﻿Alright, everybody, I’m Logan Allec, I’m a CPA, and in this video I am reviewing the M1 Finance
investing platform for the year 2021, you can use this platform on both desktop as well as
mobile through their app, I personally started using M1 Finance way back in December 2018,
I started depositing $100 a day into a mix of small-cap and mid-cap ETFs
because I thought that my portfolio was underweight in small-caps and mid-caps,
that portfolio has about $45,000 in it today, I originally had four ETFs -- VBK, VOT, IJR,
and SPSM -- the Vanguard ETFs were blowing the other two out of the water in terms of returns,
so I decided to dump the other two, actually at a loss believe it or not, and transfer those
funds to my Chase You Invest account that I’ll probably talk about in another video,
but basically I’ve been using M1 Finance for over two years now, and I feel pretty confident
in reviewing this platform. By the way, if you are interested in signing up for M1 Finance,
use my referral link below because you will get a $30 bonus if you do so, I will as well, but you
have to deposit at least $1,000 to get the $30 bonus, and if you think about it, $30 divided by
$1,000 that’s an instantaneous 3%, so keep that in mind, but let’s get into the review here.
First thing you need to know about M1 Finance is that there is a free version and there is a paid
version, if all you want to do is automate your investing, the free version gets the job done.
You can create your pies, I’ll explain those in a minute, link up your bank account, and you’re
good to go to automate your investing. The paid version is called M1 Plus, it is $125 a year,
I do use M1 Plus, and I’ll tell you why later in this video, but for now, just know that the free
version is all you need if you’re just looking to do set-it-and-forget-it investing through M1
Finance, and really that’s what M1 Finance is all about -- set-it-and-forget-it-investing because
here’s how M1 Finance works: for each account you have, you create what M1 Finance calls a pie.
Your pie consists of various investments, ETFs or stocks, if you don’t know what an ETF is,
watch my investing for beginners video, link at the top of the screen. So you tell M1 Finance,
I want my pie to consist of 10% -- or whatever percentage you want, this is just an
example -- 10% of this stock, 25% that stock, 20% this ETF, 40% of that ETF, and 5% of that ETF over
there, that’s just an example, I typically don’t mix stocks and ETFs in the same pie, you can do
that if you want, but that’s just an example, your pies can have a maximum of 100 securities or as M1
Finance calls them “slices” in each pie. And what your pie is is essentially telling M1 Finance is,
“OK, whenever I deposit money into my M1 Finance account, I want you to allocate that money
based on the percentages I told you.” So for example if I created a pie that’s like in
my case here with this account 50% VOT, Vanguard Mid-Cap Growth ETF, and 50% VBK,
Vanguard Small-Cap Growth ETF, whenever say I deposit $10 into this account,
which is the minimum deposit by the way, when I deposit $100 into this account, M1 Finance
will allocate that $100 in such a way so as to get the value of VOT to be 50% of my account
and the value of VBK to be 50% of my account. So when you make your first deposit into M1 Finance,
and your first deposit has to be at least $100, subsequent deposits can be as little as $10,
but you can’t tell M1 Finance to automate your investing until you have a cash balance of $25,
anyway when you make your first deposit into M1 Finance for $100, let’s say, or actually let’s
use $1,000 so you can get that $30 bonus, let’s say you have a pie similar to mine and you deposit
$1,000 into it, M1 Finance is going to in that case purchase $500 worth of VOT and $500 worth
of VBK. But then let’s say your VOT goes up to $550 and your VBK goes down to $450, just to make
the math easy. And then you deposit another $100. In that case M1 Finance would allocate that $100
entirely to VBK to make what you have in VBK equal to what you have in VOT because you’ve
told M1 Finance you want this portfolio to be 50% VOT and 50% VBK. Now notice that I have not
referred at all to the actual ETF price of VBK and VOT, and that’s because it doesn’t matter.
When you set up pies in M1 Finance, M1 Finance buys fractional shares of stocks and ETFs for you
so as to get your allocation in your account equal to the percentages you allocated in your pie. So
if you think, oh man, I can’t buy Tesla stock, it’s seven hundred, eight hundred bucks right now,
well, yes you can, just put it in an M1 Finance pie. So that’s M1 Finance pies in a
nutshell. Takeaway -- if you’re looking to day trade, M1 Finance is not the platform for you,
M1 Finance is for people who want to customize their investment portfolio through pies, and by
the way it’s super simple to create a new account with a new pie in M1 Finance, you simply click the
top right and click Add Account, boom, new account you can create a new pie. So like I was saying,
M1 Finance is for people who want to customize their investment portfolio through pies
and then basically make recurring deposits or one-time deposits or both into their M1 Finance
account or accounts and M1 Finance does all the investing work for you without you even having to
think about it. Speaking of recurring transfers, you can set up a recurring transfer to be taken
out of your checking account and into your M1 Finance account or accounts on a weekly basis,
biweekly basis, monthly basis, and you can even set them up on a daily basis like I do,
or at least daily Monday through Friday, by setting up five weekly deposits, one
to hit on Monday, one to hit on Tuesday, one on Wednesday, one on Thursday, and one on Friday. So
customization and automation are the biggest pros of M1 Finance. You can customize exactly what you
want to invest in and automate those investments from your bank account seamlessly. However,
with this customization and automation you give up timing. You cannot time your trades
throughout the day. For free accounts, M1 Finance has one trading window, and that begins at 9:30 AM
Eastern Time when the market opens and will run until all orders have been completed. You can’t
tell M1 Finance, “OK, pull the trigger right now, I want you to buy right now,” no, that’s not how
M1 Finance works, M1 Finance will executive your order when it executes your order. In my opinion,
the whole point of M1 Finance is for you to be able to set and forget your investing, and M1
Finance does this very well, that’s why I’ve kept this account with them for over two years now, and
I still make recurring daily deposits into this account. Also, in terms of dividends, one thing
to know is that M1 Finance automatically reinvests your dividends into their underlying securities,
well it’s not exactly automatic, how it works last time I checked is the dividends are added to your
cash balance, and assuming you have auto-invest turned on once your cash balance in your account,
combined dividends and other deposits you’ve made, reaches the minimum threshold you’ve set,
your cash will be automatically invested. Let’s talk about the automatic investing real quick. So
if you’re in your M1 Finance account, and you have auto-invest turned on, then M1 Finance will
autoinvest the cash balance in your account, again comprised of deposits you’ve made into the account
as well as dividends you’ve received in your account, once your cash balance hits $25 plus
whatever amount you’ve set as your minimum cash balance. So for example, in my case, my minimum
cash balance is $0, so that means that when the cash balance in my account hits at least $25,
M1 Finance will automatically invest my cash balance into my pie. If I put $100 here,
that means that M1 Finance will automatically invest the excess of my cash balance over $100
when my cash balance hits $125, basically $25 is the minimum auto-invest for M1 Finance. Alright,
let’s talk about one more thing here before I want to talk about M1 Plus, which is the paid version
of M1 Finance. Let’s talk about M1 Borrow. So with M1 Borrow you can actually borrow up to 35%
of your account value at an interest rate, as of right now, of 3.5%, and that’s really low, and you
can basically do it with the click of a button. By the way, only taxable accounts qualify for this,
if you have a Roth IRA or a Traditional IRA at M1 Finance, you can’t borrow against that. Now,
because I am an M1 Plus member, I can borrow against 35% of my taxable portfolio
at 2% interest instead of 3.5% that you get if you are just using the M1 Finance free version.
That’s pretty cool because you can use this money for whatever you want, oftentimes other
margin accounts at other brokerages, you can only use margin to buy stocks in your account,
with M1 Borrow you can take the money and spend it on whatever you want,
I typically invest it, though, right, because 2% is such a low interest rate,
I can invest that in other things and get a higher return than 2%, and this is not a recommendation,
by the way, keep in mind that investing has inherent risk, and borrowing to invest amplifies
that risk, so unless if you have a very stable financial footing right now, borrowing to invest
is not something I would necessarily recommend. Other benefits of M1 Plus,
that’s the paid version of M1 Finance is instead of only the morning trading window,
M1 Finance gives you an afternoon trading window that you can use if you choose or you can use both
if you have more than $25,000 in your portfolio, also if you have M1 Plus then M1 Spend,
which is basically M1 Finance’s checking account, gives you 1% interest as of right now and 1% cash
back on qualifying debit card purchases. Basically I use M1 Plus for the very low, 2% interest rate,
I think that’s huge, if you have debt at a higher interest rate, you can pay that off at 2%,
obviously run the numbers between 2% and 3% taking into account the M1 Plus $125 annual fee,
but yeah, I am very happy with M1 Finance, I am very happy with M1 Plus, so I’ll just
go over a summary here of pros and cons very quickly, starting with the pros. Pro Number One:
M1 Finance is free or at least has a free version that gets the job done if all you want to do is
do set-it-and-forget-it investing. There’s no fee to use the free version, hence “free”, and there
are no trading commissions, which is basically par for the course at this point in terms of brokerage
accounts. Pro Number Two: Customization. M1 Finance offers completely customizable portfolios
or “pies” as M1 Finance calls them. If you’ve watched my video on investing for beginners,
you know that I’m a fan of ETFs, not putting all your eggs in one basket. With M1 Finance you can
essentially create your own ETF through its pies as I explained previously. Pro Number Three:
Automation. M1 Finance makes it incredibly easy for you to automate your investing into the
platform on a daily, weekly, biweekly, monthly, whatever basis you want so that you can spend
less time on your investing and more time doing the things you love in life or making more money
to put into your M1 Finance pies. Pro Number Four: You can set up IRAs at M1 Finance, so in addition
to taxable brokerage accounts, you can also set up a Traditional IRA or a Roth IRA or a SEP IRA.
Con Number One: Learning curve. If you’re used to Robinhood or T.D. Ameritrade or Fidelity, say,
where you deposit your money and you select the stock you want to buy, you put the quantity you
want to buy, you set your limit price, and press buy, then M1 Finance is going to look
new to you with the pies and all that, but I would urge you, don’t let that be a turnoff,
it’s really not that tricky, you just have to kind of get used to the pie terminology, frankly. Con
Number Two: Timing. You cannot time your trades in any specific manner whatsoever. M1 Finance
will execute your order when it executes your order, and that’s it. Con Number Three:
Tricky to buy individual stocks. Let’s say that there’s a dip in a stock and you want to buy it on
the dip because you think this dip is overblown, it’s not warranted, if you were in Robinhood or
Chase You Invest or any other brokerage, what could you do? Log into your account,
buy the stock. With M1 Finance it’s tricker to do that. You would have to create a pie for that
stock or add that stock to an existing pie, kind of calculate what you want the percentage to be
based on how much money you want to put into that stock, and then what happens? M1 Finance
will execute your trade not immediately but during the next trading window, which if you have M1 Plus
could be in the afternoon or if you have the free version will be the next day or the next day the
stock market is open at the 9:30 AM trading window at which point the stock that you wanted to buy
the dip for may have already bumped back up or gone down even more, my point is, and this is kind
of related to the timing issue here to, but you simply just don’t have as much control surrounding
specific purchases at specific prices of specific securities as you do with a more traditional
brokerage account platform, but in return you get the customization and the automation. Con Number
Four: Account types are limited. Like I mentioned previously as a pro, you can set up IRAs in M1
Finance, and that’s great, but you can’t set up, say, an HSA or an ESA or a 529 or a Solo 401(k),
which can all be great accounts, if you’d like to learn more about my views on which accounts to
prioritize in your investing, be sure to check out my course called The Money Course, link is in the
description below. Alright, everybody, that is my 2021 review of the M1 Finance investing platform,
let me know your thoughts on this platform in the comments if you have any thoughts
on this platform, and on the screen that follows you will see links to other cool videos,
namely the one on investing for beginners and also my video on seven investment terms
you should know, be sure to watch those, and I will see you over in those videos, buh-bye.