- Hello once again guys.
Welcome back to the channel.
Hope you're having a great day so far.
So in this video today,
we are going to be talking about
M1 Finance versus Robinhood,
two of the most popular free investing platforms out there
and I'm gonna be helping you guys understand
what are the differences here
and which one may be a better fit for you
based on your investing style.
Now, at the end of the video if you guys do decide
you want to sign up for Robinhood or M1 Finance,
I do have links for both in the description below.
They are affiliate links,
which means that if you do use them,
at no additional cost to you,
I earn a commission in the process.
So it's a way for you to give back to me
if you want for putting this video together
and providing this free information,
but your use is not required,
but it is certainly appreciated
and the one other thing I want to mention real quick:
M1 Finance is my best overall pick here for beginners
when it comes to investing,
but it is kind of complicated to use and get started with
so I actually just put together
a free 30-minute video tutorial walking you through
how to use M1 Finance step-by-step
and that's gonna be linked up down in the description below
as well if you want that free beginners guide tutorial
on investing with M1 Finance.
But that being said, the first big difference here
between Robinhood and M1 Finance
is the minimum amount of money to get started.
One of the reasons why people love Robinhood
is because they have a $0 minimum.
So if you want to open up an account with them
with 20 bucks for example,
you are able to do that with Robinhood.
M1 Finance has $100 minimum
for the traditional brokerage account
and they have a $500 minimum for the retirement account.
Now, that is one area where Robinhood
is falling short right now
is they don't offer retirement accounts
at this point in time.
They've mentioned that they are planning on it,
but as far as I know, I have no clue
when they're actually launching retirement accounts.
So if you're looking to invest through a Roth IRA
for example, M1 Finance offers that.
Robinhood does not.
Both of them are completely fee free and commission free,
so they don't charge any fees or commissions to use them.
They do make money, but they make money in different ways
than charging fees and commissions to customers.
A few examples are: they make money by directing order flow,
which is pretty complicated.
Not something we're going to get into in this video.
They also make money on the cash balance held.
Within brokerage accounts, that's uninvested.
They make money on the interest
and then they also make money
by offering margin to investors.
So they're not operating a charity,
they are making money, but just in some ways
that are not the ways the traditional brokerage accounts
have made money by collecting fees
and commissions from customers.
Another big difference between these two here
is that you can invest in options
and cryptocurrency through the Robinhood platform.
That is not something that M1 Finance is currently offering.
Another difference here is that Robinhood
is really a platform designed for the more active trader.
It's somebody who is trading in and out of stocks
on maybe a weekly or monthly basis,
where as M1 Finance is designed
for longterm portfolio based investing.
So that being said, one of the things
that people tend to dislike about M1 Finance
is they only offer one trading window per day.
So if you place an order to sell or add money
to your account for example,
that trade is going to be filled
at one point throughout the day and you can't say,
"I want to buy or sell at exactly this point in time."
You can do that with Robinhood and you can say,
"Hey, I want to sell right now or buy right now."
But with M1 Finance, you're limited
to that one trading window per day.
So Robinhood offers that open-ended trading window
where you can trade at any point when the market is open
and they also offer extended trading hours,
pre-market and post-market,
giving you a lot more flexibility
of when you're placing your trades.
That's more important for active traders.
For longterm investors, they don't really care
what point in time during the day
they're buying or selling shares of their stocks in ETS.
Another area where we have some big differences here
is that there is not a single bit of guidance offered by
Robinhood in terms of portfolios or anything like that.
You're completely on your own to pick
what you're investing in.
M1 Finance on the other hand,
offers over 30 different expert built portfolios
that you can invest in that are completely again, fee free.
They have retirement funds.
They offer basic stock and bond allocations
and a number of different portfolios that you can invest in
that have been built by experts.
You don't have any guidance like that
when you invest with Robinhood.
They also offer some really helpful features
for longterm investors.
For example, fractional shares.
This is actually good for anybody.
So if you look at a stock like Amazon
that trades at close to $2,000 per share,
well if you want to buy Amazon stock on Robinhood,
you're gonna have to buy a whole share of Amazon
for close to $2,000.
And most people, especially beginners,
don't have that much money to invest.
With M1 Finance, you can buy fractional shares
and buy as little as 1/10,000th of a share
of a behemoth like Amazon, allowing you to buy
a much smaller piece and get exposure for a lot less money.
So that is one of my favorite features of M1 Finance
is that fractional shares feature.
They also offer portfolio level dividend reinvestment,
so when your portfolio earns dividends
or any stocks or ETF's within them,
that goes towards your cash balance.
Once the cash balance exceeds $10,
it's reinvested across your portfolio.
We cover all of that in that free M1 Finance training
linked up in the description below,
exactly how dividends work
and I show you some dividends
from my own M1 Finance portfolio.
And then finally, the rebalancing of the portfolios.
M1 Finance automatically rebalances
when you add money or take money out
or as rebalancing is totally something you're gonna have to
do on your own if you build a portfolio with Robinhood.
So that being said,
Robinhood is basically a good platform in my opinion
for the beginner active trader.
You can trade stocks, ETF's, cryptocurrencies
and options commission-free.
So it's also good for people
looking for those less common assets
like the cryptocurrencies and the options.
Most people don't invest in those,
but if you do, Robinhood allows that commission-free.
So it's good for people looking for that
or beginner active traders.
M1 Finance on the other hand
is good for portfolio-based investors
because everything is based on that pie,
whether it's an expert pie you're investing in
or a custom pie you build yourself
and each stock or ETF makes up a piece of that pie.
It's also good for dividend investors
because of that portfolio level, dividend reinvestment.
It's good for longterm and retirement investors.
Not a good platform for active traders,
it's just not designed for that.
So Robinhood, active traders.
M1 Finance is for more longterm, portfolio-based investors
and dividend investors.
That being said guys, that's gonna wrap up this video.
Those are the key differences.
All the resources I mentioned are gonna be linked up
down in the description below.
So thank you guys so much for watching.
Make sure you check out those resources
and that free 30-minute guide on M1 Finance
if you're interested and if not,
I will see you in the next video
and I hope you have a great rest of your day.