M1 Finance vs. Robinhood

If you’re looking for an approachable, low-cost brokerage to begin investing, it’s worth taking a look at M1 Finance and Robinhood. Both of these brokers offer commission-free trading and extremely user-friendly platforms. But, M1 Finance focuses more on long-term investing and portfolio management, while Robinhood caters more to active traders.

Let’s take a closer look at how M1 Finance and Robinhood compare to help you understand the differences between these brokers and decide which is better for you.

About M1 Finance And Robinhood

M1 Finance was founded in 2015 by Brian Barnes, who remains the company’s CEO. The platform originally charged a 0.25% account management fee, but waived that in 2017 in order to attract more users. The platform now manages more than $1 billion in client assets.

M1 Finance vs Robinhood - M1 Finance

Robinhood is one of the most popular brokers in the US, in part because it was one of the first major brokers to eliminate commissions when it launched in 2014. The platform introduced commission-free options trading in 2017 and boasts more than 13 million users and an estimated $20 billion in assets under management. 

M1 Finance vs Robinhood - Robinhood

M1 Finance vs. Robinhood: Similarities

While M1 Finance and Robinhood take different approaches to investing, they share several important features in common.

Trading Commissions

First, both platforms are fully commission-free. There is no account fee to invest with either M1 Finance or Robinhood, and you won’t be charged fees for trading any of the assets available through the two brokers.

Both platforms do offer premium subscriptions that come with some perks, though. M1 Finance Plus costs $125 per year (annual subscriptions only), while Robinhood Gold costs $5 per month (monthly subscriptions only).  

M1 Finance vs Robinhood - Robinhood Gold

Neither M1 Finance nor Robinhood requires a minimum account balance.

Mobile Apps

Both M1 Finance and Robinhood understand the importance of mobile investing and have put a lot of work into their respective mobile apps. In fact, until 2019, Robinhood was only available as a mobile platform – but it has since established a web interface that offers much of the same functionality as the iOS and Android apps.

Both platforms are very modern and user-friendly, which makes them attractive for first-time investors. However, Robinhood’s app is bent towards encouraging users to trade more frequently, whereas M1 Finance’s platform encourages smart long-term investing. Neither broker offers technical charts, instead providing users with line charts that are arguably less than ideal for responsible stock research. 

M1 Finance vs Robinhood - M1 Finance Platform

Margin Accounts

Another similarity between M1 Finance and Robinhood is that they each offer trading on margin. 

Robinhood doesn’t have any account minimums but does require a Gold account to access margin. M1 Finance requires a minimum account balance of $10,000.

Interest rates for borrowing cash are notably lower on M1 Finance. The broker charges 3.5% interest for free accounts or 2% for Plus accounts. On Robinhood, the first $1,000 is free, but borrowed money beyond that amount is charged at 5% interest.

M1 Finance vs Robinhood - M1 Finance Margin

M1 Finance vs. Robinhood: Tradable Assets And Portfolio Management

One of the most important ways in which M1 Finance and Robinhood differ is in what assets you can trade and how.

Both platforms offer trading on all NYSE and NASDAQ stocks. They also each have a selection of several thousand ETFs, although neither platform offers mutual funds. With either platform, you can invest in fractional shares.

M1 Finance vs Robinhood - Robinhood ETFs

What makes M1 Finance different from Robinhood is that the broker also offers more than 60 of its own pre-made portfolios. These are based on modern monetary theory and fall into categories for target retirement dates, dividend investing, specific sectors, and socially responsible investing. The portfolios are automatically rebalanced over time to ensure they stay on target, and you can set up M1 Finance to automatically transfer money from your bank account to one of these portfolios to increase your invested wealth.

M1 Finance vs Robinhood - M1 Finance Portfolios

Notably, with M1 Finance, you can all your money in one premade portfolio, divide it up among several portfolios, or split your investments among individual stocks, ETFs, and premade portfolios. So, you get the best of two worlds – a robo-advisor and a commission-free stockbroker. 

Robinhood offers several assets in addition to stocks and ETFs. You can trade a handful of popular cryptocurrencies as well as stock options. Options trading is part of what makes Robinhood particularly popular, since there are very few other reputable brokers that offer contracts commission-free. But, in contrast to M1 Finance, Robinhood does not have any automatically managed portfolios that you can invest in.

M1 Finance vs. Robinhood: Account Types

The other significant difference between M1 Finance and Robinhood is that they support different types of accounts. With Robinhood, you can only open a standard trading account – there are no options for IRAs, 401(k)s, or other types of tax-privileged accounts.

M1 Finance, on the other hand, enables you to set up a standard investment account, a traditional, Roth, or SEP IRA, or a trust. Notably, though, you cannot open or rollover a 401(k) from your employer to this broker.

Is M1 Finance Or Robinhood Better?

The differences between M1 Finance and Robinhood when it comes to account types and premade portfolios speaks to the broader divide between these two brokers. M1 Finance is set up first and foremost as a robo-advisor, giving investors the freedom to take a hands-off approach to long-term investing while also offering the flexibility to invest in individual stocks and ETFs. The fact that you can set up IRA accounts makes this broker suitable, especially for retirement investing.

Robinhood is more like a traditional broker, offering fully self-directed investors access to a wide variety of assets. This platform attracts both day traders and long-term investors, although the lack of retirement accounts makes it less than ideal for this specific investing goal. Robinhood also offers free options trading, which can be very appealing for more aggressive short-term traders.

Ultimately, which platform is better for you comes down to your goals and risk tolerance. If the idea of a robo-advisor and managed, pre-designed portfolios appeals to you, then M1 Finance is the better choice. If you want access to options or cryptocurrency trading, then Robinhood may be the better broker. Since both platforms are completely commission-free and neither offers much in the way of research and analysis tools, they are roughly equivalent for general-use stock investing.

M1 Finance And Robinhood Alternatives

If neither M1 Finance nor Robinhood has what you’re looking for, you have a number of other options. Wealthfront and Betterment are direct competitors to M1 Finance in the robo-advising space. They take away much of the flexibility that M1 Finance offers – you cannot invest in individual stocks, and there are only a few portfolio options – and charge a 0.25% account management fee. But they also allow you to be even more hands-off in your investing than M1 Finance does.

If you want more assets to invest in, a wider variety of account types, or highly advanced technical analysis tools, consider TD Ameritrade. This well-established broker offers one of the most powerful charting platforms on the market and lets you trade stocks, ETFs, mutual funds, options, forex, commodities, and index futures. You can also open an extremely wide variety of accounts with TD Ameritrade, including 401(k) accounts. Stock and ETF trading is commission-free, but options do carry a small commission.

Conclusions For M1 Finance vs. Robinhood

M1 Finance and Robinhood each offer commission-free trading, but they cater to investors with different goals. M1 Finance gives investors access to retirement accounts and automatically managed portfolios in addition to US stocks. Robinhood only offers standard trading accounts and takes a fully self-directed approach to investing, but gives traders access options and cryptocurrencies. Which broker is best for you comes down to what type of trading account you need and what assets you want to invest in.