M1 Finance - now Free. Great way to rebalance

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

M1 Finance - now Free. Great way to rebalance

Post by Colleen »

M1 Finance has announced that they are no longer charging for their investment platform. It is a very handy way to dollar cost average into a 3 Fund Portfolio (or any other portfolio of stocks and etfs) and always reinvesting dividends so that they are invested in your under-weighted/performing investments.

This is really, in my opinion, the Holy Grail for those of us who don't wish to engage in rebalancing calculations on a regular or even irregular basis, and particularly for those of us with a portfolio that is more complicated than 3 funds only.

Enjoy!

https://www.m1finance.com

ETA:

Q. How do they make money?

A. Receiving payment for order flow and from lending securities to short sellers, according to Bloomberg. Previously they were charging .15% AUM; I guess they figured they can steal a lot of business from Betterment, etc., if they were free. The platform is certainly a lot more conducive to maintaining a simple or complex portfolio.

Heck, the same article suggests that Vanguard is going to market an S&P 500 ETF where instead of charging AUM they are going to pay investors a small fee. So, there you have it. The wave of the future for those of us not invested in bitcoin.
Last edited by Colleen on Wed Dec 13, 2017 11:20 am, edited 1 time in total.
User avatar
WoodSpinner
Posts: 3499
Joined: Mon Feb 27, 2017 12:15 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by WoodSpinner »

Colleen,

I don't understand their business model...

How do they make money?

:|
WoodSpinner
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Colleen »

WoodSpinner wrote: Wed Dec 13, 2017 10:05 am Colleen,

I don't understand their business model...

How do they make money?

:|
Edited the OP to answer that.
Last edited by Colleen on Wed Dec 13, 2017 1:24 pm, edited 2 times in total.
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Colleen »

For what it is worth, I transferred over securities from my brokerage account months ago and it went without a hitch. The iPhone app is very handy and it is easy to link a bank account for ACH deposits and transfers.
ACJC
Posts: 86
Joined: Wed Sep 27, 2017 1:13 am

Re: M1 Finance - now Free. Great way to rebalance

Post by ACJC »

Is anyone using M1’s expert pies? Looks very enticing to a new investor like me :)
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Colleen »

I think they are worthwhile for target date type investing. But you can also just set up a vanilla 3 fund portfolio with VTI/VXUS/BND and use them to make it super easy to invest into it.
User avatar
whodidntante
Posts: 13090
Joined: Thu Jan 21, 2016 10:11 pm
Location: outside the echo chamber

Re: M1 Finance - now Free. Great way to rebalance

Post by whodidntante »

This review covers the platform nicely.

https://www.cashcowcouple.com/m1-finance-review/

It's a great offering but I will still take the approach of looking across my portfolio instead of looking at each account. So this would add a layer of complexity that I don't need. But I see that others might find this platform simpler.
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Colleen »

whodidntante wrote: Sun Dec 17, 2017 9:58 am This review covers the platform nicely.

https://www.cashcowcouple.com/m1-finance-review/

It's a great offering but I will still take the approach of looking across my portfolio instead of looking at each account. So this would add a layer of complexity that I don't need. But I see that others might find this platform simpler.
What does that mean to look across your portfolio instead of looking at each account? I guess it can be as complex or as simple as you like since you can choose the investment porfolio
User avatar
arcticpineapplecorp.
Posts: 15014
Joined: Tue Mar 06, 2012 8:22 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by arcticpineapplecorp. »

Colleen wrote: Wed Dec 13, 2017 10:00 am M1 Finance has announced that they are no longer charging for their investment platform. It is a very handy way to dollar cost average into a 3 Fund Portfolio (or any other portfolio of stocks and etfs) and always reinvesting dividends so that they are invested in your under-weighted/performing investments.

This is really, in my opinion, the Holy Grail for those of us who don't wish to engage in rebalancing calculations on a regular or even irregular basis, and particularly for those of us with a portfolio that is more complicated than 3 funds only.

Enjoy!

https://www.m1finance.com

ETA:

Q. How do they make money?

A. Receiving payment for order flow and from lending securities to short sellers, according to Bloomberg. Previously they were charging .15% AUM; I guess they figured they can steal a lot of business from Betterment, etc., if they were free. The platform is certainly a lot more conducive to maintaining a simple or complex portfolio.

Heck, the same article suggests that Vanguard is going to market an S&P 500 ETF where instead of charging AUM they are going to pay investors a small fee. So, there you have it. The wave of the future for those of us not invested in bitcoin.
what article are you referencing? I can't see that Vanguard is going to pay investors a small fee. Can you provide a link to whatever article you're quoting?

I also don't see the weighted expense ratio of their portfolios they offer. Where is that listed?

Finally, why 1% or 2% in real estate? is that really going to contribute much overall?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Colleen »

arcticpineapplecorp. wrote: Sun Dec 17, 2017 8:53 pm
Colleen wrote: Wed Dec 13, 2017 10:00 am M1 Finance has announced that they are no longer charging for their investment platform. It is a very handy way to dollar cost average into a 3 Fund Portfolio (or any other portfolio of stocks and etfs) and always reinvesting dividends so that they are invested in your under-weighted/performing investments.

This is really, in my opinion, the Holy Grail for those of us who don't wish to engage in rebalancing calculations on a regular or even irregular basis, and particularly for those of us with a portfolio that is more complicated than 3 funds only.

Enjoy!

https://www.m1finance.com

ETA:

Q. How do they make money?

A. Receiving payment for order flow and from lending securities to short sellers, according to Bloomberg. Previously they were charging .15% AUM; I guess they figured they can steal a lot of business from Betterment, etc., if they were free. The platform is certainly a lot more conducive to maintaining a simple or complex portfolio.

Heck, the same article suggests that Vanguard is going to market an S&P 500 ETF where instead of charging AUM they are going to pay investors a small fee. So, there you have it. The wave of the future for those of us not invested in bitcoin.
what article are you referencing? I can't see that Vanguard is going to pay investors a small fee. Can you provide a link to whatever article you're quoting?

I also don't see the weighted expense ratio of their portfolios they offer. Where is that listed?

Finally, why 1% or 2% in real estate? is that really going to contribute much overall?
The article was an interview piece with the CEO asking about why he was doing this for free. I don't have a link to it and it didn't say anything more than what I indicated (and certainly is not an announcement from Vanguard.)

The weighted expense ratios are available for all of their portfolios, but you may have to open an account to see that information. I don't know what you are referencing when you ask about 1-2% in real estate.

EDITED: https://www.bloomberg.com/news/articles ... es-to-zero
User avatar
arcticpineapplecorp.
Posts: 15014
Joined: Tue Mar 06, 2012 8:22 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by arcticpineapplecorp. »

Colleen wrote: Mon Dec 18, 2017 9:39 am
arcticpineapplecorp. wrote: Sun Dec 17, 2017 8:53 pm
Colleen wrote: Wed Dec 13, 2017 10:00 am M1 Finance has announced that they are no longer charging for their investment platform. It is a very handy way to dollar cost average into a 3 Fund Portfolio (or any other portfolio of stocks and etfs) and always reinvesting dividends so that they are invested in your under-weighted/performing investments.

This is really, in my opinion, the Holy Grail for those of us who don't wish to engage in rebalancing calculations on a regular or even irregular basis, and particularly for those of us with a portfolio that is more complicated than 3 funds only.

Enjoy!

https://www.m1finance.com

ETA:

Q. How do they make money?

A. Receiving payment for order flow and from lending securities to short sellers, according to Bloomberg. Previously they were charging .15% AUM; I guess they figured they can steal a lot of business from Betterment, etc., if they were free. The platform is certainly a lot more conducive to maintaining a simple or complex portfolio.

Heck, the same article suggests that Vanguard is going to market an S&P 500 ETF where instead of charging AUM they are going to pay investors a small fee. So, there you have it. The wave of the future for those of us not invested in bitcoin.
what article are you referencing? I can't see that Vanguard is going to pay investors a small fee. Can you provide a link to whatever article you're quoting?

I also don't see the weighted expense ratio of their portfolios they offer. Where is that listed?

Finally, why 1% or 2% in real estate? is that really going to contribute much overall?
The article was an interview piece with the CEO asking about why he was doing this for free. I don't have a link to it and it didn't say anything more than what I indicated (and certainly is not an announcement from Vanguard.)

The weighted expense ratios are available for all of their portfolios, but you may have to open an account to see that information. I don't know what you are referencing when you ask about 1-2% in real estate.
thank you for your response.

the 1% -2% in real estate is in their model portfolios "expert pies" (moderate and moderately agressive). They don't get to 5% in real estate which is a more worthwhile tilt until you get to their "agressive" and "ultra agressive" pies:

https://www.m1finance.com/investments/expert-pies
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Colleen »

arcticpineapplecorp. wrote: Mon Dec 18, 2017 9:48 am
the 1% -2% in real estate is in their model portfolios "expert pies" (moderate and moderately agressive). They don't get to 5% in real estate which is a more worthwhile tilt until you get to their "agressive" and "ultra agressive" pies:

https://www.m1finance.com/investments/expert-pies
You can create whatever portfolio you like and are not required to pick one of their "expert" pies.
User avatar
arcticpineapplecorp.
Posts: 15014
Joined: Tue Mar 06, 2012 8:22 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by arcticpineapplecorp. »

Colleen wrote: Mon Dec 18, 2017 9:57 am
arcticpineapplecorp. wrote: Mon Dec 18, 2017 9:48 am
the 1% -2% in real estate is in their model portfolios "expert pies" (moderate and moderately agressive). They don't get to 5% in real estate which is a more worthwhile tilt until you get to their "agressive" and "ultra agressive" pies:

https://www.m1finance.com/investments/expert-pies
You can create whatever portfolio you like and are not required to pick one of their "expert" pies.
yes i know that. but if i'm not an "expert" and they're offering "expert" allocations, then I ask again what experts recommend having 1% or 2% of your portfolio in real estate? So I'm questioning how they came up with such a trivial amount and why. I believe many on this board have said if you tilt anything less than 5% really isn't going to do very much. So I'm wondering why these experts have designed these expert portfolios in the way that they have.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
Colleen
Posts: 114
Joined: Wed Feb 15, 2017 9:58 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Colleen »

arcticpineapplecorp. wrote: Mon Dec 18, 2017 10:22 am
Colleen wrote: Mon Dec 18, 2017 9:57 am
arcticpineapplecorp. wrote: Mon Dec 18, 2017 9:48 am
the 1% -2% in real estate is in their model portfolios "expert pies" (moderate and moderately agressive). They don't get to 5% in real estate which is a more worthwhile tilt until you get to their "agressive" and "ultra agressive" pies:

https://www.m1finance.com/investments/expert-pies
You can create whatever portfolio you like and are not required to pick one of their "expert" pies.
yes i know that. but if i'm not an "expert" and they're offering "expert" allocations, then I ask again what experts recommend having 1% or 2% of your portfolio in real estate? So I'm questioning how they came up with such a trivial amount and why. I believe many on this board have said if you tilt anything less than 5% really isn't going to do very much. So I'm wondering why these experts have designed these expert portfolios in the way that they have.
I am certain they will answer the question if asked; I would guess that modern portfolio theory, however that is interpreted, and "efficient frontiers", however they are calculated, led to the various allocations chosen. Let us put it this way - 5% is certainly more aggressive than 2% and the fact that something isn't going to "do very much" is not a reason in and of itself not to do it. Perhaps it reduces volatility more than having 0% allocated to it.

https://investorjunkie.com/61/asset-allocation/ -- 3%

But whether it is 2, 3, 5, 9 or 30 doesn't matter to me. I don't personally care what anybody tells me is optimal (though some studies say 9% and others 20-30%).
User avatar
arcticpineapplecorp.
Posts: 15014
Joined: Tue Mar 06, 2012 8:22 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by arcticpineapplecorp. »

Colleen wrote: Mon Dec 18, 2017 10:36 am
arcticpineapplecorp. wrote: Mon Dec 18, 2017 10:22 am
Colleen wrote: Mon Dec 18, 2017 9:57 am
arcticpineapplecorp. wrote: Mon Dec 18, 2017 9:48 am
the 1% -2% in real estate is in their model portfolios "expert pies" (moderate and moderately agressive). They don't get to 5% in real estate which is a more worthwhile tilt until you get to their "agressive" and "ultra agressive" pies:

https://www.m1finance.com/investments/expert-pies
You can create whatever portfolio you like and are not required to pick one of their "expert" pies.
yes i know that. but if i'm not an "expert" and they're offering "expert" allocations, then I ask again what experts recommend having 1% or 2% of your portfolio in real estate? So I'm questioning how they came up with such a trivial amount and why. I believe many on this board have said if you tilt anything less than 5% really isn't going to do very much. So I'm wondering why these experts have designed these expert portfolios in the way that they have.
I am certain they will answer the question if asked; I would guess that modern portfolio theory, however that is interpreted, and "efficient frontiers", however they are calculated, led to the various allocations chosen. Let us put it this way - 5% is certainly more aggressive than 2% and the fact that something isn't going to "do very much" is not a reason in and of itself not to do it. Perhaps it reduces volatility more than having 0% allocated to it.
valid points. without running the numbers myself I'll say that's a fine argument. Anyone care to run portfolio visualizer and confirm if this is correct?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

The great folks over at Paul Merriman have written an article comparing Motif to M1 that I found very interesting. I want to be sure you guys here see the article because I know it's hard to be read all the available investing websites.
The article is here
http://paulmerriman.com/dada/mail.cgi/a ... 125092839/
inbox788
Posts: 8372
Joined: Thu Mar 15, 2012 5:24 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by inbox788 »

I've looked into Motif, and while interesting, haven't found it all that useful. All these new investing platforms have a particular slant, but the fees are relatively high compared to 0.05 EF, except in rare situations. The two that standout to me right now with low fees (free) are Robinhood and now M1 Finance. I've been trying to figure out their drawbacks, and any company that isn't making enough money is at risk of going under, so when the bleeding venture capital stops being generous, you have to worry about transferring the holdings elsewhere, hopefully easily and tax-free. I still haven't figured out where Robinhood is making any money.

Interesting that M1 trades are at 9AM. I assume opening prices are used. So opening orders are likely liquidity additive and they might get some fees from that. Are closing orders also liquidity additive?

https://www.investopedia.com/articles/a ... an-you.asp
http://www.marketswiki.com/wiki/Maker-taker

I hope these firms are able to find a sustainable model to keep their services free or low cost. There are hidden costs, but not too bad for now, where as AUM of 0.35 was too high and similar to other robotraders.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

Good points & thanks.
I make 1 maybe 2 $10 trades per year per account.

The advantage of these platforms is one can bundle a bunch of indvivdual stocks or ETFs & do it all in one $10transaction & rebalance at the same time.
Thanks again for your comments, I was not thinking along those lines.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: M1 Finance - now Free. Great way to rebalance

Post by LadyGeek »

This thread is now in the Investing - Theory, News & General forum (general investing).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
schutzk21
Posts: 156
Joined: Sat Jan 07, 2017 4:03 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by schutzk21 »

I was going to start up a Roth IRA for my wife next week. I want to just set her up with the 3 fund portfolio. I currently have my ROTH at Vanguard investing in mutual funds. Would it be a bad idea to have one Roth investing in ETF's and another investing in mutual funds? What would your recommendation be? Should I transfer my funds from Vanguard and just do two separate accounts on M1 Finance? This seems like a nice way to help with rebalancing.

Does M1 Financing automatically rebalance if your allocation gets far from where you want it?
schutzk21
Posts: 156
Joined: Sat Jan 07, 2017 4:03 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by schutzk21 »

Hi everyone, I apologize for the double post. What do you all think about this platform? After all my research, it seems like a fine idea to start a Roth IRA for my wife, and transfer my roth balance of $2500 from Vanguard.
Jags4186
Posts: 8198
Joined: Wed Jun 18, 2014 7:12 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by Jags4186 »

I’ve always been intrigued by Paul Merriman’s UB&H portfolio but found it too cumbersome to put into play. I opened an M1 account and am putting $100 a week into it with his ETF Best in Class portfolio. It will be my “side bet” fun account.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

I’ve always been intrigued by Paul Merriman’s UB&H portfolio but found it too cumbersome to put into play.
Agree, and that is the beauty of Motif, Paul's portfolios are all done for you for $10. M1 we hope will get Paul's portfolios as well (but until then you can just copy them yourself), and be even cheaper yet at $0.

https://www.motifinvesting.com/search#s ... iversified


schutzk21
others here are more qualified to help you than I am with your questions but generally speaking:
I was going to start up a Roth IRA for my wife next week. I want to just set her up with the 3 fund portfolio.

I currently have my ROTH at Vanguard investing in mutual funds. Would it be a bad idea to have one Roth investing in ETF's and another investing in mutual funds?
Not really. But you want to think of all of your accounts in the household as a total portfolio.
The first thing you want to determine is your risk tolerance.

And you want to know the percentage of stocks & the percentage of bonds of the total in which accounts are they in.
You want to know the percentage of the total in cash, in tax-deferred accounts, in taxable accounts, etc.

So your family will have 2 Roth IRA accounts, just consider it one giant Roth IRA account

What would your recommendation be? Should I transfer my funds from Vanguard and just do two separate accounts on M1 Finance?
Nothing wrong with that
This seems like a nice way to help with rebalancing.
Agree

Does M1 Financing automatically rebalance if your allocation gets far from where you want it?
Call them and ask them specifically your questions and what you are after and what it costs for you to do what you want to do since you are considering going over to M1
overthought
Posts: 274
Joined: Tue Oct 17, 2017 3:44 am

Re: M1 Finance - now Free. Great way to rebalance

Post by overthought »

JohnnyM wrote: Mon Jan 29, 2018 4:16 pm Does M1 Financing automatically rebalance if your allocation gets far from where you want it?
Call them and ask them specifically your questions and what you are after and what it costs for you to do what you want to do since you are considering going over to M1
Their web site explained somewhere that they do not generate taxable events unless you request them. They'll do their best to rebalance with new money, and will only sell funds if (a) you cash out some money or (b) you hit the "rebalance" button on your portfolio to specifically request it. When they do sell, they try to minimize taxable gains (they don't particularly aim for loss harvesting, they figured reducing taxable gains was more useful to more people).

Sorry I don't have a link...
User avatar
oneleaf
Posts: 2562
Joined: Mon Feb 19, 2007 4:48 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by oneleaf »

This looks super intriguing. All of my family's accounts are at Vanguard and feel so deeply ingrained in it (with agent authorizations, etc), so I doubt I will move over. But I am definitely keeping an eye on it.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

If Vanguard comes up with something similar they will get a lot of their customers back. I love Vanguard, but I want a basket of positions/Index Funds & re-balanced etc It is the bomb. I would return to Vanguard in a flash if they had it at the same price. Plenty stuff in my motifs are Vanguard Index funds
schutzk21
Posts: 156
Joined: Sat Jan 07, 2017 4:03 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by schutzk21 »

For future reference, does anyone know how to withdraw from their account on the website? Say if I wanted to withdraw part of my portfolio, am I able to do that?
User avatar
oneleaf
Posts: 2562
Joined: Mon Feb 19, 2007 4:48 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by oneleaf »

schutzk21 wrote: Tue Jan 30, 2018 6:12 pm For future reference, does anyone know how to withdraw from their account on the website? Say if I wanted to withdraw part of my portfolio, am I able to do that?
Yea, withdrawals, deposits, rebalancing, and changing the pie are pretty much the main actions you can take. Selling of securities will occur if you make a withdrawal such that your allocation should stay intact. The more I learn about M1, the more I feel it is a nice way to invest.
schutzk21
Posts: 156
Joined: Sat Jan 07, 2017 4:03 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by schutzk21 »

I am just not sure how you sell securities without selling the full security by zeroing it out. Is there a way you can sell part of a security at retirement? This is the only thing that worries me. Everything else looks awesome.
BeginnerInNYC
Posts: 23
Joined: Mon Oct 17, 2016 4:53 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by BeginnerInNYC »

Would a brokerage/service like this also be able to track assets held outside their platform (for example in a 401k), and take your desired overall portfolio asset allocation into account when rebalancing?
schutzk21
Posts: 156
Joined: Sat Jan 07, 2017 4:03 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by schutzk21 »

That would be amazing, but as of right now it is only for the accounts that you have on their platform.
User avatar
oneleaf
Posts: 2562
Joined: Mon Feb 19, 2007 4:48 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by oneleaf »

schutzk21 wrote: Tue Jan 30, 2018 7:48 pm I am just not sure how you sell securities without selling the full security by zeroing it out. Is there a way you can sell part of a security at retirement? This is the only thing that worries me. Everything else looks awesome.
You just withdraw money. They will sell positions starting with the positions over your target allocation. It will even sell fractional shares so the dollar amount you withdraw is exactly what you want. There is no need to think about your positions unless you want to actually change your pie/allocation.
whoever
Posts: 51
Joined: Thu Oct 17, 2013 7:17 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by whoever »

How are the order fills with wider bid ask spreads for low volume ETFs?
User avatar
oneleaf
Posts: 2562
Joined: Mon Feb 19, 2007 4:48 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by oneleaf »

whoever wrote: Tue Jan 30, 2018 9:03 pm How are the order fills with wider bid ask spreads for low volume ETFs?
It's worth asking them this question. They mention that some stocks/ETF's are not allowed, presumably because of order fulfillment issues.
User avatar
brother7
Posts: 158
Joined: Mon Mar 27, 2017 4:48 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by brother7 »

I started my M1 Finance experiment today.
I created 4 separate pies and put them in 4 separate M1 accounts (can all be managed with a single login). I chose to do it this way because I wanted to track the performance of each pie separately.
Transferred 400 into each account, 1600 total.

I'm curious to see how each pie performs:
  • Factors - US
  • Factors - International
  • Paul Merriman Best-in-Class - US
  • Paul Merriman Best-in-Class - International
This is fun money in an experimental account. When I was a kid, I was fascinated with dinosaurs and always wondered who would win, Tyrannosaurus Rex or Triceratops. Now as an adult, this is my grown-up investment version... T Rex (Merriman) vs Triceratops (Swedroe's Factors).
whoever
Posts: 51
Joined: Thu Oct 17, 2013 7:17 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by whoever »

oneleaf wrote: Tue Jan 30, 2018 10:35 pm
whoever wrote: Tue Jan 30, 2018 9:03 pm How are the order fills with wider bid ask spreads for low volume ETFs?
It's worth asking them this question. They mention that some stocks/ETF's are not allowed, presumably because of order fulfillment issues.
They are allowing quite a few ETFs that have wider spreads. I did sent a mail to their support.
whoever
Posts: 51
Joined: Thu Oct 17, 2013 7:17 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by whoever »

brother7 wrote: Tue Jan 30, 2018 11:30 pm I started my M1 Finance experiment today.
I created 4 separate pies and put them in 4 separate M1 accounts (can all be managed with a single login). I chose to do it this way because I wanted to track the performance of each pie separately.
Transferred 400 into each account, 1600 total.

I'm curious to see how each pie performs:
  • Factors - US
  • Factors - International
  • Paul Merriman Best-in-Class - US
  • Paul Merriman Best-in-Class - International
This is fun money in an experimental account. When I was a kid, I was fascinated with dinosaurs and always wondered who would win, Tyrannosaurus Rex or Triceratops. Now as an adult, this is my grown-up investment version... T Rex (Merriman) vs Triceratops (Swedroe's Factors).
What ETFs did you choose for factoe pies?
User avatar
oneleaf
Posts: 2562
Joined: Mon Feb 19, 2007 4:48 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by oneleaf »

Yesterday, I asked customer support if they support any kind of client control in regards to tax lots. Ideally, it would be a specific identification option. They said no. Only the tax minimization algorithm is possible. For those that want to maintain control over their holdings (i.e. sometimes tax gain harvesting is a good idea), M1 Finance may not be for you.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

(I posted this on other BHead threads too, unsure if folks are subscribed to all threads).
https://paulmerriman.com/?powerpress_pinw=17404-podcast
Above is a 1 hour podcast re Motif vs. M1
Some of us have individual stocks as their "play" fund (I don't any more, I'm all index funds as soon as my final 3 positions sell) - geez M1 is the way to do individual stocks! Edit: I am definitely wrong above about "M1 being the place for individual stocks". Definitely not, one of the ideas behind individual stocks is that you typically have 10 baggers outperform the losers and all the other average individual stocks, constantly re-balancing would never let those 10 baggers shine and you would continually be buying losers. Motif is more appropriate for individual stocks so that you can let your 10 baggers run and dump your losers

M1 is NOT for the "safe cash portion" of your portfolio so keep that at a different broker.
M1 trades are free vs. Motif.
M1 is fine for dollar cost averaging , Motif not really (trade fees).
Motif is increasing their trade fee from $10 to $20 this month (unless you trade at the market open 9amEST, then is $10).
M1 trades at 9amCST = 10amEST.

Re the concern of the bid-spread, is at about 34:15 of the audio podcast.
Re how do they make money & is the business model sound long term, it is around 43:00 of the podcast.
Last edited by JohnnyM on Thu Feb 15, 2018 6:19 pm, edited 1 time in total.
inbox788
Posts: 8372
Joined: Thu Mar 15, 2012 5:24 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by inbox788 »

JohnnyM wrote: Fri Feb 09, 2018 6:40 amMotif is increasing their trade fee from $10 to $20 this month (unless you trade at the market open 9amEST, then is $10).
I'm still wondering how Robinhood and M1 are going to make money, and whether their plan is sustainable. Same with Motif, and this fee raise might not generate enough revenue/profits for them compared to the lost business. To me, these are fun experiments, but not ready to jump in without an exit strategy. Simply moving equities out isn't really an option if there is nowhere to go with what you wind up with. To unwind your positions, you may have lots of fees and taxes to deal with. Or deal with ever increasing fees to keep their model going.

I hope they succeed, but that there is a viable business model which I don't yet see. I'm fairly confident Vanguard, Fidelity, Schwab are making sufficient money to stay around a bit and won't be altering their fee structure.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

Re how do they make money & is the business model sound long term, it is around 43:00 of the podcast. FWIW they state commissions generate about 10-15% of the money for all brokers apparently. Sounds like all brokers including Vanguard lend securities. And "new products" like "IPO motifs" etc get created.

Thanks for commenting, helps my evaluation.
tj
Posts: 9317
Joined: Wed Dec 23, 2009 11:10 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by tj »

JohnnyM wrote: Fri Feb 09, 2018 2:50 pm Re how do they make money & is the business model sound long term, it is around 43:00 of the podcast. FWIW they state commissions generate about 10-15% of the money for all brokers apparently. Sounds like all brokers including Vanguard lend securities. And "new products" like "IPO motifs" etc get created.

Thanks for commenting, helps my evaluation.
The podcast was disappointing. Rather than actually sharing M1 finances answers to the host's questions, he was just like "I was satisfied with their answers."
FinWizApprentice
Posts: 3
Joined: Sat Feb 10, 2018 11:28 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by FinWizApprentice »

Sorry about not reading the replies from M1 on the podcast, but I'll paste them here to make up for it.

1. Why shouldn't I be concerned that "securities loaned out by you may not be protected by SIPC"?
There may be a concern that your securities MAY not be protected by SIPC. Even during the most recent market crash, we are not aware of any SIPC claims. When firms such as Bear Sterns and Lehman failed there were no claims. Your securities will only be lent through APEX's Program who currently custodies all your securities and everyone else's at M1.

2. Will I likely "receive cash payments in lieu of dividends" that are taxed as regular income instead of qualified dividends?
That risk disclosure primarily effects municipal securities that pass through tax free dividends. If your portfolio contains primarily equity holdings any distributions would be taxable in any event. If you hold municipal securities you may not get the full tax benefit of those holdings.

3. The document suggests I (or you) will be paid for lending securities. Who get's paid, and how much?
We will make the fees, if any, on the securities held in your account. However, keep in mind that only highly sought after and hard to borrow securities will be "loaned out" and receive a fee.

4. The document also suggests I may opt out of the Securities Lending program by contacting you. Depending on the answers to the questions above, I may request that, but I'll wait till you answer first.
While it is true that you have the right to opt out, we may at any time, choose to close any account that does not participate as it undermines our ability to make money and offer the platform for free.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

FinWizApprentice wrote: Sat Feb 10, 2018 11:32 pm Sorry about not reading the replies from M1 on the podcast, but I'll paste them here to make up for it.

Thank you Chris. For those of you who may not understand, FinWizApprentice is one of the people who were in the audio podcast mentioned above, and there was a comment here that the podcast did not mention specific answers to Chris's questions about the long-term business model of M1.

I look forward to more comments.

FinWizApprentice do you have any comments further on your question #4? They are doing all the headache of lending and therefore they should be the ones who get paid to reward? Or, you feel you should get a cut too since it is your "money" that they are lending? Almost like when banks borrow against your mortgage, you get nothing for it but it is actually your note/property they are lending. Banks can do so even after you pay the note off full I believe if they can get away with it?

Thank you
FinWizApprentice
Posts: 3
Joined: Sat Feb 10, 2018 11:28 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by FinWizApprentice »

Thanks JohnnyM for explaining my role in the podcast and asking how I feel about them getting the money for doing the lending.

The reason I was satisfied with their answers is that I hope they have a sustainable business model, and the lending seems like it might do that without jeopardizing the service investors are asking them to provide. If the money they derive from lending in the back end is the price I pay for a commission-free automated investing platform that has staying power, it seems reasonable to me.
tj
Posts: 9317
Joined: Wed Dec 23, 2009 11:10 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by tj »

3. The document suggests I (or you) will be paid for lending securities. Who get's paid, and how much?
We will make the fees, if any, on the securities held in your account. However, keep in mind that only highly sought after and hard to borrow securities will be "loaned out" and receive a fee.
If only highly sought after securities get loaned out, how are they making $$$ on accounts with stocks or ETF's that are less sought after?
inbox788
Posts: 8372
Joined: Thu Mar 15, 2012 5:24 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by inbox788 »

FinWizApprentice wrote: Mon Feb 12, 2018 11:55 amThe reason I was satisfied with their answers is that I hope they have a sustainable business model, and the lending seems like it might do that without jeopardizing the service investors are asking them to provide. If the money they derive from lending in the back end is the price I pay for a commission-free automated investing platform that has staying power, it seems reasonable to me.
I hope they're successful, but I don't think they'll make enough money from the lending to cover their needs. I'm afraid they'll go under, get taken over, and/or have to adjust (increase) their fees, which is why I'm out for the time being. If they show promise of staying alive/around a while, I look into it again at a later time. In the mean time, my Vanguard account is adequate.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

I am quoting myself to show the edit I made in my post above; most likely most people will not go up and reread my original post's edit, I don't want to mislead anyone and probably you smart guys on here figured out my mistake already.
JohnnyM wrote: Fri Feb 09, 2018 6:40 am ... Some of us have individual stocks as their "play" fund (I don't any more, I'm all index funds as soon as my final 3 positions sell) - geez M1 is the way to do individual stocks! Edit: I am definitely wrong above about "M1 being the place for individual stocks". Definitely not, one of the ideas behind individual stocks is that you typically have 10 baggers outperform the losers and all the other average individual stocks, constantly re-balancing would never let those 10 baggers shine and you would continually be buying losers. Motif is more appropriate for individual stocks so that you can let your 10 baggers run and dump your losers
.
JohnnyM
Posts: 94
Joined: Sat Feb 14, 2015 9:54 pm

Re: M1 Finance - now Free. Great way to rebalance

Post by JohnnyM »

I have been seriously considering M1 and have reviewed the posts here on BH about them and also about their competitor Motif (who seems to be less recommended here on BH especially with their new fees and new trading time restrictions; but this thread should continue being about M1).
I just posted on some of the other BH threads about M1 because you never know when people comment about a question you have and you can also comment about what others have posted in those threads which may not be found in this thread. I want to keep the discussion about M1 going on, for several reasons but mostly because I plan on using them. Below is a cut and paste of what I posted on some of these other M1 BH threads; hoping to generate comments here on this most current threads about M1

I too am always suspicious of new/different ways and usually indeed they turn out to be gimmicks.

I've been seriously considering this M1. It seems to be suited for what I am after. To me the only potential issue for me is their soundness as a business long-term but since they are a regulated firm, SIPC insured along with additional insurance from Lloyd's of London, their clearinghouse is the standard Apex Clearing House, and guys way smarter than me like Paul Merriman is recommending them, so I am okay with M1.
One thing that is kind of hard for us older guys to understand is that the technology is such a game changer; I don't think the technology allowed anything like this a mere 5-10 years ago but I am not sure about that. Technology allows companies with the right engineers to do enormous amount of stuff with very few people and very little real estate, it's just hard to fathom for us older folks.

It is true that a 3 fund portfolio is really not that hard to rebalance. For someone like me who likes a little more slice and dice by way of the very conservative and helpful and respected Paul Merriman, it's a real challenge to rebalance those 9-15 positions in his portfolios, and it can get a little emotional which is always a bad sign, and you know you're not going to get it perfect.

If rebalancing is good for complicated portfolio it's good for a simple portfolio, no? So long as it does not cost you any time or money (which is indeed the case at M1), right? You are constantly buying low and selling high every time they rebalance which happens every time the account gets $10 or more cash from dividend reinvestment or new money or whatever. Is my thinking correct along these lines regarding "their constant rebalancing" is just what you want, buy low sell high, it just happens WAY more frequently than your typical annual (or whatever) traditional old-fashioned rebalancing? Please let me know because it will be helpful to me.

This concept of constantly rebalancing is absolutely NOT what you want and a portfolio composed of individual stocks where you want your 10-baggers to run and outperform all the average & loser individual stocks (but I am not in individual stocks, I am all index funds, you just simply do not see that kind of "10 bagger” concept in index funds, or do we?).
Thank you
Jonny Cash$
Posts: 1
Joined: Fri Feb 16, 2018 11:15 am

Re: M1 Finance - now Free. Great way to rebalance

Post by Jonny Cash$ »

I would really enjoy a capital gains harvesting tool so at the end of the year you can toggle it if needed to a certain value.
Post Reply