M1 Finance vs Acorns: Best Modern Day Investing App?

m1 finance vs acorns

M1 Finance vs. Acorns

Disclaimer
    Investing Simple is affiliated with M1 Finance and Acorns.

    M1 Finance and Acorns are both investing platforms designed for the modern-day investor. They are both using advanced technology that allows the investing process to be automated. However, unlike M1 Finance, where users choose a specific amount of money to invest, Acorns involves the software automatically investing spare change. Every time a user makes a purchase, Acorns automatically rounds up the purchase to the nearest dollar and invests the spare change. In this article, we compare M1 Finance vs. Acorns. 

    m1 finance vs acorns

    Summary: Acorns vs. M1 Finance

    • M1 Finance is 100% free while Acorns charges $1 to $3 per month
    • Both Acorns and M1 Finance offer a debit card and checking account
    • Acorns is a spare change round-up investing app
    • M1 Finance is far more sophisticated, offering advanced features like smart rebalancing and fractional shares
    • M1 Finance offers dozens of different portfolios while Acorns offers just 5
    • With M1 Finance, you can build your portfolios from scratch with whatever stocks or ETFs you want
    • You are limited to just five portfolios with Acorns, with no individual stocks

    What Is M1 Finance?

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    M1 Finance offers both a hands-on and hands-off investing approach. The hands-off approach utilizes expertly built portfolios, which can invest your money without you having to do research, analysis, and decision making yourself.

    The M1 robo-advisor is programmed with a series of algorithms which analyze companies and market conditions to make sound investments for you.

    These are in the form of expert pies. 

    For those looking for a more hands-on approach, you can build a custom portfolio from scratch with whatever stocks or ETFs you want to include. M1 Finance offers options for both the passive and active investor.

    M1 Finance Fees

    One of the best things about M1 Finance is that it is entirely free to use. Initially, the company started out charging users .25% of assets under management per year. However, they eventually made the platform altogether free.

    This makes it highly attractive to a wide range of investors, especially those who do not like paying fees to have their money managed, and those who are just getting started with investing.

    M1 Finance is designed to be extremely easy to use, and it makes investing easier than it has ever been before. It is no surprise that the user base for M1 is snowballing. The company currently has about $500 million in assets under management, and this number is rising steadily.

    M1 Finance Features

    M1 Borrow

    m1 borrow

    This feature allows users to borrow up to 35% of their portfolio value as a loan. If you choose to use this feature, you will not have to deal with any credit checks, loan officers, additional paperwork, or denials. You borrow as much money as you want to as long as the amount you borrow is under 35%. The interest rate for this type of loan is significantly lower than unsecured loans since your assets within M1 Finance serve as collateral. 

    Fractional Shares & Smart Rebalancing

    M1 Finance uses this feature known as fractional shares, to make sure that every last penny is invested and working to generate returns for you. With M1 Finance, you can purchase as little as 1/10,000th of a share of a stock or ETF that trades on the platform.

    This is very handy for stocks like Amazon that trade for over $1,000 a share.

    Smart rebalancing is also done periodically by the robo-advisor to make sure that your portfolio is being readjusted to account for change and performance. For example, when you put more money into your M1 Finance account, it will go towards whatever you are underweight in.

    If you take money out of your account, M1 will sell whatever you are overweight in. The goal here is to keep you close to your target portfolio allocations. 

    Passive Investing

    M1 Finance offers expert pies which are available to any investors on the platform. They have dozens of different ones to choose from. This list includes a variety of TDF’s or target-date funds, which are ideal for retirement investors. M1 is one of the only platforms that offer portfolios with zero management fees. 

    Hybrid Platform

    With M1 Finance, you get the best of both worlds. If you want to follow a hands-off approach, you invest your money into one of the prebuilt portfolios they offer. If you’re going to try your hands as a stock picker or self-managed investor, you can build your portfolio from scratch. Or, you can do both and split your money between different portfolios!

    FDIC-Insured Checking Account

    For those who are interested, M1 Finance offers an FDIC-Insured checking account through their platform known as M1 Spend. With this checking account, you can pay bills, make deposits, and spend your money with a debit card. You can even earn rewards when you spend money with your M1 checking account debit card. When you use this M1 Spend checking account, your funds are available immediately to invest. You do not need to wait three business days for an ACH transfer. 

    M1 Finance Minimums & Fees

    M1 Finance does not have any fees, meaning that you do not have to pay to make trades on the platform. However, there is an account minimum of $100 for taxable brokerage accounts and $500 for retirement accounts.

    M1 Finance Pros

    • 100% fee-free investing platform
    • Very easy to use with an excellent user interface
    • Passive or active investing options available
    • Handy features like fractional shares and smart rebalancing
    • Easy access to capital with M1 Borrow
    • M1 Spend debit card links directly to M1 Invest
    • Variety of different account offerings including retirement accounts

    M1 Finance Cons

    • One trading window per day
    • Not an ideal platform for active/day traders
    • No tax-loss harvesting

    Read our M1 Finance review here.

    What Is Acorns?

    acorns investing app

    Acorns is an investing app that automatically rounds up your spending to the nearest dollar and invests the change automatically. So, for example, if you spend $5.15, Acorns will round this up to $6.00 and then invest the remaining $0.85.

    Many people use Acorns because it is an extraordinarily, convenient, and sensible way to invest money. It is called Acorns because acorns start very small and grow into something huge, just like your investments do on the app.

    This investing app is designed for a particular user. It is the type of investor who is forgetful or the bad savers out there. With M1 Finance and other brokerages out there, it is up to you to make weekly or monthly transfers into your brokerage account. Acorns take the guesswork out of the equation with this automated round-up approach. This does come at a fee, which is $1 to $3 per month.

    Acorns Features

    acorns multiple portfolio options

    Multiple Portfolio Options

    Acorns offer several different portfolio options, which are based on risk tolerance. For example, you can choose between conservative, moderately conservative, moderate, moderately aggressive, and aggressive portfolios. The more aggressive the portfolio is, the higher the risk and the higher the potential rewards are.

    Acorns Later

    If you are saving and investing for retirement, Acorns Later is for you. This is a retirement account offered by Acorns, which carries a monthly fee of $2. Through Acorns Later, they will recommend an IRA and portfolio that fits your investment objectives.

    Acorns Fees

    Acorns are completely free to use for college students. However, for everyone else, the fee ranges from $1 to $3 per month. This is depending on which account type you would like to have. 

    For $1 per month, you get the Acorns Core investing platform.

    For $2 per month, you get the Acorns Core + Acorns Later. This allows you to invest in a retirement account.

    The $3 per month plan offers Acorns Core + Acorns Later + Acorns Spend. This is a checking account that integrates directly with your investing accounts.

    There are no account minimums for Acorns, so you can open an account and get started with any amount of money. This makes Acorns highly accessible to new investors who don’t have a lot to begin investing with.

    Acorns Pros

    • No minimum to open an account with Acorns
    • Great platform for lazy or forgetful investors
    • Spare change round-up is a painless approach to saving/investing
    • Fees are waived for college students
    • Acorns Later offer retirement accounts for $2/month
    • The Acorns Spend debit card links directly with your investing accounts

    Acorns Cons

    • Only five portfolios available
    • Acorns charges $1 to $3 per month
    • You cannot buy individual stocks

    Read our Acorns review here.

    The Verdict: Acorns vs. M1 Finance

    These platforms serve two different purposes. M1 Finance is geared towards long term investing following a passive or active approach. Acorns is geared towards turning your spare change into investments that generate returns for you. If your goal is just to make productive use of your spare change, or if you are a forgetful saver, then stick with Acorns. 

    M1 Finance is better for serious investors who are looking for better features, zero fees, and greater flexibility. Acorns is better for people who are just looking for a clever app that can help them to put their spare change to work for them. M1 Finance offers a variety of different retirement accounts for free while Acorns charges $2 per month for a retirement account. Beyond that, M1 Finance offers dozens of different portfolio options while Acorns offers just 5.

    Both of these investing platforms offer a fair amount of handholding, making them beginner-friendly options. However, M1 Finance is putting a lot more control and flexibility in your hands. If you are 100% set on a passive investing strategy, and you are not good at saving, Acorns is a better bet. However, if you think you will eventually explore individual stock investing or building your portfolio, M1 Finance is a better bet. 

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