- So in this video today we are going to be doing
a tutorial of the M1 Finance investing app.
I'm gonna be showing you guys around the app
and talking about some of the basic functions
that you need to be familiar with
as somebody who is investing with this platform.
Now that being said, if you decide at the end of this video
that you want to open up an account with M1 Finance,
I have a link for that down in the description below.
It is an affiliate link so if you do use it
I will earn a small commission in the process.
But that's at no additional cost to you.
So if you decide you want to give back to me
for putting this video together, that is an option for you.
And one other thing I want to mention real quick,
I have been getting a lot of questions from people
about how to use M1 Finance,
how to open a brokerage account,
all these different questions.
So I actually put together a completely free
30 minute video training showing you
everything you need to know to get started with M1 Finance.
And that is also going to be linked up
down in the description below.
If you want to check out that free 30 minute training
on how to use M1 Finance.
But we're gonna cover most of the basics right here
in this video today.
Okay, so here we are inside of my M1 Finance portfolio.
This was originally a $100 investment I made,
mostly just for demonstration purposes
to show people what this app actually looks like.
So my original investment here
was 50% of my portfolio into the Vanguard S&P 500 ETF
under the symbol VOO.
30% into Amazon stock, and then I had 10% in Apple stock,
and then I also put 10% of my money into Microsoft stock.
Now obviously this portfolio has actually
done pretty well here over the last,
I believe eight or nine months.
It's up about 17 percent, closer to 18 actually.
And this is the first thing you have to understand
about M1 Finance, is that everything comes back
to this pie here, or portfolio.
So with M1 Finance, you are doing portfolio-based investing.
And that's where it's different than apps
like Robin Hood for example where you're just buying
whole shares of stocks, and then having those stocks
within your portfolio.
Well with M1 Finance, you design a portfolio yourself,
or you use one of the expert portfolios.
And then as you add more money to that portfolio,
it's gonna be spread evenly across those allocations.
So in my case here, when I initially invested that $100,
50% of that money went into the Vanguard 500 ETF.
30% went into Amazon, 10% went into Apple,
and then 10% went into Microsoft.
Now I already have my portfolio or my pie in here built,
but when you actually get started with M1 Finance,
it walks you through the process
of building your own portfolio.
But I'll show you guys what that looks like now
by building a new portfolio from scratch
so you see what this looks like step by step.
So now we're gonna go through the process
of building a completely new M1 Finance pie from scratch.
And like I said when you start off using the app
it's gonna walk you through this process
of how to build your first M1 Finance pie.
So we'll go ahead and hit the plus icon here,
and then we're going to begin adding slices
to our M1 Finance pie.
So your total pie is going to be 100%,
and each of the stocks and ETFs that you can select
can make up as little as one percent of your portfolio.
So if you wanted to put 100 different stocks
in your portfolio, I don't know why you would,
but M1 Finance allows you to do that.
So we're just gonna make a random portfolio here
just so I can show you guys what it looks like.
We're gonna start off with 3M stock.
That's just one that's coming to my mind here.
So 3M is a pretty popular company.
I think the symbol is MMM.
3M Company, so we're gonna add that to this pie.
We're gonna also go with Procter & Gamble
We'll add Procter & Gamble to this portfolio.
And then let's say you also want to add
an ETF to this portfolio for some passive investing.
You can move over to the ETF or Funds column,
and select one.
Or, I know the one that I want.
Actually it's right here, VOO, the Vanguard 500 fund.
So we'll add that to the portfolio as well.
And then let's say we also want to have
a tech stock in here.
So let's say you like Tesla for example.
So we'll go ahead and type in Tesla.
And let's say these are the four components
of this portfolio that you're building.
Or pie, whatever word you want to use there.
In terms of M1 Finance, it always comes back to the pie,
and each stock represents a slice.
So, let's say that is the pie that you want to build.
Basically investing in Tesla, 3M,
Proctor and Gamble, as well as the Vanguard 500 fund.
Then you would go ahead and hit Done,
and this is the point where you're going to decide
how much of your money is going to go into
each one of these stocks or ETFs.
Now the reason you're able to do this
is because M1 Finance allows you to invest
using fractional shares.
So all of these different funds and stocks
are trading at a different share price,
but M1 Finance allows you to buy as little
as 1/10,000th of a share of each one of these stocks.
So you don't have to worry about that share price,
and you can create a well-diversified portfolio
with the minimum to get started with investing,
which is just $100.
So let's say for example you want to put 30%
of your money in the Vanguard 500 fund.
And then you want to put 15% in Tesla,
you drop that down to 15.
And then you want to put 20% in 3M,
and you want to put the remaining 35% in Procter & Gamble.
Well now you have created this pie here.
And when you add money to this portfolio,
20% is gonna go to 3M, 35% is gonna go to Procter & Gamble.
15% goes to Tesla, and 30% is going to go to Vanguard.
So, we'll go ahead and save this portfolio here.
I'm not going to personally use it,
and we'll just go ahead and name this the demo portfolio.
Just so you guys can see the functionality
and how this works setting it up.
And the other things that's really great
about M1 Finance is you can create
multiple different portfolios, and even track that progress.
So if you wanted to make like a dividend-oriented portfolio
or a growth-oriented portfolio,
you could invest in both of them,
or you could just use it to benchmark
these stocks or this portfolio,
and see what the performance is like.
Now that being said, let's say you're somebody
who doesn't want to build a portfolio from scratch.
Well another great option that you have
is the Expert Pies offered by M1 Finance.
They have over 30 different portfolios
that are prebuilt that are completely free to invest in.
For example you have General Investing here
which is just a spread of ultra aggressive
to ultra conservative portfolios.
And each one of these you can click on
and read about them, and what is actually
held within that portfolio.
And it'll show you what is actually in here.
It's usually Vanguard and iShares type ETFs,
because those are very low fee index funds.
So you have a general investing category.
You have plans specifically for retirement,
which is great for people who invest
using a Roth IRA, which is available through M1 Finance.
You also have responsible investing
for people who are looking for environmentally-friendly
companies to invest in.
Income earners, hedge fund followers,
basic stock and bond allocations,
which is just gonna be a two-ETF fund.
For example this one that's a 90/10 split
is just going to be 90% into the Total World Stock market,
and 10% into the Total Bond Market.
Which is as simple as it gets in terms
of your basic stock and bold allocations.
So, M1 Finance really does have
something for everyone here.
They have the ability to build your own portfolio
from scratch, with whatever stocks or ETFs
you want to invest in.
Or, if you don't want to do all of that yourself,
you simply pick an expert pie that's prebuilt
to automatically invest your money in.
Now the last thing I want to cover in this tutorial here
is the rebalancing of the portfolio,
which is something that a lot of people
get a little bit confused on.
So we're gonna cover what that automatically means here.
So as you can see here on the left,
we have two percentages under each one
of these pieces of my pie.
Under the Vanguard 500 ETF we have 48% and 50%,
and that means that my target allocation
for the Vanguard 500 ETF is 50%, but I'm currently at 48.
For Amazon it says 27.6%,
even though my target allocation is 30.
Apple it's 12.3%, even though my target allocation is 10,
and then finally Microsoft, 11.9%,
even though my target allocation is 10.
And this is because of something called portfolio drift,
and the reason behind that is as soon as you invest money
in the stock market, well things are gonna be doing
different things at different times.
That's the best way to explain it.
So some stocks are gonna go up, some are gonna go down.
I happened to pick four that all went up.
If you look on the right-hand side, I'm up 40% in Microsoft,
45% in Apple, which is crazy,
I wish I bought a lot more.
I'm up seven percent in Amazon,
and 13%, closer to 14 in the Vanguard 500 fund.
The issue being, this portfolio is no longer
in line with what my target allocations were.
So, what would happen as I add more money
to this portfolio is more money would flow
into the ETFs and stocks that I'm underweight in.
So right now I'm underweight in Amazon
and the Vanguard 500 ETF, because my target allocation
for Amazon is 30, and I'm at 27.6.
And my target allocation for the Vanguard 500 fund
is 50 and I'm at 48.
So I have more money than I want in Microsoft and Apple,
and less money in Vanguard and Amazon.
So if I were to add more money to this portfolio,
slightly more would flow into Vanguard and Amazon
to bring me back to my target allocations.
And this is a really important feature
for maintaining the portfolio that you're looking for
because a lot of people, they may say hey I want to have
25% in these four stocks, an equal amount in each,
and then a year later, your portfolio could be
totally out of whack because of portfolio drift.
But M1 Finance takes all of that out of the equation here,
because as long as you're contributing regularly
to this account, they're going to keep your portfolio
in line with what your allocations are,
that you set at the beginning.
But that being said, guys,
that is the basics here of investing with M1 Finance.
Like I said you can either build
your own portfolio from scratch,
or you can use the expert portfolios
available to you for free.
Or you can do a mixture of both,
and invest in both with this platform,
and compare the performance of both.
As I'm sure you guys know, M1 Finance is 100% free.
They are making money but they are doing so
on the backend with a couple of different methods.
For example, they make money by directing order flow,
and they also make money from their M1 Borrow
which is gonna be margin.
Not really stuff that most people are using,
so I didn't cover in this tutorial.
So they're not a charity, they are making money
but they're just doing it in a couple of different ways
than the traditional method of charging fees
and commissions to customers.
But anyways guys, that's gonna wrap up this video.
I hope you enjoyed it.
If you're looking to learn more about how to use M1 Finance,
I literally walk you guys step by step
through the entire process in that free 30 minute training.
That's gonna be linked up down in the description below.
But thank you guys so much for watching this video.
I hope you enjoyed it, and I will see you in the next one.