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M1 Finance vs Acorns 2024: Best Modern Day Investing App?

When it comes to investing in the stock market, there are countless investing apps to choose from.

In the past, you used to have to trade through an online discount brokerage using a complicated online trading platform.

Now, there are numerous investing apps out there that allow you to trade for low fees or no fees in some cases. There has never been an easier time to begin investing.

Today we are comparing the spare change round-up app Acorns to the robo investing hybrid brokerage app M1 Finance.

M1 Finance and Acorns are both investing platforms designed for modern-day investors. They are both using advanced technology that allows the investing process to be automated.

The platforms are tailored towards people who are too busy to worry about actively monitoring their investments or have no interest in following the markets.

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.

Here are the similarities and differences between M1 Finance vs Acorns. 

FeatureM1 FinanceAcorns
Minimum Investment$100 ($500 Retirement)$5
FeesNone$1/Mo To $5/Mo Subscription
InvestmentsStocks, ETFs, Prebuilt PortfoliosETFs (5 Portfolios Only)
Individual Stock TradingYesNo
Dividend ReinvestmentYesYes
Fractional SharesYesYes
Retirement AccountsYesYes
Checking AccountYesYes
Round Up InvestingNoYes
Trust AccountsYesNo
Best ForFee Sensitive Investors, Dividend Investors, Individual StocksForgetful/Lazy Investors, Bad Savers

Summary: Acorns vs M1 Finance

  • M1 Finance is 100% free while Acorns charges $1 to $5 per month
  • Both Acorns and M1 Finance offer a debit card and checking account, however, Acorns offers a cashback program with hundreds of retail partners
  • M1 also offers members a credit card with up to 10% cashback (in stock)
  • Acorns is a spare change round-up investing app making it a great fit for lazy or forgetful investors
  • 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 portfolios
  • With M1 Finance, you can build your portfolios from scratch with whatever stocks or ETFs you want
  • Acorns only offers portfolios, no individual stocks
  • M1 Finance offers both portfolios as well as stocks and ETFs
  • Both Acorns and M1 offer retirement accounts
  • The minimum to open a M1 account is $100 while Acorns is $5

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What Is M1 Finance?

M1 Finance offers both a hands-on and hands-off investing approach.

The hands-off approach utilizes expert-built portfolios, which can invest your money without you having to do research, analysis and decision making yourself. This is great for the passive investor who does not want to actively pick and choose stocks and ETFs. 

These are in the form of expert pies. M1 has dozens of these that are completely free to invest in. 

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. Each stock or ETF makes up a slice of your pie, and you can hold up to 100 stocks/ETFs in each M1 Finance pie or portfolio.

By creating a pie, M1 is forcing you to diversify your portfolio and ensure that your investments are not too heavily concentrated in one position. This is particularly useful for new investors who are not aware of many of the benefits of portfolio diversification.

It's important to keep in mind that with M1, there is only one trading window per day (in the morning). That means that any money you deposit before the trading window will be invested during the trading window and anything you deposit after the window will have to wait until the next day to be invested.

M1 Finance Fees

One of the best things about M1 Finance is that it is entirely free to use.

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 over $2 billion in assets under management, and this number is rising steadily.

The minimum to open an account with M1 is $100, or $500 for a retirement account.

Additionally, there is a paid service called M1 Plus that investors can choose to pay $125 per year for if they desire additional features.

M1 Finance Features

This brokerage offers an array of different features that both passive and active investors love.

Portfolio Level DRIP

Through the auto-invest feature (which you can turn off at any time) M1 Finance reinvests your dividends. 

This is a smart decision overall, as this allows you to earn compound interest.

When you earn dividends within your portfolio, that money goes towards your cash balance. Once your cash balance exceeds $25, that money is automatically invested across your entire portfolio.

This means that your money is never sitting on the sidelines and will always be invested and working for you.

Fractional Shares & Smart Rebalancing

M1 makes sure that every last penny is invested and works 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 through fractional shares

This is very handy for stocks like Amazon that trade for over $3,000 a share. On other apps, you would likely have to buy whole shares of stocks which makes it much harder to effectively diversify your investments. 

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

This effectively forces you to follow Warren Buffets age-old motto of "buy low and sell high" without having to lift a finger.

20+ Expert Portfolios

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. 

Other robo-advisors like Betterment charge fees for pre-built portfolios.

This is a particularly attractive feature for newer investors or investors who want to spend as little time as possible thinking about their investments.

Tax Minimization

M1 Finance offers a tax minimization feature that will help you save on taxes when investing. The M1 platform prioritizes sales first by selling capital losses that offset capital gains, second by selling lots that have long-term gains, and lastly by selling lots that result in short-term gains.

Tax minimization strategies take a different approach when compared to full-scale tax-loss harvesting.

Tax-loss harvesting is a much more involved process that involves evaluating where you can find built-in losses in your portfolio and recognize tax savings. Tax minimization on the other hand just ensures that when you sell you aren't selling anything that will rack up a huge tax bill for you.

M1 Spend

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 (though this is reserved for M1 Plus members.)

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. You can also recieve your paycheck up to 2 days early when you have direct deposit set up. 

M1 Credit Card

The M1 credit card, called the Owner's Rewards Card, is one of M1's latest features.

With this credit card, you have the opportunity to gain up to 10% cashback! When you make a purchase with a company you 'believe in,' you are awarded cashback. To 'believe in' a company means you own that company's stock. For example, if you make a purchase with Apple, and you own any portion of their stock, then you would get cashback rewards. This does not apply to index funds or ETFs.

There are currently over 70 participating companies that are separated into 3 tiers. The bottom tier provides 2.5% cashback. The second tier 5%. And the third tier, 10%. The card also offers 1.5% cashback on every other purchase.

A great feature of this credit card is that you can set your cashback to automatically invest in your pies.

This credit card is available to all members (pending application) but with an M1 Plus account, the $95 annual fee is waived!

M1 Borrow

If your M1 Finance account is funded with $10,000 or more, you will have access to M1 Borrow.

This feature allows you to borrow from your investment portfolio at incredibly competitive rates.

The purpose of M1 Borrow is to allow you access to a line of credit in case of an emergency or unforeseen expense without having to resort to credit cards.

With interest rates as low as 3.5%, taking advantage of this feature can be much more economical than using a credit card, personal loan, or other loan charging a higher rate of interest.

M1 is able to offer these lower rates because you are essentially borrowing from yourself. They know that if you aren't able to repay the loan they will be getting paid back because they have your investment account as collateral.

Additionally, other features like creating a flexible repayment schedule and the tax-deductibility on loan repayments makes M1 Borrow particularly attractive.

M1 Plus

In addition to the features available to all M1 users, M1 Plus offers the opportunity to access a wider array of benefits on the platform.

First, M1 Plus users receive a significantly higher interest rate on the cash held in their M1 Spend account. This is an attractive feature because it ensures that your cash is working for you at all times even if you choose to hold some of it outside of the market.

This feature is paired with a bonus of 1% cashback on all purchases made with your M1 Spend debit card credited right to your M1 account.

Additionally, you'll receive a second trading window for your investments in the afternoon allowing you more flexibility in your investment decisions.

The final perk of M1 Plus is that you'll be eligible for a lower interest rate with M1 Borrow. This single perk can more than pay for the cost of the upgrade if you decide to take advantage of it.

The cost for M1 Plus is $125 per year. 

M1 Finance Pros

  • 100% free investing platform
  • Very easy to use with an excellent user interface
  • Fully customizable portfolios of stocks and ETFs
  • Passive or active investing options are 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
  • $100 minimum to get started or $500 for retirement accounts

M1 Finance Cons

  • One trading window per day unless you upgrade to M1 Plus
  • Not an ideal platform for active/day traders
  • No full scale tax-loss harvesting

What Is Acorns?

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 $5 per month.

The biggest difference between M1 and Acorns is that M1 Finance is 100% free while Acorns comes with a monthly fee.

Acorns Features

That being said, Acorns is one of the most popular robo investing apps on the market today. That is largely due to the array of features they offer and the simplicity of the platform.

Acorns Portfolio Options

Acorns offers 5 different portfolio options, which are based on risk tolerance. You must determine your investment objective, and you can choose from 5 options...

  1. Long term investment
  2. Short term investment
  3. Major purchase
  4. Children
  5. General

Acorns will then prompt you to choose an investment portfolio based on your investment objective.

For example, you can choose between the following Acorns portfolios

  • Conservative
  • Moderately conservative
  • Moderate
  • Moderately aggressive
  • Aggressive

The more aggressive the portfolio is, the higher the potential rewards but the higher the risk as well.

There are no ETFs or individual stocks on this app. You have to pick one of these portfolios. They follow a "one size fits all" approach.

This is a pro for some and o con for others. One thing that stands out about the Acorns portfolios is that they have been developed with help from Nobel Laureate Henry Markowitz.

Acorns Later

If you are saving and investing for retirement, Acorns Later could be a good fit for you. This is a retirement account offered by Acorns, which carries a monthly fee of $3. Through Acorns Later, they will recommend an IRA and portfolio that fits your investment objectives.

With Later you're able to choose from a Traditional IRA, Roth IRA, or SEP IRA as the investment vehicle.

Retirement accounts allow you to take advantage of may additional tax breaks and potentially pay no taxes at all on your investment gains.

Acorns Early

For investors with kids, the opportunity to open custodial investment accounts could be a significant plus for Acorns.

In under three minutes, you're able to set up investment accounts for your kids at no additional cost. You can quickly set up a recurring weekly or monthly deposit and sit back while you establish a rock-solid financial foundation for the next generation.

These accounts are set up as UTMA/UGTA accounts which means they are not restricted in what they can be used for. Unlike a 529 plan which can only be used for education, these accounts can be used for anything that benefits the child.

Once your child reaches the age of majority, Acorns makes it easy to transfer their account to them so they can continue investing themselves.

This feature is uncommon on most of the other investing apps on the market today and is one of the key differentiators for Acorns.

Acorns Found Money

When you shop at one of Acorns' 350+ Found Money partners with the card linked to your Acorns account, you're able to earn bonus cash into your investment account.

These partners include Apple, Walmart, and other large companies that you're likely already shopping at.

A great way to take advantage of Found Money is to use it in tandem with a rewards credit or debit card. For example, if your credit card earns 5% cashback at Walmart and you are able to get a bonus 5% from Found Money you'd end up with a total of a 10% bonus for your spending. Not bad if you were already going to be shopping at Walmart!

Acorns Spend

Acorns Spend provides users with a checking account and metal debit card that allows you to further simplify your financial life.

With this account, you can aggregate all of your financial activity through Acorns and have everything in one place. That means you don't need to have a checking account with one bank and an investing account somewhere else.

You're able to set up direct deposit and use over 55,000 ATMs around the world without paying fees.

Acorns Spend also has a built-in feature called Smart Deposit that allows you to follow the age-old wisdom of paying yourself first by taking a portion of your income and putting it directly into investments before you even see it.

Acorns Fees

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

For $3 per month, you get the Acorns Core + Acorns Later + Acorns Spend. This allows you to invest in a retirement account and open a checking account that integrates directly with your investing accounts.

The $5 per month plan offers Acorns Core + Acorns Later + Acorns Spend + Acorns Early. This allows you to open custodial accounts for your kids at no additional cost.

There is a $5 minimum for Acorns, so you can open an account and get started with a very small amount of money. This makes Acorns highly accessible to new investors who don't have a lot to begin investing with.

Acorns Pros

  • $5 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
  • Acorns Later offer retirement accounts for $3/month
  • The Acorns Spend debit card links directly with your investing accounts
  • Found Money helps your investments grow faster while you spend
  • Custodial accounts for children for $5/month
  • Acorns plants a tree for every new user that signs up

Acorns Cons

  • Only five portfolios available
  • Acorns charges $1 to $5 per month
  • You cannot buy individual stocks or ETFs

Acorns vs M1 Finance: Closing Thoughts

These platforms serve two very different purposes.

M1 Finance is designed for long-term investors who are following an active or passive approach. While you can set up recurring deposits, it is ultimately designed for someone who is already saving money for the purpose of investing. 

Acorns on the other hand is designed for the forgetful investor who has a hard time setting aside money to invest or remembering to transfer funds to their account.

M1 Finance caters to more 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.

If you have kids and are looking to start saving for their benefit, Acorns comes out ahead. By offering custodial accounts you are able to save in your child's name from the day they are born and provide significant support by the time they become an adult. M1 Finance does not offer custodial accounts.

M1 Finance offers a variety of different retirement accounts for free while Acorns charges $3 per month for a retirement account. Beyond that, M1 Finance offers dozens of different portfolio options while Acorns offers just 5.

Article written by Ed Canty, CFP®
Ed is a CERTIFIED FINANCIAL PLANNER™. At his day job, Ed helps clients plan for retirement, manage their investments, and navigate their tax situation. In his free time, Ed enjoys golfing, traveling, fishing, and wrenching on his old car.

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