Pros

• Easy to build, automated portfolio.

• No trading fees or commissions.

• Fractional share trading.

• Ability to open a variety of accounts such as a ROTH or joint account.

Cons

• Not designed for day trading or other specialty trading such as options or cryptocurrencies.

• There is a cap on how many individual ETFs or stocks (also referred to as positions) one account can hold. Each account is capped at 100 stocks or ETFs and an individual user can have up to five accounts.

• Trade timing is dictated by M1.

How it works

There are 3 main components to M1:

1. Invest: your portfolio of investors.

2. Spend: basically an M1 checking account.

3. Borrow: borrow up to 35% of your account value.

(Invest) M1 is a robo-advisor that allows you to create an automated portfolio of stocks and ETFs. Within your account you can create a “pie” that contains a predetermined allocation of stocks and ETFs or you can create a custom pie. For example you may choose from a list of M1 “Expert Pies” that have predetermined allocations, usually several holdings and mostly ETFs. Similarly, you can create your own custom pies if you have a specific set of stocks or ETFs you would like to invest in. In this example our account has one “expert pie” and one custom pie so we’ll need to tell M1 how we want to split our money between the two pies (50/50%, 80/20%, etc.). Once this is done your deposits will be allocated automatically as specified between the pies as well as the allocations of the holdings within the pie itself.

(Spend) You also have the option of opening a checking account that is integrated with your portfolio, giving you quicker access to investable cash if needed. With an M1 plus membership you get 1% interest on your cash as well as 1% cash back with the debit card use. Personally, I don’t see much need for this with all the various credit cards that are out there with higher rewards values.

(Borrow) Once your account has more than $10k invested you are able to borrow up to 35% of your portfolio's value. This can be helpful if you would like extra money to invest or used as a loan for various personal expenses. They also claim to have no payment schedule. With an M1 plus membership your interest rate for borrowing is reduced. 

M1 Downsides and Drawbacks

First off, like many robo-advisors, M1 is not designed for things like day trading or options trading. It is also not intended for general buying and selling of an individual stock, this is better done through a traditional brokerage like Fidelity or newer stock trading platforms like Robinhood. 

Second, if you are like me, you have a million investing ideas and want to test them all. M1 limits you to 100 positions per account with a maximum of five accounts, so in theory you’re limited to 500 positions in total. This should be more than enough for an individual investor, but a limitation nonetheless. 

Lastly, M1 controls the timing of the trades. There is a morning and afternoon trading window. The afternoon window is only available with an M1 plus account. So unless you have the M1 plus any afternoon trade would not be executed until the next day.

M1 Perks and Positives

Overall M1 has been designed to make it easy for users to build and manage portfolios that match their preferences. You can search for thousands of stocks and ETFs to build your pies. Only rarely have I run into instances where the stock I was looking for was not listed on M1. If you are focused on well known American companies there should be no issue. Additionally, the automation in M1 is great, once you have set your allocations, any buying and selling or adjustments you make are taken care of. No need to worry about the logistics of trading several dozen holdings.

You have to love the no fees. Early on, M1 did charge a management fee, however they've since done away with it.  This is somewhat rare among robo-advisors as it is common to see a 0.25% management fee. Keep in mind if you are invested in ETFs there are expense fees associated with that ETF, however M1 has done a good job of selecting ETFs with low expenses fees.

Finally, M1 works using fractional shares. Meaning you do not need to buy whole shares of stocks or ETFs. This is great for average investors that might only be investing $10 per week. 

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Final Thoughts

M1 has done a great job of providing a platform that allows for flexibility and customization for different types of investors. There are options for investors that prefer minimal work and want to set it and forget it by using the 50+ expert pies. There is also the ability for more active investors to create and play with various custom portfolios. For me the downsides are minimal compared to the benefits of the customization and the automation. I have not found another platform that makes somewhat complex investing so easy.