M1 Finance vs. Robinhood

Wall Street Survivor

The days of checking the newspaper for static numbers provided by the New York Stock Exchange are gone!

Today, constant investment information flies around at the speed of light.

In fact, we can access our investments right on our mobile devices.

The proliferation of investment information, and more to the point, investment culture, has created a market opportunity that lots of smaller firms and startups have jumped on.

Investment seems to have something for everyone.

It’s a chance to watch our money work for us, a chance to make the right moves and get rich on someone else’s American dream.

And with microinvesting, investing is becoming more accessible and popular.

What is Microinvesting?

Traditionally, investing has had a high bar of entry.

You had to sink thousands into accounts and account managers, waiting a long time to turn a profit.

This high entry cost meant that many young people and people with less money couldn’t realistically enter into investments.

But microinvesting and millenial investment startups changed the game.

Instead of opening an investment account with a broker for thousands of dollars, millenials can toss the price of a cup of coffee into an investment account, all on their phone.

Microinvesting has made investing something that can be done at an earlier age and with less money.

Smaller companies and app-based investments have tried to grab the younger audience with no fees, lower entry costs, and smaller stock-specific portfolios.

Some of these companies have spent a ton of money.

Robinhood and M1 Finance are two of the companies that have become popular in this space.

Both of them are attempting to capture a younger, mobile audience.

They’re both doing it in different ways.

In this post, we’re going to take a look at the specs of Robinhood and M1.

First, we’ll tell the stories of both companies so that you can make sure you’re partnering with a mission that you believe in.

Robinhood’s Story


Robinhood came out of the friendship of roommates Vlad and Baiju, who met during their time at Stanford.

After graduating they both moved to New York and built a couple of different finance companies that sold software designed to help big firms hedge funds.

They realized during this time that while the average American is charged up to $ 10 for each stock trade, big Wall Street firms pay basically nothing.

So Robinhood wanted to build a product that would provide everyone with access to big financial decisions.

The Stanford grads moved back to California and built Robinhood, a company that uses an app to help everyone find participation in the financial system.

Robinhood values great systems, simplicity, and individual participation.

They use a great team of designers and engineers to build beautiful systems that ordinary people can use.

They use simplicity to cut through the complexity of the financial system, giving ordinary people confidence.

And finally, they want to create tools for individuals to grow wealth.

Robinhood: Account Minimum

Robinhood lets you open an account with $ 0.

And they only offer a single type of account, a taxable non-retirement account.

This $ 0 minimum has contributed to Robinhood’s runaway popularity among a younger audience.

It allows people to set things up and get a feel for the app without making any lasting monetary commitment.

Keep your cup of coffee money, Robinhood just wants you to sign up.

There are no commissions that Robinhood takes, but there are trading fees that are paid as a regulator fee.

These fees are standard for investments and are not charged by the brokerage.

Additionally, if you have a margin account with Robinhood, you will have to pay interest on the margin.

Keep in mind that Robinhood will collect on a few other fees that we’ll discuss below, like transfer fees and wire transfers.

Robinhood: Investment Options

Robinhood Stocks

With Robinhood, you’ll be able to invest in stocks and ETFs listed on the major US stock exchange.

Additionally, you can get options contracts for US-listed stocks and ETFs.

Robinhood has a unique feature that many in the younger audience have been interested in–cryptocurrency.

While cryptocurrency is only available in some states, Robinhood is a great way to invest in crypto without trying to navigate the ecommerce and e-currency world on your own.

You can snag Bitcoin and Ethereum through Robinhood.

Finally, you can trade around 250 global companies with American depositary receipts.

Robinhood: Fees


In addition to a $ 0 account minimum, Robinhood is also not charging you any money on commissions for trades.

You will have to pay a small regulator fee, but that is standard for investments and not charged by Robinhood.

The only fees to know about are account transfers and wire transfers.

If you decide to take your money somewhere other than Robinhood, they’ll charge you $ 75 to do so.

It’s a good way of ensuring that people with smaller amounts don’t transfer away.

Additionally, wire transfers cost fees.

While you can make an ACH bank transfer for no charge, domestic wire transfers run $ 25 and international ones run $ 50.

Robinhood: Account Types


While Robinhood’s basic account type has no fees and no entry price, Robinhood Gold is a paid subscription that Robinhood offers.

Gold costs Robinhood users $ 5 a month.

It gives a few different features:

  • Margin accounts. You can’t use margin accounts without Robinhood Gold.
  • You can make larger deposits instantly.
  • Research reports. This is the big one, if you are interested in getting some good data on stats right within your trading app. With Robinhood Gold you get access to professional reports from Morningstar.

Robinhood: Customer Service

Robinhood is juggling 10M+ users and so they only offer customer service over email.

If you’re used to solving problems quickly over the phone–you won’t get help here.

Now, Robinhood’s app runs seamlessly.

You shouldn’t have too many problems figuring out how it works and how to get stuff done.

They also offer a database help center where you can find FAQs.

Robinhood: Other Benefits and Features

Robinhood offers you a good bit of features.

While you aren’t going to get professional analysis without going Gold, Robinhood will offer you some ratings, research, and stories that can help you wrap your head around the market.

Gold is a great program.

M1s subscription programs will run you a ton of money, but Robinhood is only taking $ 5 a month to give you a more powerful system.

With Robinhood, your money transfers instantly.

That means you don’t have to wait days for your transfers to clear and your new investments to occur.

You can transfer money quickly and get going.

M1 Finance’s Story


The CEO of M1, Brian, started investing when he was only 10 years old.

After finishing college he began realizing that while investing is really fun, the tools that we use to invest are really boring, clunky, and old.

Pushing the financial industry to innovate, Brian thought he could start a company that disrupted things.

That’s where M1 began.

M1 is all about building a tool that is as fun and dynamic as investing itself.

M1 thinks that the financial industry needs to catch up with technology, and the places that technology can take people.

They’re combining this mission–to make investments something that everyone can do, simply–with a passion for great systems.

They want to put the personal back in personal finance, giving people the tools to manage their money for themselves.

As a trusted partner M1 wants to be with you in your money management.

They care about honesty and vulnerability.

These values are the way to build great friendships, and these values are also the way to create great financial partnerships.

M1: Account Minimum

While Robinhood lets you open an account with literally $ 0, M1 wants you to put at least $ 100 into the account to start.

Additionally, the account minimum on retirement accounts is $ 500.

This higher entry level might be harmful for customers who are looking to start with even less, but it can actually be nice for others as it urges for an early commitment.

Additionally, the fact that M1 offers tax-advantaged accounts where Robinhood doesn’t means that you can get more for your money, in the long run, from M1. While Robinhood might be targeting people who are just trying out the market, and only want to put in a few bucks, M1 might be more committed to longer financial success.

M1: Investment Options


Just like Robinhood, M1 offers NYSE and NASDAQ stocks and ETFS.

But they also allow you to trade on BATS.

You cannot short stocks on M1. When you earn dividends on your investment options through M1, these dividends are automatically reinvested into your stocks.

Also, M1 offers fractional shares, meaning you don’t have to purchase all of a bigger stock.

If a stock is $ 300 a share and you only want to invest $ 50 in that stock, you’ll be able to do that.

M1: Fees

M1 won’t charge you anything for asset management or commissions.

It is completely, totally free.

But, the company also offers you a couple of premium services.

With the M1 Borrow account, you can get a line of credit or a loan against your securities.

The interest rate is variable with the market.

With the M1 Spend account, you get debit and checking that completely ties into your investment account.

While the basic spend account is free, there is a Spend Plus which has annual fees.

M1: Account Types


M1 finance offers taxable accounts, and this is the type of account that can be opened for only $ 100.

Beyond that, you can also get Traditional, Roth, and SEP IRAs.

You can also get joint trusts from M1.

M1: Customer Service

M1 offers a ton of different customer service options.

They take their customers seriously, and allow you to chat through email, live chat, or even over the phone to get assistance.

This assistance can be for the technical aspects of using M1, but you can also snag consultations with an expert team if you want to put together a winning portfolio.

M1: Other Benefits and Features


Automated rebalancing is a service that M1’s investment accounts offers.

Basically, M1 will automatically allocate new cash and dividends across your portfolio.

They will buy and sell stocks to try to keep your allocations at target percentages.

They will try to buy things low and sell high using automated software.

This means that when you add money to your account, you don’t have to painstakingly select which stocks to buy.

Just send them a lump sum and they buy according to your preferences.

Pies and portfolios are another great perk of M1.

When you construct a pie or portfolio, it’s the percentage of stocks that automated rebalancing seeks to attain.

Even if you have a lot less money than a pro investor, you can still get the same percentage allocation as them.

Additionally, M1 borrow really allows you to max out your investments.

You can borrow from your account and pay back with interest.

The interest in this case is probably no more than 4 or 5%, which is much better than some other credit and high-interest loan alternatives.

Pros and Cons of Robinhood vs. M1

Robinhood: Pros and Cons

The platform of Robinhood is built to get people involved in investing who might not normally know what they are doing.

Because of this, there is a limited amount of research and data.

While this keeps things simple, it can mean that people outgrow the system quickly.

While they don’t currently have a dividend reinvestment plan, they are adding one.

They’ve also allowed you to purchase parts of shares on the platform.

The big con that Robinhood carries in comparison to M1 is that Robinhood doesn’t offer retirement accounts.

Basically, this means that you won’t be growing your investment accounts with tax benefits, like you might be able to do with M1.

However, Robinhood has a lower entry fee than M1.

While M1 wants you to spend $ 100 or $ 500 to get started, Robinhood lets you join the platform for $ 0 and invest what you want, when you want, commission free.

M1: Pros and Cons

M1 is a machine that is built for smart investing for people that know that they don’t quite know what they are doing.

Passive investors, or people that kind of want to set up their accounts and leave them alone, can take advantage of some expertly constructed portfolios.

You just put in the money and they take care of the rest.

If you’re a more active investor, you can construct different portfolios from the ground up or you can run A/B testing with multiple account types.

Ultimately, with the complex portfolios and tax-advantaged account options, M1 is built for someone that doesn’t know much about investing but knows that they want to stick with M1 for a long time.

If you are just getting into investing, but are ready to commit to a platform, M1 is a great choice because it’s options make more sense for the long run.

Robinhood vs. M1: Which is Best for You?

Robinhood is a great starter package.

Since it allows you to try out stocks, ETFs, options, and crypto with only a few bucks–it’s a great way to get into the game without damaging your bank account.

On the other hand, M1 offers retirement options that allow you to invest in tax-free accounts.

Because you get some tax advantages, you’ll be able to invest without paying capital gains taxes, which can be annoying.

M1 is going to be a great choice if you are okay with a daily trading window, meaning you can only make trades before a set time in the day.

You also can’t trade options, but you will get access to retirement accounts.

Robinhood is much more of a “real time” trader.

While M1 restricts trading to a single window (or 2 windows if you upgrade to Plus), Robinhood is happy to let you trade consistently all the time.

If you really care about price and are looking to make quick bucks by flipping stocks, then Robinhood is a great option.

Additionally, Robinhood extends the kind of stuff you can buy, offering options and crypto.

Conclusion: Robinhood is a better “get to know investing” app, because you can trade more stuff, anytime, for a lower entry price.

But M1 is much better for a long-term option, because the retirement accounts can offer you some serious tax-advantages.

Is Microinvesting Worth It?

Microinvesting can reasonably expect to garner greater returns than simply tossing your money into a savings account, but it certainly isn’t going to make you rich.

And when you factor in some fees and subscription charges–not to mention your time and energy–it won’t be worth a whole lot.

But microinvesting is a great way for younger, less-wealthy investors to try their hands at the wheel without betting the farm on a single stock.

You can get the kind of practice and education that you need to invest, and you can still make a small profit off of it.

Have you tried using Robinhood or M1? Got any tips for us? Tell us your microinvesting stories in the comments!

The post M1 Finance vs. Robinhood appeared first on Wall Street Survivor.

Wall Street Survivor