M1 Finance - The Perfect Platform for Beginner Bogleheads

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FIBoston
Posts: 68
Joined: Fri Feb 10, 2017 11:41 am

M1 Finance - The Perfect Platform for Beginner Bogleheads

Post by FIBoston » Wed May 16, 2018 4:09 pm

For clarity: I do not work for M1 Finance and am in no way affiliated with them professionally. I am simply a happy user.

I really believe M1 Finance is the perfect platform for a beginner boglehead beginning their financial journey using Vanguard funds. Here is why:

The lazy 3 fund portfolio calls for the use of 3 Vanguard Funds: VTSAX, VTIAX, and VBTLX. These are perfect for the lazy investor because they are cheap, broadly diversified, and allow for automatic investments. Unfortunately, because of minimum investment requirements, it would take $30,000 for an investor to create this portfolio, and it may not be adequately allocated to the investors liking (especially if they are have a long investment horizon). So, there are two options:

1. Create a portfolio using the investor level shares (VTSMX, VGTSX, VBMFX) - this lowers the minimum required investment, but still requires $9,000 and is not the cheapest version of the portfolio.

2. Create a portfolio using the ETF versions (VTI, VXUS, BND) - this does not require a very high minimum investment, and is as cost effective as an Admiral Share portfolio, but it does not allow for automatic investments.

So, one option is more expensive, and the other is not totally lazy as it requires some hands on attention. This is where M1 Finance comes in: M1 Finance is a totally free to use platform that allows partial ownership of shares. This means that the Admiral Fund portfolio expense ratio can be achieved (through ETF's) while still allowing for automatic investments. For a person just starting out their IRA, they could kick off this portfolio with a minimum investment of $100, set their desired asset allocation, schedule automatic investments, and never look at their portfolio again (M1 Finance automatically rebalances). If they really want to go all in on the Admiral Fund portfolio they could invest in their IRA through M1 Finance until they have enough money, and then roll over to Vanguard and exchange their ETFs for their Mutual Fund equivalents (this is doable inside an IRA because this is not a taxable event).

M1 Finance allows for Trad IRA's, Roth IRA's, taxable accounts, and joint taxable accounts. Since I started using the platform I loved it, and think a lot of beginner Bogleheads would love it too. I'm wondering if anybody else on this platform uses M1 Finance and has enjoyed their experience as much as I have.

livesoft
Posts: 61944
Joined: Thu Mar 01, 2007 8:00 pm

Re: M1 Finance - The Perfect Platform for Beginner Bogleheads

Post by livesoft » Wed May 16, 2018 4:15 pm

What about the timeliness and correctness of 1099-B, 1099-DIV, consolidated 1099s, how easy are Roth conversions, gifting of assets, tracking of cost basis, ease of selling specific shares, and on and on.

My point is that choice of actual investments is pretty far down the list of what a platform provides.
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FIBoston
Posts: 68
Joined: Fri Feb 10, 2017 11:41 am

Re: M1 Finance - The Perfect Platform for Beginner Bogleheads

Post by FIBoston » Wed May 16, 2018 4:22 pm

livesoft wrote:
Wed May 16, 2018 4:15 pm
What about the timeliness and correctness of 1099-B, 1099-DIV, consolidated 1099s, how easy are Roth conversions, gifting of assets, tracking of cost basis, ease of selling specific shares, and on and on.

My point is that choice of actual investments is pretty far down the list of what a platform provides.
thanks for the response. as i have only gone through one tax season with them I can only speak from limited experience but all of my required forms arrived early from them (earlier in relation to forms I was waiting on from Schwab and Vanguard).

Cost basis is located right on the main dashboard.

Selling shares has been easy enough for me so far (but if the investor is new to the game and truly lazy, I don't see why they would be selling). When I performed a Traditional to Roth rollover, all I needed to do was email their help desk, and I received an email from an actual human person within 24 hours who took care of the process for me. It felt like having an advisor who didn't try to sell you anything.

venkman
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Joined: Tue Mar 14, 2017 10:33 pm

Re: M1 Finance - The Perfect Platform for Beginner Bogleheads

Post by venkman » Wed May 16, 2018 9:13 pm

Option 3: Save up $1,000 and invest in a Vanguard Target Retirement fund. Set up automatic subsequent investments. You've got a ready made 3-fund PF (technically 4-fund, but international bonds are a tiny percentage of the 90/10 TR funds) that will do all the rebalancing for you. Once you build that up high enough, you can sell it and make your own 3-fund PF.

The 10 or so extra basis points in ER will cost you less than $30 a year, and that amount will look small compared to the daily fluctuation in the value of your portfolio. (Same concept applies to building your PF with Investor shares before you build up to Admiral shares.)

For someone just starting the accumulation phase, contributions will have a much bigger effect on their account balance than market returns. Building up a modest amount of cash to meet an investment minimum before putting money into the market will have an insignificant effect on long-term account value.

jacoavlu
Posts: 465
Joined: Sun Jan 06, 2013 12:06 pm

Re: M1 Finance - The Perfect Platform for Beginner Bogleheads

Post by jacoavlu » Wed May 16, 2018 9:42 pm

A limitation to M1s platform is that they seem to be unable to display the true cost basis for holdings transferred in kind to them.

I transferred a portfolio from Betterment to M1 as I wanted to unwind it under my control, while avoiding any trading fees on the multiple ETF holdings I had at M1 that included funds from Vanguard, Schwab, ishares, and others.

M1 displays, as “cost basis”, on holdings transferred in, the value at the time of transfer, not the true basis. I tracked the basis myself so it was more of an inconvenience than anything, it just surprised me that they wouldn’t design their platform better than that. The value at some arbitrary date is rather useless.

Of course they assure me the 1099-B will be accurate. We’ll see. Perhaps they’ll get this fixed.

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dwickenh
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Re: M1 Finance - The Perfect Platform for Beginner Bogleheads

Post by dwickenh » Wed May 16, 2018 9:57 pm

livesoft wrote:
Wed May 16, 2018 4:15 pm
What about the timeliness and correctness of 1099-B, 1099-DIV, consolidated 1099s, how easy are Roth conversions, gifting of assets, tracking of cost basis, ease of selling specific shares, and on and on.

My point is that choice of actual investments is pretty far down the list of what a platform provides.
For most people trying to get started, the actual investments are not far down the list. The rest of the list are things learned as you go
along and not the most important things for a beginner. They are important for people that buy and sell on a monthly basis, but most beginners
are not doing that and should not be encouraged to trade often when starting out. Tax loss harvesting will come along later in their investment life.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

livesoft
Posts: 61944
Joined: Thu Mar 01, 2007 8:00 pm

Re: M1 Finance - The Perfect Platform for Beginner Bogleheads

Post by livesoft » Wed May 16, 2018 10:18 pm

I consider my children beginner Bogleheads. Here is what they do:

Start with Target Retirement fund for Roth IRA with earnings in high school. Stick with that for many years. Start 401(k) at job with Target Date funds. No real chance of taxable account in the first decade or so of investing.

M1 Finance has no place in their future.
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