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- >M1 Finance vs. Robinhood
With the rise of multiple investment platforms and tools, investors are no longer limited to a handful of financial institutions that act as gatekeepers to the industry. The internet has made it easier than ever before to open an account and start trading stocks, ETFs, options, and even cryptocurrencies, but it’s also led to a growing number of options for getting the best deal on trades.
At the moment, M1 Finance and Robinhood are two of the most well-known and frequently discussed Robo-advisors on this front. Both of these platforms offer zero-commission trading to their users as well as a variety of financial instruments including crypto trading.
While there are some similarities, though, these two platforms are also quite different in several key ways that will have an impact on which one is right for your trading and investment needs.
Here’s a rundown of what to expect from each platform.
M1 Finance Overview
Launched in 2015, M1 Finance has developed to become a one-stop-shop for a wide range of investments, from stocks and ETFs to traditional IRA and even joint taxable accounts. The platform is known as a money management tool offering a two-tier investment component and most importantly its zero-commission policy on all trades.
With M1 Finance you can invest in fractional shares by purchasing portions of a company’s stock at affordable rates. You can also invest in ETFs, set up a customized or pre-built expert portfolio, or have recurring investments in your account.
With a payment of $125 per year for the M1 Plus account, you get access to added benefits such as more research tools and the ability to daytrade not to mention the ability to access margin at a 2% interest rate which is 1.5 % lower than the basic option.
Simply put, M1 Finance is a world-class investment and personal finance platform especially for beginners given that it comes with over 80 pre-built expert portfolios for beginners to mimic. You can access the platform using an app that is available on both Android and iOS devices as you manage your portfolio on the go.
Perhaps the only dealbreaker for most people is the fact that M1 Finance does not offer crypto trading as compared to competitors such as Robinhood.
- Banking super app with stocks, ETFs, IRAs, credit cards and more
- Community pies where you can follow other investor’s strategies
- M1 checking account offers up to 1% APY
- Access to crypto-based stocks like COIN, Microstrategy and more
M1 Finance Pros & Cons
Pros
Features a ton of educational resources
Offers fractional shares and automatic portfolio re-balancing
Checking accounts are secured with FDIC insurance cover
Features a debit card cash back reward
Cons
The plus account comes at an annual fee after the first year
Customer service could be better
Trades can only be placed once a day with the basic account
No cryptocurrency
Robinhood Overview
Robinhood pioneered commission-free trading that had since become the norm among Robo-advisors as far back as 2013 when it first launched with its mobile app. What appeared as a joke to most onlookers has seen the platform grow exponentially to become one of the most popular investment apps around with over 13 million active users. According to the company’s report, these numbers are expected to grow past 20 million in coming years.
Robinhood works on a ‘freemium’ model that offers stock trades at no cost though it does charge interest for margin trading. Apart from stocks, you can also trade ETFs, options, and cryptos on the platform. Plus, there are no account minimum requirements therefore you can open one with as little as $5.
Similar to M1’s plus account, Robinhood also offers its Robinhood Gold premium service which comes with added benefits such as margin borrowing and instant access to funds in your account for only $5 per month and an interest rate of 2.5% on margin calls.
While Robinhood offers crypto trading and fractional shares, there are no prebuilt portfolios for beginners to mimic as is the case with M1 Finance. Also, crypto traders cannot withdraw their cryptocurrencies directly to a third-party wallet. Instead, users have to sell their coins and transfer the value in fiat to an external bank account.
Also verifying your account to activate certain features can take up to 5 business days.
- A great one-stop shop for anyone looking to invest in cryptocurrency or stocks
- Easy onboarding procedure requires very little from user
- Fully regulated financial institution in the United States
- Support for BTC, ETH, LTC, BCH, DOGE, ETC, and BSV
Robinhood Pros & Cons
Pros
Comes with a free automated portfolio for beginners
Can borrow against your account unlike M1 Finance
Zero-commission trading on stocks is an added plus
Instant access to fractional shares
Cons
Spread on crypto trades tends to be higher
A limited number of supported coins
Mainly available to U.S residents
Beginner Friendliness
M1 Finance is not only an intuitive platform but also comes with a ton of resources for beginners to take advantage of. Beginners can access prebuilt portfolios that they can use to imitate or set up their investment plans while following certain risk levels.
On the other hand, Robinhood’s design is aimed more towards intermediate level traders through beginner-friendly features such as its tutorials and ‘How to’ guides are available. Many Robinhood reviews highlight the UX of the site. Beginners can use the platform’s prebuilt portfolios but cannot set up their own as is the case with M1 Finance.
On both platforms setting up an account is easy and there is a straightforward onboarding process for all users.
Trust and Security
When it comes to trustworthiness and security, both Robinhood and M1 Finance feature high-quality levels of security. As a member of the SPIC (Securities Investors Protection Corporation) Robinhood protects its user’s funds with an insurance cover of up to $500,000. Robinhood also protects its platform with industry-standard encryption systems not to mention support for two-factor authentication on all accounts.
M1 Finance is also a highly secure platform that claims not to store customers’ sensitive data on its servers. This means that all personal information is protected with bank-level security and SSL Encryption. As a licensed financial broker in the US, M1 Finance is registered with the SEC (securities and exchange commission) and FINRA (Financial industry regulatory authority). Similar to Robinhood, M1 Finance is a member of SPIC and has its user’s funds insured up to $500,000.
Available Cryptocurrencies
You can only trade cryptocurrencies on Robinhood. Even so, Robinhood only offers a select few coins to choose from including Bitcoin, Bitcoin Cash, Dogecoin, Ethereum, Litecoin, Ethereum Classic, and Bitcoin SV. While this gives Robinhood a leg up compared to M1 Finance, the number of supported coins is a drop in the ocean compared to the amount available on trading platforms such as Coinbase.
Transaction Fees
Users on both M1 Finance and Robinhood will benefit from zero-commission trading. However, the spread on crypto trades tends to be higher with Robinhood than other platforms that offer crypto trading such as Coinbase or Binance.
Instead of trading fees, both platforms make money by charging an order flow fee for market orders executed through third parties. If you are an expert trader trading with a margin, you will pay a 2.5% annual interest on any margin used over $1000. M1 Finance allows traders to borrow up to 35% of their portfolio’s value at a 2% interest rate.
Standout Features
For traders who are looking for an intuitive platform with access to a variety of portfolio management features, M1 Finance is the clear winner with its extensive collection of resources for new users. Investors don’t just get to invest in stocks and ETFs but also set up various retirement and taxable accounts. M1 Finance’s premade expert portfolios are also a plus feature especially for beginners looking for risk-averse methods of investing.
However, traders looking to get exposure in the crypto market on top of trading stocks and ETFs will find plenty to love on the Robinhood platform. While its crypto offerings are limited to only seven coins, its flexibility in listing popular coins such as Dogecoin is an added advantage.
Conclusion: Robinhood Better for Crypto
When it’s all said and done, both Robinhoods and M1 finance are ideal platforms for investors looking to diversify their portfolios with access to multiple investment vehicles. However, based on available investment instruments, interest charges, and overall ease of use, M1 Finance is a better option for traders who are only looking to trade traditional assets.
Robinhood offers equally competitive rates on margin interest and adds a few cryptocurrencies to trade but traders looking to access cryptocurrencies can find much better alternatives.
