I hope that you like dessert because we’re going to get you a fat slice of pie. Okay, so we’re not talking about that kind of pie, we are talking about our investment pies. When you think about investment pies most likely you think of M1 Finance.
I know many of you want to start investing or you’re looking at different investment options, but there are just so many different choices out there. You got M1 Finance, Betterment, Robinhood, Stash, Fidelity, Vanguard, I mean, the list goes on and on.
Right now I want to focus on M1 Finance and answer the most common questions that I get about investing with M1 Finance.
I shared a video on my YouTube channel with an over-the-shoulder look at my personal M1 finance accounts, and as a bonus, a more in depth training on how to set up your M1 Finance account. You can check that out here.
This is not a sponsored post, but I am an affiliate for M1 Finance. That means if you use my link to create an account with M1 Finance, I will get a small referral fee.
I am an M1 Finance account owner, actually I have two accounts. I’ve been using them for a number of years and would not recommend anything to you that I haven’t tested myself. If you want access to the in-depth training on how to set up your own M1 Finance account, sign up below for access.
Who or What Is M1 Finance
M1 Finance is a robo advisor, you’ve probably heard this term before. They aren’t an investment app as you’re not working with anybody directly. So you’re not talking to a human. But you can start investing by utilizing their platform. What they are really known for is their investment pies, which we will talk more about here in a minute.
As FinTech continues to evolve, what really makes M1 Finance special is that not only do they offer investing, they also offer the ability to borrow. You can actually take out loans with M1 Finance. They also have a debit and credit card available. This is the direction that a lot of FinTech companies are going, having that all in one solution. Basically, M1 Finance can become your bank, if you so choose.
A common question that many people have regarding M1 Finance is ‘Are they brand new, I’ve never heard of them? When you compare them to Fidelity or Vanguard, yes, they are relatively new. M1 Finance was founded in 2015. Not that old, but compared to a lot of FinTech and investment apps that are popping up left and right, they have been around a little while. I mean, they’re pretty much OG by now.
Another way that you can see if a firm is legitimate is their size.
I’m talking about what’s referred to as AUM, or assets under management. What is their aum? In July their AUM was $4.5 billion, that is a lot of money. How does that compare to some of their competitors? If we look at Robinhood they are at $80 billion, Etrade is $600 billion, and TD Ameritrade at $1.3 trillion. So, at 4.5 billion they’re still relatively small compared to a Robinhood, etrade, and some of the other bigger investment firms. Either way, $4.5 billion is nothing to scoff at, and I’ve got no issues with that size. Like if they had 100 million, then I’d be a little bit more concerned, especially for an investment app.
How To Create Your M1 Finance Account
I’m going to walk you through one of my M1 Finance accounts, as if I was starting this brand new. This will show you hot to get set up and start investing.
If you haven’t signed up for M1 Finance yet, you can do that here https://wealthhackerlabs.com/M1Finance. This is my affiliate link, if you do sign up (thank you so much) I will get paid a small referral fee. This is not a sponsored post, I am just a big fan of their platform.
This is the M1 Finance homepage. After you log in, you want to set up your account and choose what type of account you want. You can choose:
- Individual Investing
- Joint Investing
- Trust Account
- Custodial Account
If you aren’t married, you want to choose an individual account. If you are married, I would highly suggest creating a joint account.
If you’re choosing retirement, Roth IRA, traditional Sep, or any of those types of accounts, I would definitely suggest that you work with some sort of tax professional that can walk you through it. Same advice for the trust account.
Initially I set up an individual account, shown here:
For the purposes of this training, I set up a new individual account. This is what you will see after your initial setup:
You will want to verify your email address (the one you signed up with). You will receive an email from M1 Finance, open that email and click to verify:
Congrats, your account is open and ready to build.
What does M1 Finance offer?
And let’s first we’re gonna start with types of accounts. So with M1 finance, you can open up your traditional type of investment accounts. So that includes single accounts and joint accounts. These are your basic brokerage accounts that you open at other investment firms. They also offer IRA, traditional Roth SEP IRAs and trust accounts. This is the main account that I have with M1 Finance. So for my 401k, this is set up as a trust account. And I was super excited to see that I could set up my 401k trust account with M1 Finance. That is not something you could do at other places like Robinhood. If you have kids, you can also set up custodial accounts with M1 Finance.
What sort of investments do they offer?
Here’s another reason why I’m a big fan of M1 Finance, they offer individual stocks and also ETFs. So you can buy both. The other thing that makes M1 Finance cool is that they offer fractional shares. That means if you only have $100, to invest and you want to buy Tesla, if you go to these other traditional brokerage firms, you can’t buy a share of Tesla, you don’t have enough cash. With M1 Finance, you can buy a fractional share of Tesla. Depending on how much you have to invest, you don’t have to put it all in Tesla as well, if you want to put that with Tesla, or you want to put that in an ETF or split it up, you can also do that too. So it offers a lot of flexibility.
Now what most people are familiar with with M1 Finance is their investment pies. Basically, you can build your own pie. If you have $1,000, and you want to put 25% of that into Tesla stock and 25% into a Vanguard ETF, and the rest into another stock or another ETF, you can build your own pie. Some people may be discouraged by this because it may be a little scary. If you fall into this group, M1 Finance also offers their community expert pies. There are other investment experts that have already created their own pies and you are able to select that pie, as long as it matches your investment goals and your investment timeline. All the heavy lifting is done for you.
Building Your Pie
After everything is verified, you can start choosing your securities or building your portfolio. This is the investment pie that you’ve probably seen me talk about in videos.
In this search area, you’ve got 3889 different possibilities. But these are just for stocks, you can also choose funds with over 1800 options, which are your ETFs.
Let’s say that you want to build your own pie, they’re gonna give you some suggestions right here. Maybe you want a little bit of Apple, Google, Amazon, and also some Tesla. Then you can add some Facebook or maybe meta, Visa, MasterCard, we can add those.
There’s a little pop up, this is basically a little helper, in case you need help. You can close that down and now you can see your pie.
All of the stocks we picked are now represented in this pie. You should name your pie, chances are you may end up building another. You can also add a description, if you want that for your own reference. Everything is almost equally weighted, at 14-15%
What if you want a little more or a little less of some of your picks?Let’s say you really like Tesla and you want 20% to go into Tesla. Choosing this option has added 6% so you need to remove 6% from one of your other choices to put you back at 100%
When you have all of your percentages where you want them (totalling 100%), you want to click save. You have just created your first investment pie.
M1 Finance also offers a ‘borrow’ product. So they have M1 Borrow and M1 Spend, they also offer their credit card. If you need a loan, a credit card, or if you want to earn interest on money sitting in cash, M1 Finance has solutions for you.
M1 Finance has everything that you need to meet all of your financial needs. Does that still make M1 Finance safe? That is a question that many people have. Are they safe? Well, if you didn’t know this about any sort of investment firm is that they have to be regulated by some sort of governing body. In the case of investment firms, that governing body is FINRA. They are a registered broker dealer with FINRA. This means that they have to have what’s called SIPC insurance (Securities Investor Protection Corporation). This means if M1 Finance were to go under, you’re going to have protection up to $500,000, which also includes $250,000 for cash. So are they safe? Yes.
If you want more information you can go to FINRA Brokercheck, find their ADV, which is their client brochure. You can find out who the principal’s are, what’s going on behind the scenes, if there’s been any litigation, if any complaints have been filed against them.
What are M1 Finances fees?
M1 Finance offers free trading, that means that if you want to buy or sell stocks or ETFs, there are no fees. There are transfer fees and termination fees, but no trading fees.
What about M1 Finance for beginners?
I see all the challenges that a lot of people have in regards to investing. And when I look at M1 Finance I think that they are great for beginners. Even though you have to pick your own stocks, your own ETFs, and build your own pie. When you actually look at their interface it is so easy to use. If you aren’t comfortable building your own pie, you have the option of using expert pies that are already done for you.
M1 Finance offers a rebalance feature, which I think is just so super cool. My Tesla stock, right now the actual weight is 19% while the target weight is 14%. If I decided that I wanted this percentage closer to my goal weight of 14%, I could just click rebalance and M1 Finance would make all the trades necessary. One word of caution, if this is a taxable account, recognize like when you do this, there is going to be some sort of taxable event that happens. You may have to pay a short term or long term capital gain.
Whenever you add funds to invest, this is how it would be split up – into those percentages. If one stock is doing better than others, the percentages that you set up will start to fluctuate. For example, I had an investment pie with Apple 20%, Google 20%, Facebook 20%, Amazon 20% Netflix 20%.
Apple represents 34% of the portfolio and was supposed to be 20%. For those who have had a portfolio over time, this is just what happens. You’re going to have stocks that are over performing and others that aren’t doing as well.
Why would you want to rebalance? Well, if you think that Apple has kind of reached its peak but you want to hang on to it, but you see that Facebook’s got more room to grow, then you could shave off some of that gain and move it towards another stock
Since this is in an individual account, you are basically selling off some shares and you’re going to have to pay capital gains. Once again, this is why it is important that you are working with a tax professional, making sure that you understand what you are doing before you do it.
I hope you can see how easy M1 Finance is to use and if you have never invested in your life, I promise you’re not going to get stuck.
Making Changes To Your Portfolio
If you actually want to make some changes to your portfolio, you can just hit edit and change your percentages or add a ‘slice’ of a different stock.
If you want to add additional slices to your portfolio, you would just hit the ‘add a slice’ button.
I’ve added some slices, if I am happy with my changes, I would then just hit save.
Once again, if you are doing this you may have to sell off some of your shares. Just be aware that when you make these changes, that is a taxable event. Unless you have opened up a Roth IRA or a traditional IRA, then it doesn’t matter. But any sort of individual or joint account is going to be taxable.
So I want to show you another feature of M1 FInance. We talked about adding slices, but what if you wanted to create another pie?
Maybe you want to create a pie that resembles a mutual fund or ETF? You could create a pie with tech stocks or financial stocks or you could do a dividend pie.
You would just click the ‘create pie’ button, name your new pie and ‘add pie’.
Now, just like the first time around, you want to add slices to the new pie.
l want to focus on stocks that I know that are in the dividend aristocrats. I’m goint to add Target, Lowe’s, and Walgreens. Now these are added in your new pie, as a slice within your big pie. You don’t want to hit exit, just go back to your portfolio.
This is what we created, which is one slice in your big investment portfolio, your big investment pie. So right now, we have 1% of our entire portfolio that’s going to this dividend pie. That one slice owns these three stocks. If you had, $1,000, only 1% is going to this slice of the pie. Within this slice, these 3 companies are getting a third of that 1%. This allows you to create different buckets of different stocks or securities in your investment pie.
Basically, you can get crazy with it. This is how you really can create a diversified portfolio.
The last thing that I want to show you, one of the last things, is M1 Finance has their own expert pies. If you are not comfortable building your own pie, you can choose from a selection of expert pies that have already been created. What if you want this option but you also want to customize, is that possible? Yes!
Let’s go back to ‘my portfolio and add a slice. Then along the top of the screen you have stocks, funds, my pies, expert pies, etc. Click on expert pies and choose one from there.
I’m going to go with income earners. You can click on one and read more about the pie before choosing which is best for you. Add that expert pie to the basket, then at the bottom click ‘add now. If you don’t trust yourself yet, you can fund a large chuck to the expert pie, say 80% and then fund your previous stock picks with the remaining 20%.
You can continue adding different stocks and different expert pies to your portfolio, just be sure to divide your 100% among the different slices. This is how you can continue to keep growing your portfolio, the list goes on and on what you can do.
Auto Invest Option
Alright, let’s go over just a few other housekeeping items in regards to M1 Finance, you’ll notice there is an auto invest option.
If you are automatically putting in cash every month, and auto invest is turned on, that money will automatically be invested based on the percentages you have set up in your pie. If you want to always have a certain amount sitting in cash, you can designate that amount.
If you are comfortable with letting your cash build up and investing at a time that you think is best, you can turn this feature off.
So just depends on you know, think of it like if you had a 401k that you were adding money to
I hope you can see that M1 Finance is an easy platform to use,
I will say in the beginning it was a little hard to understand how my investments were doing. Once you get in there and play with it a bit it will get easier to use and understand.
Just remember, if you start adding pies and changing things around, nothing is going to actually happen until you hit ‘Confirm’. So don’t be afraid to play around with it until you are satisfied.
They do have a support team that you can contact and ask questions. I have never used it, so I don’t know how great or how responsive they are, I have to assume that they will get back to you pretty quickly. There’s anything here that you’re trying to do that needs to happen immediately. M1 Finance is not the type of day trading platform where you’re trying to execute trades, like on the second.
I’ve been showing you the desktop version, the app is just as easy to use. I love it as well. It’s super easy, super user friendly. And I assure you if this is your first time investing, you’re going to love it.
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