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M1 Finance vs Betterment 2020: Best Modern Investing Platform?

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Written by Edward Canty
Updated on April 5, 2020

M1 Finance vs Betterment 2020

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 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.

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 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

Learn More About Betterment Here!

Check Out M1 Finance Free Trading Here!

What Is M1 Finance?

M1 finance investing platform allows you to invest in individual stocks and ETFs for free. M1 charges no commissions or fees to invest. With a $100 minimum investment M1 gives investors access to their dynamic application.

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.

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

Free Automated Investing

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.

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 $2,000 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.

Click Here to Invest With M1 Finance!

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.

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.

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.

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.

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
  • $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

Click Here to Invest With M1 Finance!

What Is Betterment?

Betterment investing platform review by investingsimple.com

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 $16 billion in assets under management. This makes the company significantly larger than M1 Finance, which only has $1 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

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.

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.

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.

RateAs Of
0.40%5/19/2020

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!

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
  • 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

Click Here to Invest With Betterment!

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.

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.

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m1 finance vs betterment
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