- So in this video, today we're going to be talking about
how dividends are going to work
on the M1 Finance investing app.
Now, a lot of people really like M1 Finance,
especially dividend investors,
because it allows you to have
a type of dividend reinvestment.
Now it's a little bit different
than your traditional brokerage offering a drip,
because the way I describe it,
is it's a portfolio level dividend reinvestment,
and that may sound confusing,
but I'm going to explain it to you guys
in a very simple way in just a second here.
One thing I do want to mention real quick,
if you guys are looking to learn more
about the basics of M1 Finance,
how to open up a brokerage account,
how to build a portfolio
and the ins and outs of this app,
I actually put together a completely free,
30-minute video training
on how to use M1 Finance for beginners,
and that is gonna be linked up
down in the description below,
completely free training
that walks you guys through the whole process, step-by-step,
of how to use M1 Finance as a complete beginner.
But that being said,
let's go ahead and open the app
and talk about what is gonna happen
when you own stocks or ETFs
that earn dividends in M1 Finance.
Okay, so here we are inside my M1 Finance Portfolio,
it's just small 100 dollar portfolio
I put in here for demonstration purposes.
And in this portfolio,
I have the Vanguard 500 ETF, Amazon Stock,
Apple Stock and Microsoft,
and a couple of these investments here do pay dividends.
So the first thing I want to show you
is the dividends that I've earned so far
from this portfolio,
and you can view your dividend history
by simply going over here on the left
and selecting Activity.
So as you can see,
I have earned quite a few dividends
since opening this portfolio.
I opened it in February of 2019,
I funded it with 100 dollars,
and February 14th, I earned my first dividend
of four cents from Apple.
Now this is a very small 100 dollar portfolio,
so obviously, that is not a lot of money to be earning,
but if I had, you know, a thousand or ten thousand in here,
that dividend would be more significant.
I earned a dividend from Microsoft,
a dividend from the Vanguard 500 fund,
and I've been continuing to earn these cordially dividends
from Apple, Microsoft and Vanguard.
Well, what's gonna happen with these dividends
is that this money is going to go towards
your cash balance held within the account,
and I'll show you guys what mine is right now.
If you go over here on the main portfolio section
and you press this up arrow,
you can see my cash balance is currently $1.10,
and I have auto-invest turned on.
So basically, this is what happens
when you earn dividends with M1 Finance.
Those dividends are going to go toward your cash balance,
and then, once your cash balance exceeds 10 dollars,
that money is going to be invested
across your entire portfolio.
And so that is why I call this a portfolio level
dividend reinvestment,
and not a stock level dividend reinvestment.
Because my portfolio is set up like this.
50% of my money is gonna go towards
the Vanguard 500 ETF,
30% is gonna go towards Amazon,
10% is gonna go towards Apple
and 10% towards Microsoft,
and so what's gonna happen
is once I meet that 10 dollar minimum threshold,
that money is going to be deployed
across these four investments,
and M1 Finance is going to attempt
to bring me back to my target allocation.
I know this may be a lot coming at you guys at once here,
but let me try to explain this
a little bit more simply here.
When you invest with any brokerage out there,
you're going to experience something called portfolio drift,
which is where every stock is gonna behave differently
or ETF is gonna behave differently.
As you can see here,
I've had a 13.47% return with the Vanguard 500 ETF,
7.27% return from Amazon,
45.27% return from Apple,
and just about a 40% return from Microsoft,
meaning that my allocations are a little bit skewed.
I'm a little bit underweight in Vanguard and Amazon,
as you can see by the percentages.
My goal was to have 50% of my money in Vanguard,
it's at 48.
My goal was to have 30% of my money with Amazon,
it's at 27.6,
and I'm overweight in Apple and Microsoft.
I currently have 12.3% of my portfolio in Apple,
and 11.9 in Microsoft,
when my target allocation was 10.
So let's say I continue earning dividends
from these different companies,
and my cash balance hits 10 dollars,
well that money is going to be deployed
into this portfolio,
and spread across these four investments
and what M1 Finance is going to do
is they're going to attempt to rebalance this portfolio
by putting a little bit more money
in what I'm underweight in,
so Amazon and Vanguard,
and a little bit less money
in what I'm overweight in,
which is Apple and Microsoft.
So any time money is coming into the portfolio
or going out of the portfolio,
M1 Finance is always going to attempt to rebalance it,
to bring you back to your target allocations.
So overall, M1 Finance is
a great platform for dividend investors,
as long as you're comfortable with
that portfolio level dividend reinvestment.
So overall, for dividend investors
looking for a platform that's fee-free
and commission-free, with a dividend reinvestment,
it is a great option out there.
But anyways guys, that's gonna wrap up this video.
That is how dividends work on M1 Finance.
Like I said, if you want to check out
that free 30 minute training,
that's gonna be linked up down in the description below.
But thanks so much for watching, guys,
I hope you enjoyed,
and I will see you in the next video.