- There has never been a better time
to invest in the stock market than right now.
And no, this is not because of perfect market conditions
or anything like that.
The reason is because new investors now have an array
of free investing platforms available to them
that allow them to trade stocks commission free
and even just a few years ago,
it was common to pay as much as $7 to $10 per trade.
I know when I started investing in the stock market,
I traded through Scottrade
and I was paying $7 per trade.
Now, there are a lot of free investing apps out there.
I've reviewed most of them here on my channel
but one of the most popular free investing apps
out there today is called M1 Finance.
And we're gonna be focusing on this app
in this review today.
Now, I'm gonna keep this review short
and highlight some of the basics here
of why people like M1 Finance
and areas where they may fall short.
But if you want a more comprehensive review,
and a tutorial of how to use this app
and get started with it,
go ahead and click the link in the description below
because I've put together a completely free
30-minute long video training
on how to use and get started
with the M1 Finance investing app.
Now, one last thing I wanna mention
before I get into the review,
I am affiliated with M1 Finance.
So if you do use my link,
I earn a commission in the process
and I do thank you for your support
as that allows me to put videos like this together.
But that being said,
let's go ahead and get into the review
of the M1 Finance investing app.
All right, guys, so the first area
where M1 Finance really shines
and provides one of the most useful features
for investors is something called fractional shares.
Now, if you're not familiar with this,
this is the ability to buy less than one share
of a given stock.
In fact, with M1 Finance,
you can buy as little as 1/10,000th of any share
of stock or ETF that trades on that platform.
Now, you may not understand how powerful this actually is
until you consider stocks out there like Amazon,
for example, that trade close to $2,000 per share.
If you were to go out there
and purchase a share of Amazon
on a free investing app like robinhood,
you would have to buy one entire share of Amazon
and that would cost you, as you can imagine,
as much as one share close to $2,000.
Now, I don't know about you guys,
but when I first started investing,
I certainly did not have $2,000 sitting aside
that I could put into one share of a stock like Amazon.
So they take the share price right out of the equation
by offering these fractional shares.
So if you wanna go out there and buy $25 worth
of Amazon stock,
you can do that through M1 Finance.
So I wanna go ahead and open up the app now
and show you guys my portfolio
and show you what these fractional shares
actually look like.
So here we have my small M1 Finance portfolio
that I use for basically demonstration purposes
within the app.
I started out with a $100 investment
and it's actually done extremely well.
I'm up 21.5% in this portfolio.
But as you can see here,
this portfolio holds Vanguard,
the S&P 500 index fund,
it holds Amazon stock,
it holds Apple and Microsoft.
And as I'm sure you guys can imagine,
every single one of these stocks and ETFs trades
for over $100 per share.
So if we click on one of these, for example,
like Amazon, as you can see,
my position here is 0.01817 of a share
at a cost of 29.99
and I paid about $1,650
as my cost basis for Amazon.
So I didn't have to spend $1,650 on a whole share of Amazon,
I could buy just a fraction of a share,
allowing me to own whatever stocks I want
and to build a diversified portfolio
with a much smaller amount of money.
Now, another area where M1 Finance shines
is by offering retirement accounts completely free.
Now, as I'm sure you guys know,
one of the most powerful investing tools out there
is something called the Roth IRA.
If you're not familiar with this,
I'm gonna go ahead and link up to a video
in the corner that talks about how you can become
a tax-free millionaire
with a retirement account,
particularly with Roth IRA.
But most brokerages out there
that offer retirement accounts have commissions,
and different fees associated with these accounts.
M1 Finance offers 100% fee-free retirement accounts
and the real kicker here is that it's just a $500 minimum
to open one of these accounts.
So if you have interest
in following that tax-free retirement strategy
of the Roth IRA,
you can open that up with M1 Finance
and the process is extremely easy.
They also offer something called
Rollover Concierge service.
So if you wanna roll over an old IRA
or an old 401 k
from a previous employer,
they will help you out with the entire process.
All right, now the third area
where M1 Finance shines
and the reason why dividend investors are flocking
to this app is because they offer something
called portfolio-level drip
or dividend reinvestment.
Now, if you guys know this or not,
one of the best ways out there
of earning compound interest
is by buying dividend stocks
because when you take those dividends
and reinvest them, you're earning more dividends
and then you're able to earn dividends from your dividends
which allows your money to grow exponentially.
Now, a lot of brokerages out there
either don't offer dividend reinvestment
or they charge commissions on those trades.
Or the other issue you often run into
is that when you have a dividend reinvestment,
you're only able to buy whole shares.
So for example, if you invest with robinhood
and you earn a dividend from a stock you're investing in,
well, you would need to have enough money
to buy a whole share of that stock
because they do not offer fractional shares.
So here's what happens on M1 Finance
when you earn a dividend.
A couple of these investments in my portfolio have dividends
and if I go over here to the Activity tab,
you can see where I earn those dividends.
In fact, just recently on November 14th,
I earned a five cent dividend from Apple.
October 1st, I earned 26 cents from the Vanguard S&P 500 ETF
and so on and so on.
So when those dividends are paid to you,
they're going to go over here
and they're going to be in the cash balance held
within your account.
As you can see right here,
I have $1.15 in my cash balance
and I have this feature called M1 Auto-invest turned on.
So what's going to happen here
is that once that cash balance exceeds $10,
they're going to invest that $10
across the entire portfolio,
effectively reinvesting those dividends
across my whole portfolio.
And again, because you're able to reinvest those dividends,
and purchase fractional shares,
you're keeping the maximum amount of money invested here
and you are earning that compound interest.
The fourth reason people really enjoy this app
is because of a feature called automatic rebalancing.
So a lot of people are not even familiar
with the concept of rebalancing
but essentially what it is
is when you have a portfolio,
you're going to experience something called portfolio drift.
It sounds confusing but it's really not.
As you can see here, I have four different stocks
and they've all performed very differently.
The Vanguard S&P 500 ETF is up 17.29%.
Amazon stock surprisingly is the worst one here,
up only 7.14%.
Apple is up 59.63% which is crazy
and Microsoft is up 47.66%.
So all investments are going to behave differently
within your portfolio.
So you may set target allocations
or how much of that stock you want to own
but because they all do different things
at different times,
those allocations are going to drift.
So on the left-hand side,
you can see what my allocations were.
For the Vanguard S&P 500 ETF, it was 50%,
for Amazon it was 30, for Apple it was 10
and for Microsoft it was 10 as well
but because of the performance of these stocks
and portfolio drift,
my allocations have now skewed.
So Microsoft is now 12.1% of my portfolio,
Apple is 13%, Amazon is 26.7%
and Vanguard is 48.
So I am effectively overweight in Apple
and Microsoft and underweight in Amazon and Vanguard.
So what M1 Finance does here
is as I add money to this portfolio
or take money out,
they're going to buy more of whatever I'm low in
and buy less of whatever I have too much of
or if I'm selling from this portfolio,
they're gonna sell more of what I have too much of
and sell less of what I don't have enough of,
effectively rebalancing that portfolio
and bringing me back to my target allocations.
Now, there are literally so many reasons
why people love M1 Finance,
but I wanna just focus one more to keep this video short
and that is something called expert pies
and it's something I have not seen
any other brokerage offer
and it's a really useful feature.
So this right here is called a custom pie
because I built it myself.
I chose these four investments,
chose my allocations and invested my money
but let's say, for example,
you don't wanna do this for yourself.
You don't wanna build a portfolio from scratch
and you want some help
as far what you should be investing in.
Well, if you go over here to the Research tab,
we can take a look at what M1 Finance has
called Expert Pies
and these are expert-built portfolios
you can invest in completely free.
M1 Finance does not collect any fees
to invest in these portfolios
and there's over 30 different ones.
This includes General Investing portfolios
that range from ultra aggressive
to ultra conservative.
This also includes target date retirement funds,
income portfolios and even hedge fund followers.
If you wanted to follow some
of your favorite billionaire investors out there
like Carl Icahn, for example,
you could replica his portfolio.
Or there's the basic Just Stock & Bond allocations
that you can invest in.
And if you wanna learn more about each one
of these portfolios,
all you do is click on it
and it gives you a description
and you can click on Targets
and it shows you exactly what that portfolio is invested in.
So these expert pies really take the guesswork out
of investing and give you that hand-holding completely free.
So overall, for the reasons mentioned in this video,
M1 Finance is my favorite investing platform out there
for long-term investors.
And on top of that, M1 Finance also also has great features
for dividend investors
as well as target date funds specifically meant
for retirement investors.
Now, that being said,
M1 Finance is not an ideal platform
for active traders but that is simply not
what the app was designed for.
Now, M1 Finance can be a little bit complicated
to get started with and navigate the platform
but that's exactly why I put together
that free 30-minute video training on M1 Finance
that is linked up down in the description below.
So if you're ready to start that free training, guys,
go ahead and click that link down in the description below
and I will see you there
but thanks so much for watching this video.
I hope this was helpful to you
and I will see you in the next one.