M1 Finance and Robinhood are some of the most popular mobile-first brokerages. Both platforms provide investors with commission-free trading. However, they share some important key differences.
In this M1 Finance vs. Robinhood review, we will take a deep dive into each platform to help you decide which platform is right for you.
|Investment Options||Individual Stocks|
Exchange-traded funds (ETFs)
Options trading: U.S. Equities only
|Account Types||Taxable Brokerage|
High Yield Checking Account
Credit Card Account
|Best For||Long-term investors||Active traders|
What is M1 Finance?
M1 Finance is a mobile-first investing and trading platform that focuses on beginner to intermediate investors interested in long-term investing.
The company’s services include Robo-advisory services, a digital checking account, a credit card, and lines of credit.
M1 Finance was founded in 2015 by Brian Barnes and has $6 billion in assets under management.
The company is headquartered in Chicago, IL.
What is Robinhood?
Robinhood is an investing app that offers commission-free stock and options trading with a minimum balance of just $1.
Robinhood focuses on active investors who trade frequently.
The company rose to fame by being one of the first brokerages to offer commission-free trading.
The company is publicly traded on the NASDAQ and has 31 million users.
Robinhood is headquartered in San Francisco, CA.
How Does M1 Finance Work?
M1 Finance uses a pie-based portfolio concept to create a diversified portfolio of stocks, ETFs, and cryptocurrencies designed to meet your long-term investing goals.
A pie is your selection of stocks, ETFs, and cryptocurrencies used to create your customized portfolio.
Each unique holding is considered a slice. All the slices make up your pie.
Keep Reading: Read our entire 2022 M1 Finance Review
How Creating A Pie Works
1. Create your pie-based portfolio.
2. During the trading window, your funds will be invested based on your selections.
3. If you want to change your targets, such as changing the percentage allocation or adding a new slice, your portfolio does not automatically buy and sell holdings to return to your targets. Still, it will occur over time through M1’s Dynamic Rebalancing.
Note: The exception to the dynamic rebalancing rule is when you remove a slice from your portfolio. When a slice is removed from a Pie, M1 will liquidate the holdings and reinvest the money in that same pie.
For Example, You deposit $500 into your M1 Investing account and allocate the money among the 5 pies you selected at 20% each. During the trading window, your investment will be aligned with the pies you choose.
There is a $100 minimum to open taxable brokerage and crypto accounts. There is a $500 minimum for retirement accounts.
M1 Finance offers one AM trading window ( 2 Trading Windows if you are an M1 Plus member), which means all orders are executed during that specific window).
How Does Robinhood Work?
Robinhood caters to active traders with taxable brokerage accounts. Through Robinhood, investors can trade stocks, options, ETFs, and cryptocurrencies on a whole or fractional share basis.
You can open an account with Robinhood for just $1.
Robinhood offers two tiers of investment accounts. A free and premium version (Robinhood Gold) for $5 a month.
Robinhood Gold provides access to margin trading, more access to unsettled funds, third-party market research, and Level II market data from Nasdaq.
M1 Finace vs. Robinhood: Account Types
M1 Finance offers a wide range of account types to suit different investor needs, while Robinhood only offers taxable accounts.
Several types of accounts are available with M1, including taxable brokerage, custody accounts, a high-yield checking account, margin accounts, a credit card, and traditional, Roth, and SEP IRAs.
Customers can create a single account that integrates borrowing, investing and banking.
There is a $100 minimum to open a taxable account and a $500 minimum for retirement accounts.
M1 Finance Account Types
- Taxable Brokerage
- Traditional, Roth, and Sep IRAs
- Margin Accounts
- High Yield Checking Account
- Credit Card
Robinhood customers have fewer choices. With Robinhood, you can open a taxable brokerage and a margin account.
Robinhood does not offer retirement accounts.
You can only open a margin account if you have a Robinhood Gold account, which is $5 monthly.
You can open a Robinhood account with just $1.
Robinhood Account Types
- Taxable brokerage account
Margin accounts (Robinhood Gold only)
M1 Finance vs Robinhood: Investment Options
M1 Finance has more investment options, while Robinhood focuses primarily on stocks and options trading. Both platforms allow investors to trade with no commission.
M1 Finance provides customers with numerous investment options like stocks, bonds, mutual funds, ETFs, and cryptocurrency. Investors can trade whole shares or fractional shares. You can also set up automated investing with just $25.
You cannot trade options with M1 Finance.
Meanwhile, Robinhood’s investment options are limited to equity, ETFs, and cryptocurrency. However, they do allow options trading, but only on U.S. stocks.
It’s important to note you can buy and sell in real-time with Robinhood, whereas M1 Finance has specified trading windows during which buy and sell orders are executed.
Robinhood Investment Options
- Individual stocks
- Cryptocurrencies (Bitcoin, Ethereum, Polygon, and many more)
- Options Trading: U.S. Equities only
- Fractional shares
Exchange-traded funds (ETFs)
M1 Finance Investment Options
- Individual stocks
- Exchange Traded Funds (ETFs)
- Fractional shares
M1 Finance vs. Robinhood: Fees
Robinhood and M1 Finance offer commission-free trades for stocks and ETFs. Neither platform charges any fees to open an account.
There are no fees to buy or sell stocks and options with Robinhood. There are also no fees to maintain your account, making Robinhood one of the most economical brokerage firms in the market.
Investors who open a Robinhood Gold account will have to pay a $5 monthly account fee. But Robinhood Gold comes with enhanced features like margin trading, more access to unsettled funds, third-party market research, and Level II market data from Nasdaq.
Like Robinhood, M1 provides commission-free stock trading and ETF trading.
However, investors with no activity for 90 days will be required to pay an inactivity fee of $20.
M1 Finance Fees:
Trading Fees: None
Margin Fees: 6.50%, 5% with M1 Plus
Miscellaneous Fees: Wire Transfer: $25, Check request: $25, Returned Checks: $30
IRA Management Fees: None
Inactivity Fee: $20 after 90 days
Trading Fees: None
Margin Fees: 9.75%, 5.75% with Robinhood Gold
Inactivity Fee: None
Miscellaneous Fee: ACATs (Outgoing): $75, Domestic overnight check delivery: $20, Paper Statements: $5, Paper Confirms: $2
M1 offers excellent customer service through its extensive online Help Center, which provides a range of valuable answers to common questions about investing and the M1 Platform.
Meanwhile, Robinhood has long been known for its limited customer service, but they are making progress.
In November 2021, Robinhood announced a new telephone service for all users. Support requests are also available from within Robinhood’s mobile app.
Both M1 Finance and Robinhood offer “premium” level accounts. M1 Finance offers M1 Plus for $125 a year, and Robinhood has Robinhood Gold for $5 a month.
Both premium-level accounts come with unique features for their customers.
Trading Windows: M1 Plus offers 2 trading windows (AM and PM) and only an AM trading window without M1 Plus. This feature isn’t relevant for Robinhood accounts because all taxable accounts can trade as long as the market is open.
Margin Rates: With M1 Plus, you can borrow at 5%, and it’s 6.50% without M1 Plus. Meanwhile, Robinhood Gold offers a margin rate of 5.75%, and 9.75% for users without Robinhood Gold.
If you trade on margin, Robinhood Gold is a better option.
Cash Rates: If you have an M1 Plus account, you can earn 2.50% APY and 1% cash back on purchases. Meanwhile, with Robinhood Gold, you can earn 3% APY on uninvested brokerage cash (1.5% without Robinhood Gold).
It’s important to note that the M1 Plus cash rate is for checking accounts, while the Robinhood Gold cash rate is for uninvested cash in taxable investment accounts.
Other Premium Features: Through M1 Plus, individuals who open an M1 credit card can have the $95/year fee waived, plus you can earn 1.5% – 10% cashback on purchases.
Meanwhile, with Robinhood Gold, you can access instant deposits, Morningstar professional research, and level II market data from Nasdaq.
Overall, Robinhood Gold is not only cheaper than M1 Plus at $60 vs. $125, but Robinhood also offers better margin rates and pays a higher interest rate for uninvested cash.
M1 offers a top-rated smartphone app that is incredibly well-designed. The app is available for Android and iPhone and has almost the exact same functionality as its website.
Robinhood has an Android and iPhone-compatible app available to its users. The app has been designed especially for new investors and designed for rapid trading. The Robinhood app does not have advanced functionality.
Add More details comparing the mobile apps
Robinhood and M1 Finance are regulated by FINRA and the Securities and Exchange Commission.
Customers also receive financial protection under SIPC — which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
Note – cryptocurrencies are not covered under SIPC.
From a personal security perspective, Robinhood provides data encryption (keeping your personal information safe, and 2FA (two-factor authentication).
PROs and CONs
|Semi-guided investing||1 or 2 trading windows|
|Automatic portfolio rebalancing||No options trading|
|Commission-free investing||Design to build a portfolio – no total control|
|$1 minimum investment||Only taxable brokerage accounts available|
|Real-time trading||Designed for short term trading|
|Easy to use platform||No bonds or mutual fund trading|
Who Should Use These Brokerages?
M1 Finance is better for…
- Long term investors
Investors who want a semi-guided approach to invest
Robinhood is better for…
- Active investors
- Individuals who want to use a taxable brokerage account only
Robinhood is an online trading app designed for active traders who want to quickly and easily buy and sell equities, options and cryptocurrencies. This is evidenced by the fact that Robinhood only offer taxable brokerage accounts.
Meanwhile M1 Finance focuses more on building a well-diviersified long-term investment portfolio to meet your investing needs.