The way we trade stocks changed forever in 2013, thanks to the launch of the trading app Robinhood.
Typically when investing the traditional way, you pay commissions to your broker. The commission fee usually ranged from $5 to $10 per trade. When Robinhood launched as the first commission-free trading platform, it changed the industry. It made investing, previously seen as something only the rich did, now is simple and accessible to anyone.
A couple of years later, M1 Finance followed suit and launched their pie based free investing app.
I’ve been growing both portfolios for a year and they’re currently around the same size. I’m going to share the basic features of both, the pros and cons and my advice to get you started today.
M1 Finance is a work horse as far as investment apps go. They offer portfolio level dividend reinvesting, which simply means that when you receive a dividend balance of $10, you have the option to allocate that balance to your whole portfolio.
It is also worth noting that M1 Finance is a pie based platform, or an investment strategy that uses the visual aid of diversifying into a pie chart. This makes it extremely easy to see your investments, how they are doing and if you are diversified enough in your portfolio.
You have the ability to have different pies. For example, you can have a tech pie, a utility pie, a dividend pie, a growth pie and more. You can visually see which pies are doing better than others.
On top of the varying pies, they have ‘template’ pies, or expert pies. These pies are already divided up for you with pre-selected stocks, so it takes the guesswork out of diversifying. That’s the most beginner-friendly feature of M1 Finance. The expert pies make it easy to fiddle around with investing and get the hang of it.
On the flip side of the pies, you have the ability to ‘rebalance’ your pie. This means that if you specify that ‘Company X’ is to take up 10% of your portfolio and later down the road you realize that ‘Company X’ over or under performing, you can rebalance the pie to make ‘Company X’ take up a originally specified percentage. The purpose of this is to ensure that you aren’t over balanced in one stock or category and well diversified.
Another wonderful feature of M1 Finance is the ability to purchase fractional shares of a company. If you don’t have enough money to buy into a company, you can purchase a fractional share at a minimum of $10.
Say you want to purchase stock in Tesla. Tesla’s stock is currently trading at $700 — which isn’t chump change. Let’s say, you only have $100 to put towards your portfolio at the moment. With M1 finance, you can take the $100 and purchase a fraction of tesla. You get 1/7 of a share.
The last pro is that when you invest in M1 Finance, you don’t have to purchase just ETFs and stocks. They have options for retirement accounts as well. With M1 Finance, you aren’t limited, which is the greatest advantage of investing with them. M1 Finance offers Individual Brokerage Accounts, Joint Brokerage Accounts, Traditional IRAs, Roth IRAs, SEP IRAs and Trust Accounts.
If you are looking into day trading or short-term investment opportunities, M1 Finance is not for you. M1 Finance is structured for long-term, sit and wait investing. Investors who are trading on this platform are thinking about thirty years down the road, not if a stock is $2 less than it was the day before.
M1 Finance only has one trading window throughout the day, not extended hours like Robinhood. This means that if you want additional trading windows, you will have to upgrade for a second window, or move to Robinhood.
Robinhood is a more cut and dry app than M1 Finance. You buy stock. You sell stock. That’s it. There’s no automatic diversification method, there’s no minimum and there are no fees or commissions.
It’s a simple app that makes investing easy to understand and participate in. This makes it the ideal beginner investing platform.
Robinhood also offers cryptocurrency, if that is your jam and extended hours for trading. If you are looking into day trading or quick trading, Robinhood is for you.
Unfortunately, Robinhood is a bit too simple for the seasoned investor. There is no dividend reinvesting available in the Robinhood interface and it is just a stock based investing platform. Robinhood does not offer retirement investment options.
|$0 minimum||$100 minimum|
|100% free – no fees & no commissions||100% free – no fees & no commissions|
|No dividend reinvesting – dividends will become buying power for you to use towards your next purchase||Portfolio level dividend reinvesting – when you receive a dividend balance of $10 you can have it paid out to be dispersed throughout your whole portfolio|
|Cryptocurrency options||Fractional shares. Don’t have enough to buy the company you want but want into that company.|
|Stock based – no pies||Pie based – one pie or multiple pies – offers expert pies with option to rebalance|
|Beginner active tracer||Portfolio based – long term retirement|
|Trading window||1 trading time throughout the day — long term traders typically don’t care what time of day they buy because they are in it for the long haul.|
|Very simple: You want a stock – you buy a stock. You want to sell – you sell a stock||Little bit more complicated than Robinhood, I was confused in the beginning of using the app but with anything the more you play around the more you understand.|
Ways I save money:
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• M1 Finance is an easy to use brokerage platform that allows you to invest in Fractional Shares and auto reinvest!
• Webull Get 2 Free Stocks on WeBull when you deposit $100 (Valued up to $1400).
• Budget Templates: Excel budget templates with pre-populated categories and formulas to keep you on track with hitting your financial goals.
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