There are more online investing platforms than ever before. These choices are great for new and experienced investors, but it can still be challenging to choose the right now. Today we’re comparing M1 Finance vs. Robinhood to help you decide which of these two low-cost, commission-free platforms is best for you.
While both Robinhood and M1 Finance investors incur minimal costs, these two brokerages have different focuses:
- M1 Finance is better than Robinhood for long-term investors or investors who want a hands-off experience because they take an automated and portfolio-based approach.
- Robinhood is better for active investors because you can trade stocks, options, and cryptocurrency.
Those key differences give you a good grasp of what to expect, but let’s check out all of the features, fees, and what you can expect from each of these investment apps.
M1 Finance vs. Robinhood | Which $0 Fee Investment App is Best?
Table of Contents
- M1 Finance vs. Robinhood | Which $0 Fee Investment App is Best?
- About M1 Finance
- About Robinhood
- M1 Finance vs. Robinhood: Fees
- M1 Finance vs. Robinhood: Investment Options
- M1 Finance Additional Features
- Robinhood Additional Features
- Who Is Robinhood Best For?
- Who Is M1 Finance Best For?
- M1 Finance vs. Robinhood: The Final Word
About M1 Finance
M1 Finance was founded in 2015 and offers investors a new take on the robo-advisor experience. Instead of letting M1 Finance completely select your portfolio for you, you can pick and choose which kinds of investments are in your M1 Finance portfolio. M1 Finance still handles automated trading and portfolio maintenance, so you get a sophisticated investing experience that combines control with a hands-off approach.
M1 Finance also has nearly non-existent fees. There are $0 portfolio management or trading fees, and no fees for deposits or withdrawals to a connected bank account.
M1 Finance has been growing its list of features over the past few years to include an integrated digital banking account with cash sweep features, margin trading, and a financial planning tool called Smart Transfers.
One of M1 Finance’s newest features is called M1 Plus, which is an upgraded subscription service that allows members to earn 1% interest on cash balances, a lower margin rate, multiple trading windows, custodial accounts, and more.
Robinhood launched in 2013 and was one of the first investment apps to offer zero-commission trades. That set off a chain of brokerages eliminating their fees and commissions to compete with Robinhood.
Overall, Robinhood is a pretty stripped-down app that simplifies the investing experience, and it’s a good place for new, active investors to get their feet wet because it’s so affordable. And it certainly helps that Robinhood offers investment options that active investors want, like options, cryptocurrency, and margin trading.
Robinhood has been expanding its features in recent years by offering fractional shares, a cash management account, and a premium account feature called Robinhood Gold.
M1 Finance vs. Robinhood: Fees
Both Robinhood and M1 Finance are solid choices if you want a budget-friendly online brokerage. There are no fees to sign up and create an account with either. They also charge $0 commissions and trade fees. They start to differentiate themselves when it comes to their subscription-based services and margin fees.
Robinhood Gold is Robinhood’s add-on service at $5 per month. This comes with $1,000 over margin for free. Margin above $1,000 comes with a 2.5% interest rate.
M1 Finance’s premium service is called M1 Plus and costs users $125 annually. It lowers your margin interest rate from 3.5% to 2%.
Both investment platforms also charge several miscellaneous fees that you’ll find at most other brokerages. This includes outgoing transfers — M1 Finance charges $100, and Robinhood charges $75. M1 Finance also charges a $20 inactivity fee on accounts with up to $20 and no activity for 90+ days.
M1 Finance vs. Robinhood: Investment Options
M1 Finance takes a hybrid approach to investing that’s part robo-advisor and part hands-on brokerage. What this means for investors is that you have control over what goes in your portfolio. Still, you get automated features like rebalancing, access to 80 expert-built portfolios, and recurring investments.
Your M1 Finance portfolio is called a “pie,” and the assets in your pie are “slices.” You can choose from about 6,000 stocks and ETFs to include in your pie. They offer various account types to invest in, including individual taxable accounts, joint accounts, IRAs, and trusts.
M1 Finance does not offer bonds, mutual funds, cryptocurrency, or options trading. You can’t do day trading on M1’s platform, and you’re limited to one trading window unless you upgrade to M1 Plus.
Robinhood investors can trade stocks, ETFs, options, and cryptocurrency. There aren’t prebuilt portfolios or robo-advisory features. You’re on your own with total control over what’s in your portfolio.
Robinhood has limited account types, only offering individual taxable investment accounts. There aren’t any retirement accounts, trusts, etc.
Both M1 Finance and Robinhood now offer fractional shares of stocks and ETFs, giving investors the ability to purchase a percentage of a stock instead of paying the cost of a full share. This can be advantageous to new investors because it allows you to build a diverse portfolio affordably.
Robinhood uses their fractional shares feature to offer a dividend reinvestment program (known as DRIP). You can turn this feature on or off, and when it’s on, Robinhood will reinvest dividends from a company into additional shares or fractional shares.
M1 Finance Additional Features
Customized investment portfolios
M1 Finance uses circular charts they call “pies” to represent what’s in your portfolio. You can build these yourself, or select one of their over 80 Expert Pies. Expert Pie are professionally curated portfolios made up of ETFs and stocks, and each aligns with a different “generally accepted” investment strategy.
In addition to Expert Pies, you can invest in Community Pies, which are portfolios that align with different socially responsible goals or values. There are Community Pies for Black-led businesses, companies run by AAPI (Asian American Pacific Islander) executives, and business led by LQBTQ+ execs.
M1 Finance takes a slightly different approach to automatic rebalancing, a common robo-advisor feature that uses an algorithm to buy or sell assets when your portfolio’s asset allocation gets off target.
You can initiate rebalancing, but what M1 Finances does automatically is something called Dynamic Rebalancing. When money hits your account, M1 Finance first makes trades to shore up any natural drift that has happened to your asset allocation.
M1 Checking Account
M1 Spend is M1 Finance’s integrated checking account. Spend is an FDIC-insured checking account that comes with a debit card, there is a $0 account minimum, and you’re reimbursed one ATM fee per month.
Borrow is M1 Finance’s margin loan feature, and you’ll need a portfolio value of at least $10,000 to access it. M1 Finance limits you to borrowing up to 35% of your portfolio balance.
M1 Finance advertises that its margin account can be used like a line of credit in place of a personal loan, HELOC, auto loan, etc. — typically, margin is used as portfolio leverage. M1 Finance also doesn’t put you on a set repayment schedule. You’re charged monthly interest, but make payments on your own terms.
But it’s important to understand the risk of margin lending before using it. If the value of your portfolio declines too much, M1 will force a call for repayment. There’s also the danger that leveraging your portfolio will magnify any losses you experience.
M1 Plus is M1 Finance’s subscription-based service that costs $125/year. New M1 Finance users can receive a free 1-year trial of M1 Plus when they sign up.
M1 Plus breaks down to about $10/month and includes the following benefits:
- Smart Transfers: Set up automated ITTT (if this, then this) rules that trigger money moving across all of your M1 accounts.
- Lower Borrow rates: M1 Borrow rates drop from 3.5% to 2%.
- Multiple trading windows: You can trade in the morning trading window or the afternoon one, and investors with more than $25,000 equity in their portfolio can trade during both windows.
- High-interest rate checking: M1 Plus users get 1% APY on the cash held in checking, which is 33x over that national average APY for checking accounts at 0.03%.
- Cash back rewards: Earn up to 1% cash back on qualifying purchases with your Spend debit card.
- ATM reimbursements: You’re reimbursed for four ATM fees each month on your M1 Finance checking account compared to one with Basic.
Robinhood Additional Features
Trading on margin
Robinhood follows FINRA (Financial Industry Regulatory Authority) standards that require investors to have at least $2,000 in their accounts before trading on margin. You will also need a Robinhood Gold account to trade on margin, and that gives you your first $1,000 of margin interest-free. Robinhood charges a 2.5% yearly interest-free on margin over $1,000.
Options trading is a more advanced trading strategy, and Robinhood assesses your financial situation, trading experience, and investment objectives before letting you trade options on their platform. They give you a Level I, II, or III designation; you need to be at Level II to execute long calls, long puts, covered calls, and cash-covered puts.
Level III traders can execute more advanced strategies, like call credit spreads, put credit spreads, call debit spreads, put debit spreads, iron condors, calendar spreads, iron butterflies, and box spreads.
Robinhood only allows for three-day trades within a five-business-day window before you’re considered a day trader. You’ll need at least $25,000 in your margin account before you can make more than three trades in that five-day window.
Learn more at How to Trade Options on Robinhood.
Robinhood currently supports a shortlist of cryptocurrencies: Bitcoin (BTC), Bitcoin Cash (BCH), Bitcoin SV (BSV), Dogecoin (DOGE), Ethereum (ETH), Ethereum Classic (ETC), and Litecoin (LTC).
Crypto trades are commission-free on Robinhood’s platform, and they are releasing crypto to customers on a state-by-state basis.
Cash management account
Robinhood’s cash account is an FDIC-insured high-yield savings account that currently earns 0.30% APY (this rate is variable and can change at any time). Opening a Robinhood cash management account is free and comes with a debit card. There are no ATM fees from over 75,000 ATMs nationwide wide. Plus, there are no overdraft fees, transfer fees, or foreign transaction fees on this account.
This is Robinhood’s subscription-based upgraded account option gives investors more research material, instant transfers, and margin trading. There’s a $5 monthly fee for Gold.
Gold adds Nasdaq Level II quotes and research on over 1,700 different companies from Morningstar. However, there are other apps — Webull, for example — offering the same kind of in-depth data and analysis for free.
Gold also gives you instant access to transfers going up to the value of your portfolio. You’ll need a balance of at least $5,000 for transfers, and there’s a maximum instant transfer limit of $50,000.
Who Is Robinhood Best For?
With features like options trading and cryptocurrency, Robinhood is clearly the better brokerage for more active investors, including newer investors who want to learn more than stock trading basics.
Robinhood still isn’t as advanced as platforms like Interactive Brokers or Fidelity’s Active Trader Pro, but it has an intuitive platform that won’t overwhelm you as you’re learning.
Who Is M1 Finance Best For?
M1 Finance is better for people who want to learn how to invest but don’t want to take the time to analyze every stock or ETF. That’s because they offer expert-built portfolios that align with different investment goals and strategies. And when you want to have more control, M1 Finance does let you choose individual stocks and ETFs.
M1 is also better than Robinhood for retirement investors because they offer Roth, Traditional, and SEP IRAs. You can also roll over an existing 401(k) into an IRA with M1 Finance.
M1 Finance vs. Robinhood: The Final Word
Both of these brokerages are great low-cost options for investors, but which you choose comes down to what kind of investor you are.
If you’re more hands-off and/or want the ability to invest for retirement, then M1 Finance is the clear winner here. But if you’re fired up about learning how to invest in stocks, options, and crypto, or want to be hands-on with your trading, then Robinhood may be for you.