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 common platforms being M1 Finance and 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 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 roboadvisor 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.
M1 Finance vs Fidelity Summary
- M1 Finance offers commission-free stock and ETF trading
- Fidelity offers commission-free stock, ETF, and options trades.
- M1 Finance account minimum $100 ($500 for retirement accounts)
- M1 Finance offers a list of prebuilt portfolios, "expert pies" completely free. These portfolios are created by investment professionals with overall goals such as growth, value, or sector performance.
- Fidelity Go is a roboadvisor offered by Fidelity with a $0 minimum balance and 0.35% annual fee. The service will ask you a variety of questions and invest your funds in a variety of more than 10 Fidelity funds.
- M1 Finance is geared towards building portfolios and provides an easy to use interface for beginner investors.
- Fidelity offers a wide range of tools ranging from full-service brokerage services to roboadvisor features.
|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|
What Is M1 Finance?
M1 Finance is a 100% free investing app that offers features for both active and passive investors. Active investors love the custom pies they can build with both stocks and ETFs. Passive investors love the expert built portfolios available. Many investors fine the fractional shares feature very useful.
M1 Finance has no annual fee 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.
Here is my video review of the platform:
M1 Finance Features
Smart Rebalancing & Fractional Shares
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.
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.
Another huge benefit to investing with M1 is the 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.
Expert Portfolios (Pies)
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.
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. More on the M1 Finance Roth IRA here.
Hybrid Brokerage Platform
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 day trading. It is mostly intended for long term investors who are looking to automate their investing.
FDIC-Insured Checking Account
Through M1 Spend, you can have your 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!
Margin Investing & Borrowing
With M1 Borrow, you can borrow up to 35% of the value of your portfolio.
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 and credit checks, or even deal with loan denials when you borrow with M1 Finance.
This is genuinely hassled free borrowing!
M1 Fees & Minimums
There are zero fees on M1 Finance. The only fees you will pay will be the expense ratios for the funds you purchase.
- Stocks - $0 commission
- ETFs - $0 commission
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 Finance Pros
- You can trade stocks and ETFs $0 commission-free.
- The platform is beginner-friendly and easy to use.
- Reasonable account minimums of $100 and $500 for retirement accounts.
- Hassle-free borrowing through M1 Borrow.
- Great features like smart rebalancing and fractional shares.
- Taxable Accounts, Joint Accounts, Roth IRAs, Traditional IRAs, Rollover IRAs, SEP IRAs and Trusts are all available.
- Fractional shares mean you remain fully invested.
- Useful automation features like rebalancing.
M1 Finance Cons
- No full scale tax loss harvesting.
- No financial planning guidance
- Not suitable for day traders.
- No commodity or real estate investing on the platform.
- 1 to 2 trading windows per day only.
What Is Fidelity?
Fidelity is an investing platform that is exceptionally well known.
The platform has a staggering $2.46 trillion worth of assets under management and $6.8 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 it has grown to be so large.
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.
In addition to excellent human advisors, Fidelity also offers robo-advisors which can manage your money based on algorithms.
Fidelity’s robo-advisor is Fidelity Go. There are no account minimums for Fidelity Go, but you will need $10 to begin investing. Fidelity Go will cost 0.35% per year to use this robo-advisor.
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.
Integration with Other Fidelity Accounts
If you have other Fidelity accounts, then you will be able to integrate your different investing account with them.
This is extremely convenient for many people, and that’s why so many people choose to combine all of their Fidelity accounts. This allows you to see your entire financial landscape in one place. Another great app for that is Personal Capital.
24/7 Customer Service
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 in customer support. M1 does offer phone, email and chat support but not to the extent that Fidelity does.
Zero Expense Ratio Mutual Funds
Fidelity has changed the brokerage indeustry 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.
Fidelity Fees & Minimums
There are no account minimums for Fidelity Accounts.
This brokerage has free trading for U.S. stocks, Exchange Traded Funds (ETFs), and options.
- Stocks - $0 commission
- ETFs - $0 commission
- Options - $0 commission + ($0.65 per contract fee)
- Bonds/ CDs - $1
- Mutual Funds - $49.95, Fidelity funds are commission-free
Fidelity also offers Zero-expense ratio index funds which save even more in fees for investors.
- This brokerage has an outstanding reputation
- ZERO expense ratio Index Funds
- The company has over $2 trillion in assets under management.
- You can invest yourself, with a Robo-advisor or with the help of a human advisor.
- Free trades on US stocks, ETFs, and options.
- There are no account minimums.
- There is outstanding 24/7 customer service.
- You can invest in a wide range of assets.
- The platform can be complex to use since it offers so many things.
- It is not simple for beginners to use.
- Asset management fees for prebuilt portfolios
M1 Finance vs Fidelity: Summary
Both of these platforms are good to use for long term and dividend investing.
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 rollover a 401k for example.
The Case For M1
M1 Finance is better for people who do not have an abundance of investing experience. If you fall into this category, then we recommend that you start with M1 Finance.
M1 has an easy to understand interface that does not overwhelm the 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.
So, M1 Finance’s robo-advisor is significantly cheaper, because it is free!
The Case For Fidelity
If you are a more advanced investor, the research tools and features Fidelity offer 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.