Is M1 Finance costing you money every time you buy stock? Let’s look into the issue and figure out what it could mean for the long-term investor with M1 finance.
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A bit about my credentials…I have a B.S. degree in Finance, I’ve spent my entire career working in various corporate finance roles, and have been an active stock market investor for over 20 years. While all of this means I know what I’m talking about (most of the time!), it does not mean you should act solely on my word alone.
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DISCLAIMER: Jay Fairbrother, including but not limited to any guests appearing in his videos, are not financial/investment advisors, brokers, or dealers. They are solely sharing their personal experience and opinions; therefore, all strategies, tips, suggestions, and recommendations shared are solely for entertainment purposes. There are financial risks associated with investing, and Jay Fairbrother’s results are not typical; therefore, do not act or refrain from acting based on any information conveyed in this video, webpage, and/or external hyperlinks. For investment advice please seek the counsel of a financial/investment advisor(s); and conduct your own due diligence.
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M1 Finance is a popular investment platform that has gained traction among both new and experienced investors. With its user-friendly interface and sophisticated features, M1 Finance has appealed to those looking for a convenient and customizable investment experience. However, many individuals may not realize that M1 Finance could actually be costing them thousands of dollars in the long run.
One of the main attractions of M1 Finance is its claim of being a commission-free platform. While it’s true that M1 Finance doesn’t charge traditional trading commissions, there are other hidden costs that can eat into your returns over time. One such cost is the spread, which refers to the difference between the bid and ask price of a security. M1 Finance earns money by executing trades at prices slightly less favorable than the market, meaning you end up paying a hidden fee for each trade you make.
Moreover, the practice of fractional share trading offered by M1 Finance may seem appealing, especially for those with limited capital. However, this feature comes at a cost as well. M1 Finance bundles fractional shares into “pies,” which are essentially pre-determined portfolios of stocks and ETFs. While this makes investing much simpler, it restricts your control over individual stock selection. Additionally, the rebalancing feature, which automatically adjusts your portfolio to maintain your desired asset allocation, can lead to unnecessary trading fees and taxable events.
Another aspect to consider is the lack of control over timing your trades. M1 Finance aggregates all your buy and sell orders and executes them once a day, typically during market hours. This means that you may not be able to take advantage of market volatility or make timely decisions based on the latest news or events. In the fast-paced world of investing, this can be a disadvantage and may lead to missed opportunities or potential losses.
Furthermore, M1 Finance offers limited support for margin trading. Margin trading allows investors to borrow money against their investments to increase their purchasing power. While this can be a powerful tool if used responsibly, it also comes with additional risks and costs. M1 Finance’s limited margin offering, along with its interest rate of 3.5% for borrowing, may not be as favorable as those offered by specialized margin trading platforms.
Finally, it’s crucial to consider the overall cost-effectiveness of M1 Finance’s investment strategies. While the platform offers a variety of “Expert Pies” created by reputable financial institutions, these may not always align with your specific investment goals or risk tolerance. Customizing your portfolio outside of these pre-built options can be cumbersome and may require manual adjustments regularly.
In conclusion, while M1 Finance may provide a convenient and easy-to-use investment platform, it’s important to be aware of the potential costs it may be imposing on your portfolio. The hidden fees associated with trading spreads, the restrictions on individual stock selection, and the limited control over timing trades can all add up over time. It’s crucial to carefully evaluate these factors and consider alternative investment platforms that may offer more flexibility and cost-effectiveness to ensure you’re maximizing your investment returns.
WATCH NEXT -> 2023 Updated M1 Finance Review https://youtu.be/K87WfeWG5vc
M1 Bought PRU stock for me today $ 85.37, amazing the high of day was $ 85.34 How can that be, they said looking into, and would call back or send email, I got neither. Lady called me 2 months ago asked why I stopped sending money. I told her ya'll always buy my shares near high of the day. Today they cold buster themselves. It finally went barely over $ 85.40 at 1pm. I know they gonna come back and say $ 85.34 wasn't high of day. I took pictures of times to prove. Calling first thing in morning to see why no one called me back.
Don't trade thinly traded stocks.
Man I just wonder why my money didn't auto invest in my m1 accounts on this friday when I executed my transactions before the morning window around 5ish this morning. This was a first
Older video I know, but the main reason I love M1 is for their stock pies. I love making the pies with percentage allocations of the stocks you want. Wish other platforms did this. If SoFi ever does something like that I'll switch the rest over there, as most of my stuff is already there aside from my IRA.
If the M1 finance don't execute their trade at the highest spread possible, then, how else would they make money then?
M1 or Mt4 is removed from iPhone. Mt4 allowed in the laptop cause ??
Can't stand M1. They are extremely slow in releasing your dividends, constant security login hassles and quick time out. No DRIP, awful customer service and I even had a couple of instances where I had auto invest turned OFF but they went ahead and bought the crappiest stock in my portfolio that I didn't want to put money into. Miserable experience all around. Oh, and it'll cost you $200 to move your IRA from them and another $100 for regular brokerage.
Why does M1 not allow to place limit orders? I find that highly suspect. I moved my account to Fidelity.
so would u say Fidelity or M1 finance is better I am looking for long term savings for when I am older currently 23 just I am very conflicted on which app I want too use and would like some help I guess because I don't want to put money in fidelity and then use M1 at the same time just confused and if you could give me ur thoughts Jay?
Dude the point is ppl want to place limit order in M1
M1 Finance has let it be known that it is not for day/swing traders it’s for Long Term investments
M1 is worst broker by far. Should only be used by people that know nothing about stocks.
The peace of mind not worrying about placing orders is priceless
M1 is strictly for novice investors who have a long term buy and hold strategy. It's a small niche. Not for me.
I opened M1 finance a created a pie of 50% VTI and 50% VOO. I deposited $2000 into it from my checking account and then placed a buy order for $500 in the morning. It said trade pending with a balance now of $1500. At 12pm when the order executed, M1 bought $2000 of both funds, $1000 each. But I only wanted to buy $500 not the whole $2000. Did I do something wrong?
Adam Sandler?
Thank you Adam Sandler (lookalike) of finance!
Why you doing this?
Lol , I just have a recurring investment on , got 3 etfs and deleted the app , don't care what happens
So what ur saying ? U gonna get rid off M1 finance, just a few cents
M1 Finance is not built for swing trading. It was made for long term investors.
Jay, vti is 3 bips on vanguard. How much is it on m1 finance? Thanks in advance
You are very fair brother. Subbed
It sucks for highly volitile days, but it's the minor cost of ease of setup and pie automation. It hurts more for someone who put a huge order in ($10k+).
Commenting for the algorithm 😉 as I have nothing further to add
Thanks Jay!! Great stuff!!
This sounds like such a scammy practice lol. Why would anyone use this app?
This is why I use this account for long term holdings. A few pennies missed is not going to make a blind bit of difference 10 years from now. For swing trading, I go elsewhere.
I don't think this is a big deal, but I have done the same experiment before and seen M1 Finance execute the trade above the price range for the trading window (and sometimes above the high price for the day). These times were at most $0.05 – $0.10 above what I may have been able to get elsewhere. I don't have pictures, but it has happened to me. Again, I don't think this is a major concern.
My bigger concern is Apex Clearing. The past two years, I have had trouble trying to determine cost basis for tax purposes. I decided to switch to Fidelity based on the headache I have had the last two years of filing taxes for my M1 Finance holdings.
*edited for clarity
I saw another another finance youtuber make a video about this recently. Mokhi finance. I appreciate your opinion on this
I think the title is a bit misleading, it should be framed more of a question: "Is M1 Finance costing you THOUSANDS!?"
Yeah, but those few cents that M1 Finance stole from you, over 50 years, could have appreciated to a few dozen cents, maybe a dollar per share. Hopefully M1 Finance gets hauled before Congress like Robinhood and Citadel.
M1 Finance literally sucks! Not enough trading windows for day trading. Can't place Limit Orders for swing trading. How am I supposed to get trade in and out of stocks during the day if M1 Finance only gives me one random trading window and won't let me set the price I want to buy/sell for?
So you’re telling me you don’t know how to perfectly time the market? Pshhh rookie