Robinhood vs. M1 for managing your stock portfolio, which is better?

For the past few months, I’ve been trying both the Robinhood and M1 Finance apps and Web sites, and in the end I prefer Robinhood. Here’s my review.

Robinhood versus M1, which is better?

I took over managing my own retirement about six years ago when I discovered that my financial adviser was spending half of my annual retirement contribution on “fees.” I moved everything to Vanguard, and since then have been managing my own portfolio and that of my parents.

Vanguard emphasizes a buy-and-hold approach, where you invest in low-cost index funds over the long-term, rather than trading each day based on the whims of the market. But, I admit that the individual-stock bug gnawed at me, so I decided last summer to invest a very small portion of my portfolio (maybe 1%) in a variety of individual stocks. As I’m mostly a buy-and-hold investor, I liked M1s ability to automatically rebalance my account for me (more on that below), so I went with them. And now I regret it.

Robinhood and M1 focus on different types of investors

The first big difference between Robinhood and M1 is their focus. Robinhood is for people who want to trade stocks often. M1 is for people who want to buy a stock or index fund and sit on it a while. What does that mean in practice? With Robinhood, the moment you execute a buy order, you buy the stock (assuming there’s a seller). With M1, your order sits until 9:30am ET the next morning. Unless you pay for M1’s premium service, in which case they execute trades at 9:30am ET and 3pm ET, but you still need to have $25,000 or more in your account or you can only trade once a day at either time. Only those with $25k or more can trade twice per day.

Personally, that rubbed me the wrong way, at least for purchasing stocks. With index funds, I know that my order won’t execute until later that evening (if I order before the market closes). But when I buy a stock, I like to see what the price is now, and maybe follow it a little and jump in when it drops a bit. I don’t want to risk not knowing what the price will be the following morning when M1 finally gets to my buy or sell order. (And you can’t do limit or stop-loss orders with M1.)

M1 excels at rebalancing

Now, that’s not to say that M1 doesn’t have other virtues. If you’re looking to buy and hold long-term, especially a group of related stocks, M1 has some advantages. For example, if you want, M1 will automatically rebalance your account with new money. It’s a bit complicated (and frankly, was too complicated for my tastes), but M1 lets you set up “pies” of various stocks or funds. Say, “tech stocks.” You then decide what your percentage goal is for investing in each stock, totalling 100%. So say you choose to invest 25% in Apple, 25% in Tesla, 25% in Microsoft, and 25% in Amazon. You invest $1,000, and M1 automatically buys you $250 of each, with fractional shares if necessary.

Let’s say you invest $1,000 a month. Next month, you move another $1,000 to M1, and, if you so choose, M1 will automatically add your money where it’s needed to get you back to 25% of your portfolio being invested in each company. That means M1 helps you “buy low” by purchasing the stock that lags the others. Of course, if you’re a momentum investor, you might not like that. But if you’re a long-term index fund investor, like me, you typically have already decided you want, say, X% in domestic funds, and Y% international. So M1 really helps you rebalance by doing the math for you, which can be complicated if you own a lot of funds. That, I like.

M1’s “pies” just confused me

Now, back to those M1 pies. I have to admit, they confused the heck out of me. It’s an interesting idea, but for me at least, it was way too complicated. The best way to see if the pie method works for you is to set up an account (for free) at M1 and try it for yourself. Some people clearly prefer M1, so check it out and see if it’s more to your taste.

There are some similarities between Robinhood and M1 as well. Both Robinhood and M1 charge no commissions, and have no account minimum. Though Robinhood offers one share of a random stock for free to every new account. which is a nice touch. (Though somehow, I got mine — Groupon — and now can’t find it. Apparently you need to “claim” your stock within a set period of time, you lose it.) Still, free is free.

But, in the end, for me it came down to functionality. M1’s pies sound like a great idea, but they just confused me, and I really don’t like the notion of trading stocks on delay. Index funds aren’t even priced until the evening, but watching a stock go up or down while my order sits there until the next morning, that would drive me crazy.

Oh, and one more downside for both Robinhood and M1, or any company that offer fractional shares. You can’t transfer fractional shares to other brokerages. Your shares have to be sold first. So if you ever want to move your fractional shares to another brokerage, you’re going to have to take capital gains or losses to do it. And that’s something I’d rather time than be forced on me.

I prefer Robinhood, but why not try both?

So, while I’ll keep my M1 account for now, simply because I’d rather not sell the shares, I just don’t like those pies, thus my most recent stock purchases were at Robinhood. But my best advice is to try both, and see what works for you. If you Google the reviews, you’ll see a lot of people like M1. So don’t write either off until you check them both out.

PS You can use this link to sign up for your Robinhood account and you’ll get your free stock and they’ll give me one too for referring you (make sure to “claim” your stock). M1 also has a referral program, but asks you to keep it to family and friends, so I won’t link to it. But you can check out M1 generally here.

CyberDisobedience on Substack | @aravosis | Facebook | Instagram | LinkedIn. John Aravosis is the Executive Editor of AMERICAblog, which he founded in 2004. He has a joint law degree (JD) and masters in Foreign Service from Georgetown; and has worked in the US Senate, World Bank, Children's Defense Fund, the United Nations Development Programme, and as a stringer for the Economist. He is a frequent TV pundit, having appeared on the O'Reilly Factor, Hardball, World News Tonight, Nightline, AM Joy & Reliable Sources, among others. John lives in Washington, DC. .

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One Response to “Robinhood vs. M1 for managing your stock portfolio, which is better?”

  1. Its Outlet says:

    If you’re looking to buy and hold long-term, especially a group of related stocks, M1 has some advantages.

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