Picking the right stock broker can be challenging. These days, there are dozens of free investing platforms out there offering unique features for customers. Two of the most common platforms being M1 Finance vs Fidelity.
In the past, you had to pay high commissions to trade stocks, and the accounts required thousands of dollars as a minimum balance to open them. Not to mention, there was often a stack of paperwork to fill out and mail in.
In the past year, many stock brokerages cut their fees and commissions to zero, with two of those brokers being M1 Finance and Fidelity.
M1 Finance is a commission-free stock and ETF trading platform. Investors can build portfolios from scratch or choose from a variety of pre-built portfolios for free with a minimum account balance of $100. Retirement accounts require a minimum initial investment of at least $500.
Fidelity is a full-service stock brokerage that offers a variety of different securities and account types. Users can trade stocks and ETF's commission-free. Fidelity offers all-day trading and options trading as well. The platform also offers Fidelity Go which is a robo-advisor with a $0 account minimum and 0.35% annual management fee.
M1 Finance and Fidelity are both popular investing platforms that are widely used today. However, there are several important differences between the two platforms. Here is our full comparison of Fidelity vs M1 Finance.
M1 Finance Review 2021: Best Free Investing App?
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Fidelity Investments Review 2021: Best Brokerage?
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|Minimum Investment||$100 ($500 Retirement Accounts)||$0|
|Assets||Stocks, ETFs||Stocks, ETFs, Options, Mutual Funds, Bonds|
|Account Types||Taxable, Retirement, SEP, Checking||Taxable, Retirement, SEP, 529, Custodial, Annuity, Checking, Money Market, CD|
|Broker Assisted Trades||No||Yes, $32.95|
M1 Finance is a 100% free investing app that offers features for both active and passive investors. The platform is growing quickly and surpassed $3 billion in assets under management in early 2021.
Active investors love the custom pies they can build with both stocks and ETFs. Passive investors love the expert-built portfolios available.
Many investors find the fractional shares feature very useful for diversifying across dozens of stocks.
M1 Finance has no annual fee (except for M1 Plus, which is optional) and no commissions. They offer some great features like portfolio level dividend reinvestment, automated rebalancing, and even tax minimization strategies.
Overall, it is a long-term investing platform and it is not good for trading. For active traders, we recommend checking out Webull.
M1 Finance has many excellent features that are very appealing to investors of all different experience levels. When M1 Finance was first created, it started out charging its customers a 0.25% annual fee. However, to make the platform more appealing, it got rid of these fees entirely. Now, it is 100% free to use.
If you are looking for an investment platform that is very simple to use and does not require you to pay any fees or commissions, then M1 Finance is an excellent option. It is overall a great pick for portfolio-based long-term investors as well as dividend investors.
As the self-proclaimed "Finance Super App" M1 Finance offers a host of features that allow investors to streamline their personal finances. M1 aims to be a one-stop-shop for an individual's finances.
M1 Finance structures its platform in a way that is unique from the other investing apps out there. Instead of showing a dashboard of the stocks in your portfolio, they display your portfolio as a "pie" containing slices of each of the stocks and ETFs held within it.
Investors don't purchase individual shares of stock on the platform. Instead, they set their pie with their target allocation percentages for each asset and let M1 handle the rest. When you deposit funds into M1, you don't have to decide where they should go because you already created your pie. M1 automatically allocates your funds according to the slices of your pie.
You can continue to add new stocks to your pie and edit your pie whenever you want. Nothing is set in stone.
You can also set up multiple pies within your M1 Finance account. For example, if you want to have a pie that is only tech companies and another that is diversified across multiple industries, you can easily do so. This makes it possible to invest for multiple goals at once on the M1 platform.
The "pie" setup is easy for beginner investors to understand and significantly streamlines the investing process.
One of the best feelings out there is knowing that every last penny is invested.
It is annoying when you have leftover money when trying to purchase whole shares of stocks or ETFs. Let's say you have $100 to invest and you buy shares of a company that are $45. After buying 2 shares, you have $10 left over that remains uninvested.
This reduces the overall return of your portfolio due to something called cash drag. That excess cash is not invested and is dragging back your entire portfolio.
Through the use of fractional shares, you can ensure you will always be fully invested. You can purchase as little as 1/10,000th of a share on the platform. This makes it possible to invest in companies like Google and Amazon that are currently trading in the thousands of dollars!
Another huge benefit of investing with M1 is automated rebalancing. As you add more money to your portfolio or remove money from it, they will try to bring you back to your target allocations. For example, if you were overweight in a particular stock (had too much of it) they would sell more of that stock if you were taking money out of your account.
If you contribute new money to your M1 Finance account periodically, they will keep you close to your target allocations and keep your portfolio on track. In essence, this forces you to buy low and sell high without any active involvement or effort from you.
Rebalancing your portfolio manually is an extremely tedious process, especially if you want to do so frequently. The fact that M1 offers this service for free and is constantly rebalancing is a big plus for many investors.
Another way that M1 Finance will keep your portfolio allocated to your specifications is through the dividend reinvestment program or "DRIP".
Investors can choose to allow M1 to re-invest their dividends into their portfolio if they do not want to receive them as cash. This allows for compound interest to work its magic and continue to grow your portfolio.
Instead of being re-invested into the particular stock that paid the dividend, it will be re-invested across your entire portfolio. This will be done using their Smart Rebalancing technology to bring you back to your target allocations.
If you are a beginner investor and you don't want to build your portfolio from scratch, M1 Finance has an array of expert portfolios or "pies" available. With 80+ options to choose from, investors should have no trouble finding a portfolio that aligns with their goals.
This includes basic stock and bond allocations, hedge fund followers, and even target-date retirement funds. Most brokerages would charge a fee for these portfolios. However, M1 Finance does not charge a fee for this service.
They also offer 100% free retirement accounts, which is a perfect match for the TDF's. We have more information on the M1 Finance Roth IRA, which has a minimum opening balance of just $500.
M1 Finance is truly a hybrid platform because you can choose your investments or simply automatically invest in one of the prebuilt M1 portfolios. You can also automate the contributions to your portfolio.
For example, I invest $500 into my M1 portfolio every Monday. You can rest easy knowing the automated rebalancing feature is keeping you on track.
However, the platform only offers one trading window per day, or two if you pay for M1 Plus. So, it is not an ideal place to do any day trading. It is mostly intended for long-term investors who are looking to automate their investing.
Through M1 Spend, you can access an FDIC-insured checking account.
These checking accounts are directly integrated into the M1 app, so they are incredibly convenient to use. You can even invest money without waiting for a three-day ACH bank transfer.
Through M1 Plus, the premium debit card, you can also earn cash back and interest on your account balance!
With M1 Borrow, you can borrow up to 35% of the value of your portfolio without any credit checks or red tape.
You can then use the money you borrow to make investments on margin, or this could be used as a loan. You will not have to speak to any loan officers, go through any credit checks, or even deal with loan denials when you borrow with M1 Finance.
This is genuinely hassled free borrowing!
Additionally, these loans typically carry much lower interest rates because they are secured against your portfolio. Currently, rates are as low as 2% for M1 Plus members.
For investors looking to further automate their investing, M1 Smart Transfers will allow you to do just that.
The premise of Smart Transfers revolves around setting up logic-based rules that trigger based on your account balance. For example, you could set up a Smart Transfer that would automatically trigger once your checking account balance reached $1,000. Any time your checking account went over $1,000, the surplus cash would go straight into your investments.
This is just another way to make your investing more hands-off and continue to streamline the process.
At the moment, this is a relatively new feature and only available to M1 Plus members. However, over time we expect M1 to expand on this feature and potentially roll it out to non-Plus members as well.
There are zero fees on M1 Finance. The only fees you will pay will be the expense ratios for the funds you purchase.
M1 Finance does not charge a fee for the prebuilt portfolios called "expert pies". Investors are free to use these pre-built portfolios completely free on the M1 platform.
The minimum is $100 to open a traditional account.
For a retirement account, it is a $500 minimum.
M1 Plus is the premium version of M1 Finance which has an annual fee of $125 per year. With this, you get the following benefits:
Fidelity is an investing platform that is exceptionally well known.
The platform has a staggering $4.9 trillion worth of assets under management and $8.3 trillion of assets under administration. Fidelity is similar to M1 Finance in that it aims to provide customers with extremely low-cost and easy-to-use investing. However, there are many essential differences between Fidelity and M1 Finance.
Fidelity is a prevalent trading platform that is used by institutional investors, retail investors, and day traders alike. They have an excellent reputation, and this is a large part of the reason why they have grown to be so large.
While not as modern as M1 Finance, Fidelity offers a host of features to serve all types of investors.
If you would like advice from an actual human being when you are carrying out your investments, then you can get it from Fidelity.
For people who want this kind of assistance, Fidelity is an excellent platform for investment advice from advisors. However, this will come at a fee. You will not be able to talk to an advisor about your investments with M1 Finance or other free investing apps out there.
You'll also be able to stop into 190+ physical branch locations across the country to talk to a real person. While this is generally most appealing to older investors, it can also be a beneficial feature for brand new investors to take advantage of.
In addition to excellent human advisors, Fidelity also offers a robo-advisor which can manage your money based on algorithms.
Fidelity’s robo-advisor is called Fidelity Go. There are no account minimums for Fidelity Go, but you will need $10 to begin investing and there is a fee of 0.35% per year.
M1 does offer expert pies, but these are one size fits all. They are not tailored to any one person's specific needs. Fidelity and other robo-advisors build you a custom portfolio based on the data you provide them with.
Recently, Fidelity changed the fee structure for the Fidelity Go robo-advisor:
As far as fees go for robo-advisors, there are pretty on par with what you will find elsewhere. However, when compounded over many years even a reasonable fee can have a significant impact on returns.
Unlike many of the other older brokerages, Fidelity does offer fractional shares to investors. In general, these legacy brokers tend to be quite slow to adopt new features when compared to the newer investing apps, this is one case where Fidelity is keeping up.
Whether you are using Fidelity Go or the standard Fidelity broker, you'll be able to keep more of your money invested through the use of fractional shares. You'll also be able to set up dividend reinvestment and use the dividends you receive to purchase more fractional shares.
Many investors have questions, and a lot of them are not able to call customer service during the day because they are busy working.
So, being able to call customer support at any time is extremely beneficial. One area where these free platforms are lacking is customer support. M1 does offer phone, email, and chat support but not to the extent that Fidelity does.
Fidelity has changed the brokerage industry by offering mutual funds on its platform for a 0% management fee.
Fidelity calls these funds ZERO index funds.
They build these funds to track the performance of broad market indexes. FZROX is a Fidelity ZERO Total Market Index Fund. FZILX is a Fidelity ZERO International Market Index Fund. Fidelity offers multiple different ZERO expense ratio index funds.
Many long-term investors know the significant impact that even a small fee can have on investment returns over time. Taking advantage of these ZERO funds can potentially allow passive investors to higher returns over time by avoiding costly fees.
There are no account minimums for Fidelity Accounts.
This brokerage has free trading for U.S. stocks, Exchange Traded Funds (ETFs), and options.
Fidelity also offers Zero-expense ratio index funds which save even more in fees for investors.
Both of these platforms are good to use for long-term and dividend investing. However, Fidelity is the clear winner for active stock trading.
You can take advantage of robo-investing tools and features with either platform, which is a significant benefit.
However, if you would like to work with a human advisor, then Fidelity is the only platform of the two, which will allow you to do this.
You will not be able to get a person on the phone to help you with investments at M1 Finance. They will only offer support for account-related questions, like how to roll over a 401k for example.
M1 Finance may be better for people who do not have an abundance of investing experience. If you fall into this category, you may find that M1 Finance is easier to use and navigate.
M1 has an easy-to-understand interface that does not overwhelm new users. The platform offers beginners a simple way to become invested quickly and easily. However, if you are an advanced trader and are looking for a trading platform with advanced features and a long history of excellence, then Fidelity could be the better option for you.
M1 offers lower margin rates than Fidelity. You can automate investing with either platform. However, if you want to use Fidelity to automate your investing, then you will have to pay a 0.35% annual fee to Fidelity. If you have under $10,000 that fee is waived.
So, M1 Finance’s robo-advisor can be significantly cheaper, because it is always free!
If you are a more advanced investor, the research tools and features Fidelity offers might make this the winner for you.
Fidelity has many more trading options, they have custody options, they have better customer support and they have proven the quality experience over many years. Fidelity also offers ZERO expense ratio index funds, which can be a great resource if you build your own portfolios.
If you are an experienced investor and would like to customize and manage your own unique investment portfolio, Fidelity is most likely the better option for you.
M1 Finance is very promising, but the company is still in its early years and still has a long way to go before it is anywhere near close to being on the same level of Fidelity. That being said, they do offer a great platform for beginners that is much easier to dive into than a full-blown online brokerage.