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Written by Edward Canty on November 24, 2020
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M1 Finance vs Betterment 2020: Best Modern Investing Platform?

Investing in the stock market can be confusing and, at some points, totally overwhelming. Today, there are many options for automated investing. These automated platforms are often called robo-advisors.

By leveraging algorithms and other cutting edge technology, investors can use these platforms for a fraction of the cost of a traditional advisor.

M1 Finance and Betterment are both investing platforms that are incredibly cheap (or free)  to use and that do not require large account minimums. If you are looking for a great, low-cost investing platform with automation capabilities, then both of these platforms are a great choice for you to grow your wealth!

On the surface, both platforms are pretty similar. M1 Finance is a completely free robo-advisor/brokerage hybrid, while Betterment charges a small fee but offers more functionality. Betterment offers human advisor features and tax loss harvesting but comes with a fee. M1 Finance offers prebuilt portfolios and fractional shares for free.

In this review, we will be helping you understand which platform may be a better fit for you.

Product Features Overall Price Buy Now
m1 finance review

M1 Finance Review 2020: Best Free Investing Platform?

  • Pricing & Fees
  • Assets
  • Trading Window
  • Tax Minimization
  • Investment Tools & Features
  • Prebuilt Portfolios
  • User Interface
  • Account Types
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betterment review

Betterment Review 2020: Is This The Best Robo Advisor?

  • Pricing
  • Assets
  • Account Types
  • Automation Tools
  • Prebuilt Portfolios
  • ETF Expense Ratio
  • Tax Strategy
  • Cash Management
Invest With Betterment

Summary: Betterment vs M1 Finance

  • Both M1 Finance and Betterment offer automated robo investing.
  • M1 Finance offers custom portfolios where you choose what stocks or ETFs to invest in.
  • Betterment does not offer this level of customization.
  • M1 Finance also offers dozens of expert built portfolios completely free.
  • M1 Finance charges zero fees for investing with them, even if you choose to invest in the expert built portfolios.
  • Betterment collects an annual asset management fee of 0.25%, however they build a custom portfolio for you based on your specific goals and objectives.
  • Betterment offers several features that go above and beyond what M1 does, such as the coordinated tax portfolio, Cash Back Offers, and Cash Reserve.
  • Neither platform is ideal for short term traders, as they are both geared towards long term investors.
  • M1 Finance lets you follow an active or passive approach to investing.
  • Betterment only offers a passive investing approach.
  • M1 has a minimum of $100 to invest or $500 for a retirement account.
  • Betterment has no minimum balance to begin investing.
FeatureBettermentM1 Finance
Minimum Investment$0$100 ($500 Retirement)
Fees0.25% Digital, 0.40% PremiumNone
Trading CommissionsNoneNone
AssetsETFsStocks, ETFs
Fractional SharesYesYes
Individual StocksNoYes
Expert GuidanceYesNo
Account TypesIndividual, Joint, Traditional IRA, SEP IRA, Roth IRA, Business 401(k) Plans, Trust, Checking, SavingsIndividual, Joint, Traditional IRA, SEP IRA, Roth IRA, Trust, Checking
Checking AccountYesYes
High Yield Savings AccountYesNo
Access To Financial AdvisorsYesNo
Tax StrategyTax Loss HarvestingTax Efficient Selling/Buying
Best ForPassive Investors, Hands OffDIY Stock/ETF Investors

What Is M1 Finance?

M1 Finance is a relatively new brokerage that is based out of Chicago, Illinois. The company offers an investing platform with two primary options.

The first is a custom portfolio of stocks and ETFs you build yourself.

The second is a hands-off approach, where you invest in one of the free expert portfolios.

These portfolios are constructed and allocated based on the opinions of financial experts as well as help from algorithms. While it is a "one size fits all" approach, there are dozens of portfolios to choose from.

A differentiator for M1 Finance, is that you're not purchasing shares of individual stocks and ETFs. Instead, you're designing a "pie" with your target portfolio allocation and then depositing money into that pie. For example, you can't just buy a share of Apple on M1 FInance, but you could design an investment pie that contains a slice of Apple.

That is the gist of the investment options, however the features are really what sets M1 apart from other free investing apps.

M1 Finance Features

M1 Finance offers several features that make it a unique choice among other online brokers. Couple this with a highly competitive and limited fee-structure, and M1 stands out from the crowd!

Free Automated Investing

Automated investing is made easy on M1 Finance! So how does the process work exactly? First, you will be able to choose from the 1,000's of stocks and ETFs that are offered on its platform. From large technology companies to smaller biotech names, you have a multitude of options on M1 Finance.

Now that you have made a portfolio, you can set up an investment schedule where money is automatically deposited on a weekly or monthly basis. M1 Finance will allocate that money across your portfolio automatically, or you can do this yourself by turning "auto invest" off. You can also choose to reinvest your dividends back into the companies you are investing in to amplify the effects of compound interest. Compound interest is essential for enhancing portfolio returns and this is made easy through the dividend reinvestment feature on M1!

Last but not least, sit back and watch your portfolio grow. Because of the highly automated features part of this portfolio, the only thing left to do is to be patient.

M1 Finance out of business

Fractional Shares & Smart Rebalancing

When you add more money to your M1 Finance account, they will automatically rebalance your portfolio. This is accomplished by buying whatever assets you are underweight in. On the other hand, if you take money out, they will sell whatever you are overweight in first.

You can also rebalance your portfolio at any time at the click of a button, but this may result in a taxable event.

Fractional shares is another game-changing feature offered by M1 Finance. With most brokerages out there, you have to purchase whole shares of stock. This isn't a big deal with shares like Ford that trade for $10 a share. It is a big deal when looking at stocks like Amazon that trade for close to $3,300 a share.

M1 gives you the ability to purchase as little as 1/10,000th of a share of any stock that trades on the platform.

This allows you to build a well-diversified portfolio with a small account.

M1 Finance Expert Pies

Investors have the option to create their portfolios or use the expert built portfolios on the M1 platform.

M1 Finance offers a variety of prebuilt portfolios called expert pies. Security professionals create these pies and managed by M1 Finance. Expert pies may be a suitable choice for beginners who do not want to build an investment portfolio from scratch.

These expert pies can make up your entire investment portfolio or just a portion of it. They are 100% free to invest in!

M1 Finance Expert Pie Portfolios

  1. General Investing: Choose from risk levels ranging from ultra-conservative to ultra-aggressive.
  2. Plan For Retirement: Invest for your target retirement date. Your portfolio allocation will adjust over time to become more conservative as you approach retirement.
  3. Responsible Investing: Socially conscious investing. This investment category invests in companies that are concerned about financial obligations as well as social and environmental obligations.
  4. Income Earners: Contains dividend and interest-paying securities.
  5. Hedge Fund Followers: Pies that track public funds such as Berkshire Hathaway and Icahn Enterprises.
  6. Industries & Sectors: Invest in one segment of the overall economy.
  7. Stocks & Bonds: Multiple options for diversified stock and bond exposure.
  8. Other Strategies: Other investment options like blue-chip stocks, domestic growth, domestic value and more.
  9. Trinity Portfolios: Portfolios created by Cambria Investments.

M1 Finance Free Training

We put together a free 30 minute video training that walks you through the entire process, step by step.
This training will help you get up and running in no time at all.
Get The Guide

Hassle-Free Borrowing

With M1 Borrow, you are allowed to borrow up to 35% of the value of your portfolio. You can use this borrowed money to invest on margin or for other expenses like unexpected medical bills. There is no additional paperwork, credit checks, loan officers, or denials with this borrowing.

So, it is extremely convenient. However, you will have to pay it back on a schedule. Since this is a secured loan, interest rates are much lower than unsecured loans.

Investors in need of a low-interest loan may find M1 Borrow extremely convenient and effective for accessing capital quickly.

M1 Finance Smart Borrow

FDIC-Insured Checking Account

M1 Finance offers FDIC-insured checking accounts that can be directly integrated into the M1 app. You can use these checking accounts to make direct deposits, to pay bills, and to spend with a debit card. When you spend with your M1 debit card, you can earn rewards.

FDIC Insurance is very important because it secures up to $250,000 of your cash in a M1 Checking Account. This can help prevent you against a bank run and means that, as long as your account is below $250,000, it is secure.

Your investments will be covered by SIPC insurance, as opposed to FDIC insurance, up to $500,000. This does not protect you from bad investment decisions, only if the financial institution were to go under.

Dividend Reinvestment

Dividend investors are loving M1 Finance thanks to the portfolio level DRIP they offer. When you earn a dividend, that money is added to your cash balance held within your portfolio.

Once that cash balance exceeds $10, it is automatically invested across your entire portfolio. This dividend reinvestment allows you to earn compound interest.

The M1 Finance DRIP is different from most other DRIPs out there because, with M1 Finance, dividends are re-invested across your entire portfolio, not just back into the stock that paid them out.

Smart Transfers

In addition to setting up recurring deposits into your M1 Finance portfolio, you can also enable Smart Transfers to take things a step further. Smart Transfers allow you to put every single dollar to use by setting up threshold-based rules for your account.

For example, if you knew you wanted to keep $1,500 in your checking account at all times and invest anything above and beyond that amount, you could do that. By setting up a Smart Transfer, M1 would move money from your checking account to your investment portfolio whenever your checking account reached that balance.

This can be a great feature for investors who have a plan in place and want to spend as little time as possible on their investments. M1 has also stated that they plan to add more functionality to their Smart Transfers over the coming weeks so make sure to stay tuned for more updates!

Currently, this feature is only available to M1 Plus members. It's possible that they'll end up rolling it out to more users over time, but for now you'll need to fork over the $125 per year for M1 Plus in order to utilize Smart Transfers.

M1 Finance App

Clearly M1 Finance is committed to making the investment process as simple as possible, and it doubles down on this even further through its mobile app! Access M1 Finance at your fingertips, available on both the Google Play and App stores, the simplicity of the M1 app makes all of its features extremely easy to understand. If you are someone who understands more visually, the charts and diagrams that are scattered throughout the app will help you understand what you're investing in even further.

M1 Finance Borrow Risks

M1 Finance Fees

While M1 Finance prides itself on offering no fees for trades on stocks and ETFs through its platform, it does still have several miscellaneous fees that you should be aware of before opening an account.

Request Paper Copies

Here is a list of some of the paper fees that you will encounter when requesting documents to be delivered directly through M1 Finance.

Overnight Mail (Domestic) will cost you $125, overnight mail (International/Canada) will cost you $100, a paper confirm fee will run you $2, a paper statement fee/ paper tax statement fee (per 50 pages) will cost you $5, and lastly a return mail (per piece) will cost you $2.

That is a lot of fees for paper copies! Remember, however, that all of these documents can also be accessed digitally through M1 Finance. But, if you are interested in paper copies and also willing to pay these fees, M1 has that option as well.

Account Maintenance Fees

Account MaintenanceFee
Inactivity fee: accounts with up to $20 & no activity for 90+ days.$20
Escheatment Processing (Per account)$75
TOD Account Transfer Fee (Per transfer)$200

Direct Account Transfers

For incoming account transfers, you will not be charged a fee. This is different for outgoing transfers, however, which will cost $100 for money out. You should keep this fee in mind if you are looking to move money in and out of your account, but are not looking to pay a large fee for doing so.

Regulatory Fees

Last but not least, let's take a look at some of the regulatory fees associated with M1 Finance. Regulatory fees are enforced by the SEC and work like this:

If you decide to sell a stock or ETF, you will pay a very small fee to the SEC and also a Trading Activity Fee to M1 Finance.

The fee is extremely small, however. For example, if you want to buy 10 shares of a stock that is priced at 150 per share, you will pay 3 cents in SEC fees and a 1 cent Trading Activity.

While these fees should not kill your balance, they are something to be aware of if you are looking to be in and out of multiple companies per day when trading.

M1 Finance Pros

  • Free $0 fee robo-advisor/brokerage hybrid
  • Dozens of free portfolios to choose from, or you can build your own
  • Assets are sold in the most tax efficient manner
  • Fractional shares allow you to remain fully invested and well-diversified
  • Tools for fully automating your portfolio and saving time
  • $100 minimum and $500 minimum for retirement accounts

M1 Finance Cons

  • This is not an ideal platform for active traders as there is only one trading window per day
  • There is no 401k guidance
  • Limited to stocks and ETFs
  • No access to financial advisors

What Is Betterment?

Betterment is another investing platform that is very similar to M1. However, there are several key differences. The two biggest differences are the fee structure and portfolios.

Betterment builds you a portfolio from scratch based on your specific needs and goals. That tailored service comes at a small fee of 0.25% per year.

If you want to take it a step further, they offer the Premium plan for those with $100,000 or more invested. This gives you unlimited access to financial advisors for just 0.40% per year. 

Both Betterment and M1 Finance are designed to be extremely easy to use and to be very low cost. They are great platforms for beginners and experienced investors alike. Betterment offers several features that go above and beyond M1, so it may be worth considering this platform even though they do charge a small fee.

Read our Betterment review here!

Betterment currently has $22 billion in assets under management. This makes the company significantly larger than M1 Finance, which only has $2 billion in assets under management. However, M1 is growing very quickly, largely due to its free pricing structure. So, it could grow a lot larger shortly.

Betterment Features

Betterment's features are really what make the online broker shine. Let's take a look at some of the most popular and notable ones now!

Personalized Guidance

Unlike M1, Betterment offers personalized guidance which is based on your preferences, risk tolerance and needs.

This is accomplished via the algorithm for the Digital accounts or Premium users have access to a team of financial advisors.

For brand new investors, it can be extremely useful to have that personal guidance to help you build confidence that you are on the right track. However, more experienced investors may prefer the flexibility of choosing their investments on their own.

Want to find the best robo-advisor for you?

We put together a free comparison table that analyzes all of the top robo-advisors available today. This guide will help you compare the features and benefits of each side by side.
Get The Guide

Tax Coordinated Portfolio

Betterment offers several features that help you cut down on your tax bill at the end of the year.

One of these features is the tax coordinated portfolio. Through this feature, Betterment looks at all of the assets held within your different accounts and organizes them in the most tax-efficient way possible.

For example, an investment that would incur maximum capital gains tax might be placed in a tax-sheltered retirement account.

By following this strategy, investors can save thousands of dollars in taxes over the long run, more that paying for the cost of the service.

Showing off the betterment UI

Cash Reserve

With low-interest rates being a characteristic of the economy over the last 10 years, it can be difficult to earn a yield on your cash. Betterment offers a solution to this issue by offering a high yield savings account called Betterment Cash Reserve. This is a great option for your emergency fund.

Having a way to continue to earn on your uninvested cash is a must, and so Betterment Cash Reserve will be a great feature for many investors.

RateAs Of

Cash Back Offers

Recently, Betterment partnered with Dosh to offer cash back rewards to Betterment users. When using your Betterment debit card to shop at participating merchants, you'll be earning cash back.

Examples of partner merchants include:

  • Dunkin Donuts
  • Adidas
  • Walmart
  • Sam's Club
  • and many others!

Cash back will be deposited directly into your Betterment checking account in as little as 24 hours after you make a purchase with a participating store. You won't have to activate any offers and all cash back earning is 100% automatic. This feature makes the Betterment checking account and debit card much more attractive.

Betterment Advice Packages

Betterment now offers advice packages for the specific one-on-one advice you are looking for. Advisors on the Betterment platform will then guide you through your financial goals and your current financial situation.

All you need to do is select your package, schedule your call, and talk to an expert about your specific situation. Betterment offers 5 different advice packages ranging from $199 to $299. This ranges from a getting stared package to a marriage planning package and even college planning!

Most investors would do well to check in with a financial advisor on a periodic basis, and so having the ability to do that on Betterment without signing up for a long-term commitment is a big plus.

You can learn more about Betterment Advice Packages here!

Betterment Account Minimums and Fees

Betterment charges 0.25% to 0.40% per year. The minimum for Digital is $0. The minimum for Premium is $100,000.

This is more expensive than M1, which charges nothing. However, it is significantly less than the 1% that most money managers charge. So, if you open an account with Betterment, then you will still be accessing high-quality investment options for a very reasonable and cheap fee.

Betterment also offers several features that go above and beyond what M1 is offering.

Betterment does not have any account minimums to get started. So, you do not have to start with a large amount of capital when you open an account with Betterment. Many younger investors find this ideal as it makes the platform much more accessible to them.

Betterment Pros

  • Portfolios are tailored to your specific needs
  • You can get personalized advice from a financial planner
  • No account minimums for Digital
  • Extremely low fees relative to the level of service
  • Betterment Advice Packages help you plan for major life events
  • Has excellent retirement planning options
  • Offering custom investment portfolios based on risk tolerance and end goals

Betterment Cons

  • No individual stock or ETF selection
  • Managed portfolios only
  • Only able to invest in stocks and bonds
  • Fees charged

The Verdict: Betterment vs M1 Finance

M1 Finance and Betterment are both inexpensive, extremely easy to use and convenient. They are both exactly the kind of investing platform that many millennials are seeking out. You really can’t go wrong with either of these platforms, but the subtle differences set them apart.

Neither is going to cost you a fortune in fees, each has a solid reputation for its investments and each has many outstanding features which add value to the platform.

In terms of which is better, M1 Finance or Betterment, it comes down to what your priorities are. If your priority is to find the absolute cheapest robo-advisor/brokerage that you can invest your money with, then M1 Finance is better. This is because there are zero fees to use M1.

However, if you are looking to have a more personalized experience, then Betterment is the better option.

Personalized or "One Size Fits All?"

With Betterment, you can have a human or algorithm help you (based on the plan you choose) with financial planning and they can help to sculpt your portfolio according to your needs and preferences.They designed M1 Finance to be as automated and hands-free as possible. With M1 Finance, the goal is essentially just to be able to invest in your own custom portfolio or the expert pies that are "one size fits all."

Betterment offers a much more personalized experience, but at the cost of having less ability to make tweaks to your plan once it has been set up.

However, regardless of which platform you decide to go with, you should be able to grow your net worth and avoid paying the exorbitant fees that many other investing platforms and money managers charge. So, it is really a win/win.

Robo-advisors are the future, and so both M1 FInance and Betterement will provide that increased level of service at a price point that makes sense.

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m1 finance vs betterment
Article written by Edward Canty
Ed is a financial planner and personal finance enthusiast. 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, and wrenching on his old BMW.

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