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If you’ve been wondering which is better: M1 or Robinhood, you’ve come to the right place. Since their introduction just a few short years ago, free investing apps have started crowding out old-fashioned, fee-ridden investing platforms. Both of these apps are great options, but depending on your investing strategy, one might be better than the other for you. In this M1 Finance vs Robinhood comparison, I will share with you everything you need to know so you can choose the right investing app for your needs.
M1 Finance Overview
Before I dig into a detailed comparison of M1 Finance vs Robinhood, I want to start by sharing with you a bit about each platform.
M1 is a bit like a regular brokerage platform and a bit like a robo-advisor. While you can trade individual securities (more on that in a minute), the “secret sauce” of M1 lies in its ability to guide you towards the portfolio that’s right for you.
When using the M1 app, you’ll have the option of self-directed trading, buying pre-built portfolios, or both. Like to pick your investments? You can do that. Want the app to provide a portfolio based on your investing goals and risk tolerance? You can do that do.
In addition to its brokerage offering, M1 finance also offers additional services, including M1 Borrow (which allows you to borrow money), M1 Spend (an integrated checking account/debit card solution), and more.
M1 Finance Pros
M1 Finance has quite a few standout features. Some of the biggest pros of M1 Finance are:
- No commissions or management fees
- Self-directed trading, pre-built portfolios, or the option to use both
- Automatic portfolio rebalancing
- Fractional share trading
M1 Finance Cons
While M1 is an extremely robust trading platform, there are several areas it falls short, including:
- Only stock trading is available (no other asset classes)
- Lack of tax-loss harvesting (as is the case with other robo-advisors)
- No mutual funds (individual stocks and ETFs only)
If you want to learn more about M1 Finance, check out this After School Finance review of M1.
Like M1 Finance, Robinhood is a commission-free trading platform which allows you to buy stocks, ETFs, options, and cryptocurrencies.
Robinhood was one of the first commission-free platforms onto the scene, and luckily for all investors, it has forced other brokerage platforms to adapt to a lower fee model.
In addition to allowing you to purchase stocks, Robinhood also offers option and cryptocurrency trading.
- Commission-free trading
- No account minimum
- Fractional share trading
- App interface
While Robinhood is a wildly popular trading platform, there are some areas it falls short, including:
- Lack of account types (e.g., IRA accounts)
- No bond or mutual fund trading
- No phone support
M1 Finance vs Robinhood
Depending on your individual investment goals, certain account types may be a better fit for you.
Luckily, M1 Finance allows you to open individual, joint, IRA, and trust accounts. This means you can open an account with a partner, a tax-deferred retirement account, and more.
Robinhood, however, only offers individual brokerage accounts. If you’re looking for another option, such as a tax-deferred IRA, Robinhood is not the right brokerage for you.
Winner: M1 Finance
Opening an account with M1 Finance can be done with as little as $100. Robinhood, on the other hand, has no minimum to open an account.
When it comes to fees, both M1 Finance and Robinhood are winners. You may be wondering if M1 Finance and Robinhood really are free. The answer is yes.
Both M1 and Robinhood offer commission-free trading and have no management fees.
M1 Finance does offer a paid solution (M1 Plus), which provides some perks (such as high-interest checking, better borrowing rates, etc.), but I generally do not recommend this, as I don’t think the added features outweigh the cost.
As mentioned, M1 Finance does offer pre-built portfolios (similar to robo-advisors). One thing that makes M1 unique relative to other robo-advisors is that it does not charge a management fee (as is the case with others like Wealthfront and Betterment).
Additionally, M1 Finance has a better free structure on margin accounts (more on that in a minute).
Winner: M1 Finance
When it comes to investment selection, M1 and Robinhood start to diverge. M1 Finance allows you to trade stocks and ETFs. On the other hand, Robinhood will enable you to trade stocks, ETFs, options, and cryptocurrencies.
If option trading and cryptocurrency trading are important to you (which they shouldn’t be for most long-term investors, in my opinion), Robinhood is the way to go.
Luckily, both M1 and Robinhood offer automated dividend reinvestment programs and the option to purchase fractional shares.
I advocate for nearly all investors that a long-term approach is the way to go. The truth is, almost no one can outperform the market over the long-term.
However, certain investors do find day-trading and margin trading to be essential features. Trading stocks on margin is extremely risky, and it is a strategy I recommend you avoid.
That said, both M1 and Robinhood offer margin trading.
M1 Finance offers margin trading up to 35% of your portfolio value once you have $10,000 invested.
However, M1 Finance and Robinhood have different fee structures.
Robinhood offers a service called Robinhood Gold, which allows you to trade stocks on margin. This service starts at $5/month, with a margin interest rate of 5.0%.
Currently, M1 Finance does not charge a monthly fee for margin trading, and it offers lower interest rates (3.5% at the time of this writing, or 2.0% with M1 Plus).
Winner: M1 Finance
One question that frequently comes up is, can you day trade with M1 Finance or Robinhood? This is another area where M1 and Robinhood differ.
For M1, the answer is no.
M1 Finance uses a single trading window. In other words, M1 executes all trades once per day. Executing all trades at once is how M1 Finance keeps its platform free, though it means you cannot day trade.
Robinhood, however, does allow you to day trade.
While long-term investors shouldn’t be concerned about day-trading, if it’s an important feature for you, you’ll want to go with Robinhood.
M1 Finance offers customer service through both a phone option and an email option. While you won’t reach a financial advisor, the technical support provided via phone and email is robust.
Unfortunately, Robinhood only offers an email support option, so this is an area it falls short relative to many other brokerage options.
Winner: M1 Finance
When it comes to security, both M1 and Robinhood have proven secure. M1 Finance uses military-grade data encryption, and all accounts are secured with two-factor authentication. M1 accounts are covered by SIPC insurance, and M1 Spend checking accounts are FDIC insured. You can learn more about M1 Finance security by visiting its website.
Similarly, Robinhood accounts are SIPC insured, and data including is encrypted. You can learn more about Robinhood’s security protocols here.
One criticism of Robinhood is that the platform has experienced outages at inopportune times for traders. For example, in March 2020, when the Coronavirus pandemic impacted the stock market, Robinhood had three outages in a single week. The first outage was the most severe, lasting 17 hours, causing traders to miss out on a surge in stocks.
While short-term outages do happen, the outages Robinhood faced were not typical, and it is likely many Robinhood users were negatively impacted. Of course, if you’re investing for the long run, perhaps this doesn’t matter, but it’s worth mentioning.
Winner: M1 Finance (due to Robinhood outages)
M1 Finance vs. Robinhood: Which is Right for You?
While M1 Finance and Robinhood have a lot in common, you may still be wondering which is better. The answer, as is so often the case, is that it depends.
M1 Finance and Robinhood are suited for different types of investors. M1 Finance is largely for investors with a long-term perspective looking for some level of portfolio automation.
On the other hand, Robinhood is targeted at active traders who want to day trade or trade alternative investment products like options and cryptocurrencies.
If I had to pick one option, for me, M1 Finance is the clear winner. I advocate taking a long-term approach to investing, and for this purpose, I have simply not found a better option than M1 Finance.
So, depending on your investment approach, get started with M1 Finance or Robinhood today!