M1 Finance vs. Robinhood: Which One Is the Best Free Investing App in 2022?

M1 Finance and Robinhood are two popular investment apps, but M1 Finance is best for longer-term investors, while Robinhood appeals to day traders. Learn which one is better for you.

SustainFi   Updated December 12th, 2021

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At a glance

  • M1 Finance and Robinhood target different types of investors. M1 Finance helps you create diversified portfolios of stocks and ETFs to keep for some time. Robinhood is all about day trading stocks, ETFs, options, or cryptos
  • Best for investors: M1 Finance. M1 Finance is best for building portfolios of stocks and ETFs and watching your investments grow over time. The app will even rebalance your portfolio when you want
  • Best for day traders: Robinhood. Robinhood lets you trade stocks, ETFs, options, and cryptos whenever you want during market hours (24/7 for crypto)

Keep reading to learn more.

Minimum

 $0

Minimum

$100

Fees

$0 for stock and ETF trades

$5 / month for Robinhood Gold

Fees

$0 for stock and ETF trades

$125 / year for M1 Finance Plus

Investments

Single stocks, ETFs, options, cryptos

Investments

Single stocks, ETFs

Margin loans

Yes

Margin loans

Yes

Socially responsible investing

No

Socially responsible investing

Yes

Account types

Investment accounts

Account types

Investment accounts, retirement accounts, custodial accounts, trusts

What is M1 Finance?

M1 Finance is more than just a brokerage account. The investment platform is a cross between an online broker and a robo-advisor. M1 Finance offers an easy-to-use app that lets you build customizable portfolios (called “pies.”) The pie portfolio model allows you to easily add a stock or an exchange-traded fund (ETF) as a piece of the pie. You choose what percentage to invest in each asset.

If you don’t want to “bake” your own pies, M1 Finance comes with over 80 premade options, which are called “expert pies.” Two of them are socially responsible pies. In addition, M1 Finance offers fractional shares (when you buy less than the entire share) and lets you borrow to invest.

Despite its flexibility, M1 Finance is a platform for investing, not for day trading. For example, you can only buy and sell during the daily trading window (two windows for M1 Plus members.)

Brian Barnes started Chicago-based M1 Finance in 2015. His startup has recently surpassed $4.5 billion in assets under management, raising over $300 million from investors like Softbank.

🔔 Read the full review of M1 Finance.

What is Robinhood?

Robinhood was one of the first commission-free apps that led to the low-cost trading revolution. After Robinhood started offering free trades, other brokers had to follow suit. Robinhood has seen a lot of success and, as of 2021, it’s a public company.

The app lets you trade over 5,000 U.S. stocks and funds, options on them, and 650 global stocks (ADRs). You can buy fractions of shares, a good solution if buying the entire share is more than what you would like to spend. Robinhood also lets you invest in crypto.

With instant deposits, you can start trading as soon as you deposit money, without having to wait for the transfer to clear. The interface of the app is great to boot.

However, Robinhood doesn’t support trading foreign-domiciled stocks, mutual funds, and some over-the-counter stocks. The app has also come under fire for making investing look like a game and potentially encouraging risky trading. And it experienced a backlash when it stopped letting investors buy GameStop (GME) at the height of the pandemic.

M1 Finance vs. Robinhood: Account types

M1 Finance supports the main account types:

  • Individual and joint taxable investment accounts
  • Retirement accounts, including traditional, SEP, and Roth IRAs, plus rollover IRAs
  • Custodial (UTMA/UGMA) accounts for kids (must be an M1 Plus member)
  • Trusts

Robinhood is offering individual taxable investment accounts only, though retirement accounts may be coming at some point.

💰 The winner: M1 Finance.

M1 Finance vs. Robinhood: Minimum investment

You need $100 to open an account with M1 Finance ($500 for M1 retirement accounts.)

Robinhood doesn’t have a minimum to open an account.

💰 The winner: Robinhood.

M1 Finance vs. Robinhood: Fees and expenses

Both M1 Finance and Robinhood offer free trading in stocks and ETFs, though there are nuances for additional services.

M1 Plus Membership. For $125 a year, you get perks like an extra trading window and discounted borrow rates. Plus accounts also let you set up Smart Transfers, a service that sweeps excess cash into your investing account. As a Plus member, you also earn interest and get cash back on your M1 Spend account.

Robinhood Gold. Robinhood has a Gold membership that costs $5 a month. The Gold membership gets you $5,000-$50,000 in instant deposits (based on how much you have in your account) and margin loans with a 2.5% interest. You can also access research from Morningstar and advanced market data from NASDAQ.

Note that you don’t need to be an M1 Plus member to get a margin loan from M1 Finance (though rates are more attractive if you are a member). You do need to be a Robinhood Gold member to borrow from Robinhood.

💰 The winner: Tie.

M1 Finance vs. Robinhood: Individual stocks and fractional shares

Both M1 Finance and Robinhood let you buy single stocks, including fractional shares.

Fractional shares allow you to buy a piece of a share if buying the entire thing is more than you would like to spend. For example, one share of Tesla (TSLA) costs $1,000, but if you only want to spend $100, you can buy 1/10 of that share. Buying fractions of shares limits how much cash is sitting in your account unspent.

M1 Finance gives you access to more stocks and funds than Robinhood does (over 6,000 for M1 Finance vs. over 5,000 for Robinhood).

💰 The winner: M1 Finance (because it has a wider investment selection.)

M1 Finance vs. Robinhood: Options and crypto

M1 Finance doesn’t support options or crypto, but Robinhood does. As of December 2021, Robinhood offered the following coins:

  • Ethereum
  • Bitcoin
  • Litecoin
  • Dogecoin

💰 The winner: Robinhood.

M1 Finance vs. Robinhood: Margin lending

Margin investing is when you borrow against your investment account to make more investments or for any other reason.

M1 Finance gives margin loans to customers with over $5,000 in their investment account. The platform charges 3.5% interest (2% for M1 Plus members), and you can borrow up to 35% of the value of your account.

🔔 Read the review of M1 Borrow.

Robinhood gives margin loans to Robinhood Gold members only. Before you can get a loan, you need to apply for eligibility. The first $1,000 is included in your monthly $5 fee, but to borrow more you need to pay 2.5% in annual interest.

💰 The winner: Tie.

M1 Finance vs. Robinhood: Rebalancing

Sometimes when one asset class, like stocks, does much better than another one, like bonds, your portfolio may “drift” and become riskier (or less risky) than it should be. Then you need to buy or sell investments to get to your optimal asset allocation, like 80% stocks and 20% bonds.

M1 Finance lets you easily rebalance the portfolio when you want.

Robinhood doesn’t help you create portfolios with a target asset allocation and it doesn’t offer rebalancing either.

💰 The winner: M1 Finance.

M1 Finance vs. Robinhood: Recurring transfers

Both M1 Finance and Robinhood let you set up recurring transfers or investments, e.g. every week they will pull $100 from your bank account and invest that in the security you pick.

M1 Finance also has a feature called Smart Transfers. Available to M1 Plus members with an M1 checking account only, this feature lets you automatically move cash between your investment account, your checking account and your IRA, based on the criteria you select (such as account balances.)

💰 The winner: Tie.

M1 Finance vs. Robinhood: Checking accounts

M1 Spend. M1 Spend is a free bank account that comes with a Visa debit card. M1 Plus members get 1% APY on their money and 1% cash back on qualifying purchases. The account is FDIC-insured for up to $250,000. M1 Plus members get reimbursed for up to four ATM transactions each month.

Available to M1 Plus members only, the Owner’s Rewards card lets you earn 2.5% – 10% cash back when you shop with some of the big brands in your portfolio, including Apple, Amazon, and Starbucks. You can reinvest your rewards in your portfolio.

Robinhood Cash Management. Robinhood lets you earn interest on the idle cash sitting in your account. They currently pay a reasonably attractive 0.30% APY. There are no monthly fees and no balances. You also get an (optional) debit card that gives you access to 75,000 ATMs through the Allpoint and Moneypass networks.

💰 The winner: Tie. (Although M1 Finance can pay a higher APY, you need to be an M1 Plus member to benefit.)

💰 The Overall Winner

  • There is no clear winner: the two platforms have different end goals in mind
  • Best for investors: M1 Finance. M1 Finance targets investors who want to see their wealth growth over time. You can add stocks or funds to a portfolio and rebalance that portfolio if needed. With one or two daily trading windows, M1 Finance wants to discourage short-term speculation
  • Best for day traders: Robinhood. Robinhood has spearheaded the rise in day trading during Covid, and they continue to target day traders. You can trade stocks, ETFs, options, and crypto whenever the market is open

🔔 Want to compare more options? Check out this list of the top 10 investing apps.

Compare:

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