single deposit to an M1 Finance taxable account for the first time.
The individual who sends the invitation link must have a paid M1 Invest account, and the person who is invited must be a new member to be eligible for the referral program. The bonus will be credited to the new user’s account within 14 days of joining up and financing it.
A first-time single investment of at least $1,000 is required for new investors to fund an M1 Investment account. They will get a one-time deposit of $30 into their cash balance in this manner. After investors meet the requirements, M1 will make the deposit within three to five business days.
M1 Finance is the source of this information.
The referral program and the first-time sign-up incentive are two comparable promotions that Robinhood presently provides to its customers.
If investors join up with Robinhood, the company promises to credit their account with a free surprise stock. It’s possible that the stock comes from Microsoft, GE, or Apple (1 in 80 chances), but bear in mind that 98 percent of stocks given are worth between $2.50 and $10.
Users may earn up to $500 in reward stock each year via the referral program. They must encourage friends to create a Robinhood account, and each of the two friends will get a free stock after the registration is complete. In addition, investors will get an additional fourth shares for every three friends they bring.
Fees & Pricing: M1 Finance vs. Robinhood
Despite the fact that M1 Finance and Robinhood are essentially free platforms that provide commission-free stock and ETF trading, they also offer premium features.
M1 Finance customers, on the other hand, are required to have a minimum account balance of $100 ($500 for retirement accounts). Robinhood, on the other hand, does not need a minimum deposit to buy stocks, ETFs, options, or cryptocurrencies.
The basic investment account at M1 Finance is completely free. Users may, however, improve their rank by paying a $125 yearly membership charge for the M1 Plus Account. Users may then take advantage of the M1 Borrow program’s reduced interest rates. For M1 Plus Account users, the interest rate is lowered from 3.5 percent (basic M1) to 2 percent.
On the other side, they receive a 1% checking APY on their bank account balance and 1% cashback on any purchases made using the M1 Spend program’s associated debit card. These extra features are not available to basic account users.
The Robinhood platform is free, and there are no fees associated with trading accessible assets on the site. The company does, however, charge a $5 monthly fee for Robinhood Gold upgrades.
A 2.5 percent annual interest rate on margin transactions is another cost charged by the business. The first $1,000 in the margin is, however, free for Robinhood Gold customers.
Also bear in mind that outbound account transfers ($75), local wire transfers ($25), and international wire transactions ($50) are all subject to Robinhood costs.
Robinhood is the source of this information.
What We Like About M1 Finance vs. Robinhood (Pros)
Both businesses successfully altered the way financial institutions must function in order to remain competitive. Find out what we appreciate most about the two businesses featured in this post in the following paragraphs:
- a licensed financial services company headquartered in the United States
- Investing options include a variety of account kinds (including retirement accounts)
- Trading stocks and ETFs for free
- Free passive investment service based on a robo-advisor
- Portfolios may be built from the ground up by experienced investors.
- Dividend investors may participate in a portfolio-level dividend reinvestment plan (DRIP).
- Investors may diversify their portfolios by purchasing fractional shares.
- Users may take out a loan from their broker at a low interest rate.
- Platform that is simple to use
- Cashback, an above-average APY, a reduced borrow rate, and a second trading window are all available with the M1 Plus account.
- A licensed brokerage company headquartered in the United States.
- Trades with no commissions on a broad range of assets
- Other brokers do not have access to cryptocurrencies (at least not for free)
- A dividend reinvestment scheme is available via Robinhood.
- The company’s margin rates are very competitive.
- Trading is available 24 hours a day, 7 days a week for free.
- When investors join up with Robinhood, they get one free stock.
- Robinhood Gold gives you access to sophisticated and useful features.
- Investors have the option of trading fractional shares.
What We Don’t Like About M1 Finance vs. Robinhood (Cons)
There are two sides to every coin, and M1 Finance and Robinhood are no exception. Here are some things we don’t like about them that you should know about:
- A brokerage account requires a minimum deposit of $100, whereas a retirement account requires a minimum deposit of $500.
- Only stocks and ETFs listed in the United States are accessible.
- For small investors, $125 for the M1 Plus Account may be too expensive.
- Other robo-advisors provide tax-loss harvesting, but this one does not.
- Cryptocurrencies and options aren’t supported (due to the orientation towards long-term investing instead of short-term trading)
- Mutual funds, currency pairs, foreign stocks, OTC securities, penny stocks, and futures are not among Robinhood’s assets.
- Investors may only invest in assets that are listed in the United States.
- When there is a lot of market instability, assets are banned from trade.
- There is no option for automatic investment with this service.
- There are just a few account options available on Robinhood, and no retirement accounts.
- Trades are routed to third-party market makers in order to earn money via order flow payment (PFOF). While it’s true that Robinhood doesn’t charge fees, their PFOF policies are murky and may be a conflict of interest.
- The app is the sole way to buy and sell cryptocurrencies.
Robinhood is the source of this information.
M1 Finance vs. Robinhood: Which Is More Secure?
M1 Finance and Robinhood are licensed financial services companies headquartered in the United States. Both businesses and their goods are well-insured, ensuring that your money is safe. This protection guarantees that an investor’s money are secure in the event that their broker fails.
M1 Finance is a member of the self-regulatory Financial Industry Regulatory Authority and is governed by the Securities and Exchange Commission (SEC) (FINRA).
SIPC protection is also available for M1 Finance investment accounts, which covers up to $500,000 and includes a cash limit of $250,000. The Federal Deposit Insurance Corporation insures the M1 spend account up to $250,000. (FDIC).
Robinhood, like M1 Finance, is regulated by the SEC and is a member of FINRA.
Investors with Robinhood accounts also benefit from the same SIPC protection, which covers accounts up to $500,000 (including $250,000 in cash claims). FDIC member banks issue the broker’s financial products, which are insured up to $1.25 million. As a result, this is five times higher than M1 Finance’s industry norm.
Platforms and Apps: M1 Finance vs. Robinhood
M1 Finance and Robinhood both feature user-friendly platforms and mobile applications that are geared toward new investors. They are, nevertheless, somewhat different.
A pie investment chart is used to show the portfolio’s precise asset allocation on both M1 Finance’s trading platforms (web-based and mobile app). Pie charts make it simpler for you to see how your assets and positions are doing and where they are now.
With the assistance of M1 Finance’s robo-advisory service, users can simply browse through the various features and make deposits, withdraw cash, borrow money, conduct trades, and have personalized portfolios created practically immediately via a very user-friendly interface.
The M1 Finance Android app, as well as its iOS counterpart, has been reviewed over 30,000 times and has received great reviews and ratings from its users. Both provide a variety of tools for managing your assets on your phone.
M1 Finance is the source of this information.
Robinhood offers a web-based trading platform as well as a mobile trading app for complete novices who want to get up and running fast. As a result, their software is simple to use but lacks the sophistication of more sophisticated trading applications.
Users can do basic activities like as purchasing and selling assets, checking account balances, reading research materials, and upgrading or downgrading their accounts as a result of this.
Investors can easily find stocks and choose accessible features using the web-based platform’s simple search bar and menu tab.
Users get access to tools such as alerts and notifications for different events, a charting tool with indicators, newsfeeds, analyst reports, and basic fundamental data for stocks at the end of the day.
The iOS version has a 4.2-star rating with over 2.8 million reviews as of late January 2021, whereas the Android version has a 1.1-star rating with approximately 265,000 reviews in Google’s Play Store.
For Whom Is M1 Finance Intended?
M1 Finance is the ideal investing platform for long-term stock and ETF investors looking to avoid high fees and keep their investments on autopilot. It’s also ideal for active investors seeking for minimal trading costs and the flexibility to build an investing portfolio without the help of a robo-advisor.
In an emergency, the M1 Borrow program comes in handy since it enables the customer to borrow money from the broker without having to liquidate any portfolio holdings.
What Is the Purpose of Robinhood?
Robinhood appeals to two distinct groups of people. The platform is popular among active traders since it provides low-cost features like as cheap margin rates, no minimum deposits, and quick deposits. More significantly, the broker provides no-cost trading choices and cryptocurrencies.
The trading platform is also a great option for individuals with a limited budget. They may get free access to fractional shares and diversify their portfolios with their preferred companies.
Robinhood’s services, on the other hand, aren’t a suitable match for investors who want someone else to develop their portfolio for them. This kind of investor may benefit from M1 Finance’s services.
M1 Finance and Robinhood both have a solid value proposition for their goods, providing outstanding, low-cost services as well as unique features that cater to their target audiences. They offer investors the opportunity to increase their financial worth by making previously costly services accessible.
M1 Finance, on the other hand, stands out with its excellent investment platform, which is ideal for long-term and dividend investors looking for an automated passive investing service and someone else to do the legwork for them.
Robinhood, on the other hand, caters to more active customers with the ability to trade various asset classes commission-free, making it a popular platform among millennials.
M1 Finance is preferred by investors who need a retirement account, while Robinhood is preferred by traders of options and cryptocurrency. While neither company is perfect, they are both excellent at what they do and provide, so choose the broker that best suits you and your financial activities — long-term investment or aggressive trading — and your financial goals.
The robinhood to m1 finance is a comparison of two investing apps. Robinhood has been around for a while and M1 Finance just recently came out.
Frequently Asked Questions
Is M1 same as Robinhood?
No, M1 is a different company.
Is M1 a good investment App?
M1 is a good investment app, as it is highly profitable.
Is M1 Finance good for long term investing?
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