What is The M1 Finance App?

3 minutes

The M1 Finance App is receiving accolades and buzz from many people as “the best trading platform of all time”.

Because of its rather quick rise to success (having been founded in 2015, and marketed more heavily in 2019) this “overnight success” is causing concern among investors who have traditionally used other platforms like Acorn or Robinhood.

So, what is the M1 Finance App, and is this business legitimate? Learn all this and more in what we believe to be among the best apps for investing your money the world has seen so far.

Is M1 Finance a Legitimate Investment Tool?

Founded in Chicago, IL, in 2015, M1 Finance is an online financial services company that is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. M1 Finance put simply is a legitimate finance robo-advisor that has a near-perfect range of benefits for even the most inexperienced users to get the feel for.

M1 holds checking accounts furnished by Lincoln Savings Bank, Member FDIC. M1 VisaTM Debit Card is issued by Lincoln Savings Bank, Member FDIC.

Knowing all of this, you can rest assured that the money you’re placing into your free brokerage account is being handled by a legitimate business and is protected. Furthermore, whenever you find a broker-dealer that is a member of both SIPC and the FINRA you are dealing with a legitimate brokerage firm. In the case of M1 Finance, they have both licenses and investor accounts are protected for up to $500,000 if negligence or fault is found on behalf of M1 Finance, because of their membership with SIPC.

Having said all of this, it’s still important to do your own due diligence before you invest time, effort, or money into anything. We encourage you to keep reading the article below to learn more about what makes M1 Finance so unique and powerful in the marketplace right now.

How does M1 Finance Make Money if There are No Trading Fees?

In December of 2017 founder and CEO Brian Barnes decided to eliminate trading commission fees. The decision to eliminate the fees cause a lot of his competitors to vocally criticize his strategy claiming that this would not work for the small company. Barnes’ rebuttal has been that commissions only made them a very small amount of actual income anyways, so he decided to move his company in a direction where it could only make money through backend offers.

Their profits are currently coming from the interest rates they offer on loans/lines of credit. In the very short future from now, M1 is also planning on integrating an “improved M1 account” that may cost between $100-$125 annually that also offers all the features M1 Free users are currently enjoying, plus potentially lower APR rates on lines of credit, 1.5% APY on checking accounts, 1% cashback on debit card purchases, and an additional daily trading window.

What Makes M1 Finance Different than Robinhood App?

There are a lot of similarities between Robinhood and M1 Finance, but really the small details make all the differences.

On a basic level, M1 Finance seems to be for those that are a bit more financially savvy, but don’t be discouraged, even if you are brand new to investing you may really like some of these differences. What M1 does better than the rest is allows fractional shares in stocks you otherwise couldn’t purchase.

So for example, maybe you’re a big fan of Amazon, but don’t have the entire $1,805 to invest in a share of their stock — the good news is you can still get a cut of the action by buying a fraction of the share itself. This makes it super beneficial for long term investors who really believe in the direction of a company overall.

Some other things M1 Finance is great about is allowing for portfolio level drip, or a dividend reinvestment plan. Meaning that every year, your portfolio will pay dividends to the shareholders, with an automatic portfolio reinvestment plan, and dividends that are paid out to you automatically get reinvested back into buying fractional shares/other shares of interest on your pie based portfolio.

One of the things Robinhood does that really sets itself up to be drastically different than M1 Finance so far, is that it allows you to buy bitcoin. Bitcoin is an aggressive investment — something you have to be comfortable with possibly losing entirely, but with a trusted platform like Robinhood, you can rest assured that your investment is covered by their company and not some sketchy online digital wallet business.

Final Thoughts

M1 Finance has been making a lot of news recently because it is such a prospering business that offers thousands of stocks, ETFs + strategies. With no management fees, ability to invest in stocks, bonds, funds, and more,  as well as their fractional share purchases there is a ton of features to really be excited over.

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