M1 Finance vs. Robinhood: Which Investing App is Best in 2022?

M1 Finance vs. Robinhood: Which Investing App is Best in 2022?

Investors these days have more options than ever before to help them grow their money.

They can use investment apps on the stock market to invest in various options, which include the ability to think about their retirement through crypto IRA.

However, it’s also not just about the usual stocks and bonds anymore; investors can also lend money through peer-to-peer lending sites.

But if you’re brand new to investing, you might be wondering how all of these different types of services work.

Robinhood and M1 Finance are two popular options for investors who want more control over their investments and would like to build a personalized portfolio.

In addition, they both offer a mobile app so you can manage your portfolio from your phone, which makes it easy to check on the status of your investments whenever you have a spare moment or two.

In this article, I’ll compare some of the essential characteristics and features of each investing app and then give you my thoughts on which one is the better option for you.

Keep reading to find out more.

M1 Finance vs. Robinhood: An Overview

Let’s get started with a quick overview of the two platforms.

M1 Finance

m1 finance homepage

Let’s start the M1 Finance review by going through some of the features that this platform offers.

One of the most valued features of M1 is its money management system.

This includes an investing section featuring two levels of accounts.

Thanks to fractional-share investing, you may invest in equities and ETFs at almost any amount with its free edition.

The capacity to purchase fractional shares may make investing an action that’s more accessible to everyone involved.

By buying a part of a stock (rather than the whole thing), the paid price will be significantly less.

M1 Finance’s primary aim is to make investing more realistic for people who are new to it.

In addition, it can also help experienced investors by creating portfolios that are built in advance.

The platform also has the capabilities of creating portfolios that are capable of rebalancing themselves based on specific factors.

The focus on beginner investors is a big plus for this platform since it provides a lower barrier to entry.

Plus, the fact that they provide pre-made portfolios means you don’t have to research different companies and industries to decide which ones you want to invest in.

m1 borrow

With M1 spend and M1 borrow, these two actions also become more accessible and transparent.

Robinhood

robinhood homepage

When Robinhood launched in 2013, it was the first company to offer commission-free trading, and after that, many firms have followed suit.

Two levels of investment accounts are available on Robinhood: a free and a paid version.

You can use the free version of Robinhood to trade stocks, stocks, options trading, cryptocurrency trading, and ETFs as the action happens.

Robinhood, similar to M1 Finance, lets you invest in fractional shares.

This means that if you’re looking to invest in the stock market, you don’t need a large amount of starting capital.

Given Robinhood’s real-time functionality, it is excellent for those who want to make frequent purchases.

M1 Finance and Robinhood In More Detail

Let’s now look at some of the specific features and qualities of M1 Finance and Robinhood to see where they are similar and where they vary from one another.

Premium Trading

M1 offers the possibility of a more advanced account, known as the M1 Plus.

This costs $125 per year and comes with more advanced benefits in addition to the basic ones.

The interest rate on M1 Plus is 2%, which, compared to the 3.5% rate at the basic account, might make the Plus account a worthwhile option if you have a portfolio over a certain amount.

If you want to go premium on Robinhood (Robinhood Gold), you will be given to use their research tools and have the ability to do margin trading.

This low-cost membership is $5 a month and allows you to borrow up to a maximum of $1,000.

The interest rate for borrowing more than $1,000 is charged at 2.5%.

Investing In Fractional-Shares

Both M1 and Robinhood provide fractional-share investing, a popular way to invest small amounts of money.

It allows you to purchase a fractional share of any stock, ETF, or fund for a small fee.

Since you don’t need a large number of resources to invest, this feature makes it easier for people who have a smaller capital to start investing.

For example, rather than investing $200 for a total share, you may buy 1/10th of this stock for just $20.

This will help you allocate a higher proportion of your monetary resources toward fractional shares in numerous businesses or funds – rather than simply putting all of your money in one basket.

No Commission Fees To Trade

Robinhood and M1 Finance do not put in the need to pay commissions to execute transactions.

This is excellent if you plan to buy and sell frequently.

It can also help those that are in this game for the long-term to invest consistently over time and don’t want to pay commissions when buying or selling.

Account Balance Requirements To Get Started

M1 Finance asks for a $100 individual account minimum and $500 in funds to open taxable accounts or retirement accounts.

To start trading on Robinhood, you only need a valid account on their platform.

Keep in mind that to use margin, you must have a minimum balance of $2,000 and sign up for the $5/month option.

If the lack of a set starting amount of money is essential to you and you don’t plan on trading margins, then Robinhood is the clear winner in this regard.

Portfolio Building And Maintenance

You may use a Robinhood account to buy equities, but it does not handle their management for you.

As a beginner, you might have the time and resources to handle this, but it can become challenging as your portfolio grows and the number of stocks you own begins to increase.

On the flipside, with M1 Finance, it is possible to build and manage a well-diversified portfolio.

Using M1 Finance to create a pre-built professional portfolio or customizing your own with this platform means you can take advantage of M1’s various perks when it comes to diversification options.

M1 Finance also offers the possibility to rebalance your portfolio when you buy more assets to match your ideal portfolio allocation – this is a feature known as “Expert Pies”.

Robinhood and M1 Finance also both enable you to make recurring purchases.

Recurring investments can make it easier for you to increase your positions or gain exposure without having to monitor the stock, ETF, or fund every day.

The feature is simple to understand and use.

All you need to do is set the amount and your investment frequency, and the platform (Robinhood or M1 Finance) takes care of the rest.

When it comes to long-term investors, especially those with a long time horizon to invest and buy more assets over time, creating a diversified portfolio might be very helpful.

Account Types

The following account alternatives are available at M1 Finance:

  • Taxable
  • Rollover IRA
  • Custodial (An M1 Plus account is needed for this)
  • Roth IRA
  • Traditional IRA
  • SEP IRA
  • Joint
  • Trust

At the moment, Robinhood only offers a taxable account.

They do not provide other accounts such as retirement, trust, joint, or custodial accounts.

Investing Options

You may invest in equities, exchange-traded funds (ETFs), stocks, ADRs, cryptocurrencies (including Bitcoin and Ethereum), and options on Robinhood.

M1 Finance restricts you to stock and ETF trading.

If you want to trade in cryptocurrency or options, Robinhood might be a better option for you.

M1 Finance offers a variety of ETFs and individual equities that are available on major exchanges.

Margins

A margin is defined as a collateralized loan on your assets to provide greater exposure for investing or trading.

To use margin, you must pay for the $5/month Margin Gold premium account and have a minimum balance of $2,000 on Robinhood.

To use margin on M1 Finance, you must have a taxable account of at least $10,000.

Keep in mind that margin trading comes with specific risks.

These may result in you losing more than you put into the trade.

Trading Times

Robinhood gives investors the ability to trade in real-time, but M1 Finance doesn’t give this option.

You’re limited to one daily trading session for standard clients or an AM and PM window for M1 Plus client accounts.

As a result, Robinhood is the better selection of the two if you’re looking to day trade.

Interface/Usability

The M1 Finance website is simple to navigate and uses an intuitive, straightforward layout for both novice and experienced investors.

m1 user friendly

Robinhood’s interface is less user-friendly than that of M1 Finance, but not by much.

Considerations To Keep In Mind When Choosing A Trading Platform

Now that I’ve talked about the features of M1 Finance and Robinhood, I will present some further factors to consider when choosing a trading platform.

Generally speaking, your choice of investing app isn’t going to make or break your investment portfolio or destroy any money you have saved up.

However, it is still an essential factor to consider when choosing the right service for you.

Account Fees

Account fees define how much it will cost to keep your account open on that platform.

Generally, the longer you have had an account or the higher your assets, the fewer fees you will pay per year.

However, this will vary from platform to platform.

Account fees also define how often you will need to deposit new funds into your investment account.

If you don’t like to plan ahead of time, you might prefer a platform that doesn’t require deposits.

Dividend Reinvestment Plan

This makes it possible to automatically reinvest the money you make back into your account and gives you the option to buy fractional shares of assets.

This means that every penny of profit you make goes right back to work for you.

The Platform’s Standing According To Regulators

The financial industry regulatory authority, or FINRA, guides investors about reliable and safe services.

You should consider this factor before choosing a long-term investing app because it could be dangerous if the platform you select cuts corners and doesn’t follow the proper protocols.

Security Of Your Personal Information

Your choice for a trading platform should also depend on the security imposed by the platform of your choosing.

If you want to be extra careful with your private information, you might want to choose a reputable platform known for being safe from hackers.

This ensures that confidential data and your digital assets do not end up in the wrong hands.

The Use Of A Margin Account

A margin account allows you to borrow funds from your brokerage.

Borrowing money could be helpful for both veteran and new investors because it can help them make more money on their investments.

However, this is also risky if you’re not careful with how much you borrow.

Generally speaking, using margin accounts isn’t recommended unless you know what you’re doing.

The Daily Trading Window

Some platforms are open at specific times of the day, meaning you can only buy and sell stocks during such times.

Being able to trade whenever you want could be helpful if you like to make frequent trades or keep up with the market throughout the day.

Trust Accounts

These are accounts where the company will hold the securities you purchase until they’re ready to be sold.

Some investors prefer to have their investments held in a trust account to help them save on trading fees.

However, others choose not to use these types of accounts because they don’t like having their money locked away, even if it means they’ll be saving more.

Asset Management Fees

These fees describe the costs of managing the assets you invest in.

Investing in a diverse group of companies could help you make more money, but it can also be harder to manage.

If you’re someone who doesn’t like to spend time researching individual companies or watching market fluctuations, an app that manages your investments for you might be a better fit.

Account Minimums

Your choice for a trading platform could depend on what they require as a minimum balance to open an account.

Some people might not be comfortable making a minimum deposit, but others might prefer to start small and work their way up from there.

In general, having a lower account minimum can help you start investing sooner.

Passive Investors Vs. Active Investors

Having an investment strategy can help you make better decisions about what to buy and sell, but not everyone likes the idea of establishing such a set strategy.

Active investors enjoy making their own investment decisions, while passive investors prefer to have their money managed by professionals.

Having a platform that allows you to trade based on your preferred way of doing things is essential.

Cashback

Some platforms will offer you cash back when you make purchases with them, which could save you money in the long run.

However, it’s essential to consider how this fee will affect your returns because if a cashback is too high, it could reduce your overall returns.

In addition, some platforms give a free stock when signing up with them, but it’s essential to consider that significant fees can follow these transactions.

M1 Finance Vs Robinhood – FAQ

What Is A Brokerage Account?

Brokerage accounts are often referred to as investment accounts.

These accounts allow you to buy, sell or trade assets with the brokerage just like you would at a traditional stock market.

There are typically four types of brokerage accounts:

  • cash accounts
  • margin accounts
  • options
  • IRA and retirement accounts

When it comes to a retirement account, M1 Finance is the only option as they offer retirement accounts.

M1 retirement

Robinhood does not allow trade in IRA accounts.

Is A Bank Account Critical When Trading?

Each trading platform will have different requirements for banking accounts.

The brokerage account you choose allows you to deposit funds into the investment account, typically held in an FDIC-insured bank account.

In addition, trading fees associated with brokerage accounts are paid through a bank checking account credit card or even a debit card.

This means that in most cases having a bank account is essential when trading.

What Is Cash Management?

Cash management is the process of managing your cash to make it work for you.

Cash management allows you to set up automatic investments and withdraw funds with brokerage accounts.

For example, a Robinhood cash management account allows you to set up automatic deposits and withdrawals and schedule recurring investments to happen every so often.

What Are Some Good Individual Stocks To Invest In?

A quick disclaimer before I get into this – It’s always best to thoroughly research a company before even thinking about investing in it.

This will help you decide if it’s the right company for you or not.

Once you’ve done that, consider looking into popular companies with a long history of success.

Some good ones to start are Apple, Google, and Amazon.

Companies that trade on the NASDAQ and offer a service that people use every day are generally a good pick.

Also, looking at past market data is helpful to see how well certain stocks have been doing historically.

What Are Some Other Investment Apps To Consider?

Webull and eToro and two other competitors to keep in mind.

Wrap Up.

In conclusion, choosing an investing platform all comes down to what you’re looking for.

Both M1 Finance and Robinhood offer unique features, and choosing the better platform depends on your investing style.

I hope that the above factors will help you make a better decision for yourself and your personal finance.

Have you ever used M1 Finance and/or Robinhood? If so, what are your thoughts about them? I’d love to hear from you in the comments.

Further reading on AdamEnfroy.com: If you want to get serious about crypto investments, check out my post on the best crypto exchanges and trading platforms.

After that, check out my reviews of TD Ameritrade vs. Robinhood and Webull vs. Robinhood if you’d like to see more comparisons between big investment platforms.

Disclosure: I may receive affiliate compensation for some of the links below at no cost to you if you decide to purchase a paid plan. You can read our affiliate disclosure in our privacy policy. This site is not intending to provide financial advice. This is for entertainment only.