M1 Finance will rebalance your pies consistent with that allocation. Which means you won’t be able to invest in stocks that trade only on foreign exchanges.Įach pie will contain general asset allocations, which you can choose to fill with investments of your choice. In addition, individual stocks must be selected either from the New York Stock Exchange, the NASDAQ, or the BATS system. There is a limitation however in that you cannot include mutual funds in your pies. M1 Finance provides more than 60 pre-selected pies that you can choose from, or you can construct your own. Each pie can be made up of up to 100 individual “slices”, which are represented by ETFs and individual stocks. M1 Finance’s investment methodology is really a discussion of the pie concept. But it’s passive in the way the pies are managed. It’s active in the sense that you select your own investments, and can change them at any time. In this way, M1 Finance is both an active and passive investment platform. M1 Finance then manages your portfolio using modern portfolio theory (MPT), just as other robo-advisors do. And there’s no limit on the number of pies. For example, you can create a technology-based pie, a socially responsible investment pie, and an emerging market pie–all at the same time. You can choose existing pie templates provided by M1 Finance, or create your own. In this way, the platform is better for experienced investors, who are able to determine their own investment comfort level.īut still, another distinguishing factor is that you can create an unlimited number of pies. It gives you complete control over the investments you’ll hold.Īnother departure from typical robo-advisor practice is that M1 Finance does not have you complete a questionnaire to determine your risk tolerance. The use of individual stocks–and your own ability to choose which stocks and ETFs go into your pies–is what sets M1 Finance apart. But individual stocks are offered by only a few providers, and when they are, they’re usually selected by the robo-advisor. ETFs are a staple of the robo-advisor universe. These are individual portfolios that are comprised of a mix of exchange-traded funds (ETFs) and individual stocks. The service is built around what it refers to as “Pies”.
M1 Finance is based in Dallas, Texas, and was launched in 2015. It wouldn’t be an exaggeration to say it represents the best elements of both. It doesn’t fit neatly within the description of a robo-advisor, but it’s really a hybrid between robo-advisors and self-directed investing. Your only responsibilities are to choose your investments and fund your account.
M1 Finance then manages your portfolio for you, including periodic rebalancing and dividend reinvesting. But once you choose your investments, you get all the benefits of a robo-advisor. It’s a robo-advisor for sure, but one with a unique twist: you choose your own investments. If you’ve been fascinated with the idea of robo-advisors, but still prefer to go the do-it-yourself route, you need to check out M1 Finance.
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