(M1#1) Thoughts After Using M1 Finance for a Week

Week 1 Review M1
Not a very happy day in the stock market.

I’ve been using M1 Finance for a week now, and despite the rocky week the stock market had, I think overall the app is great. As I mentioned in my last post about M1, I’m using this as a platform to get more experienced with the stock market, which is why I’m only investing a little at a time. In fact investing a fixed amount at periodic intervals (Dollar Cost Averaging) is a good way to ensure you don’t pay too high for shares of a security. It’s probably a good thing that I only invested a small amount initially considering my overall portfolio dropped 5.43%. So let’s jump right into my thoughts on the market, the app, and what I’ve learned overall.

Thoughts on Stock Market

If you follow the news on the market, you’ll hear that the “Dow Jones dropped more than 700 points” on Thursday. This was mostly due to Trump announcing that he is imposing $60 billion in tariffs on China. I also believe that Facebook’s data breach exposed by Cambridge Analytica not only drove Facebook’s stock down, but a lot of other tech companies, especially those that connect to Facebook. Additionally, some sell off may have happened due to news that the Federal Reserve is increasing its interest rates. This is only a gradual increase, so I do not think it had that much of an impact. I talk about the market separately because it’s important to separate market performance from your broker’s performance and to not let your emotions affect your thoughts on a service, in this case it’s M1 Finance.

Thoughts on M1 Finance

Pros

  • Friendly user interface
  • Expert pies available to use as the model or even just a slice of your pie
  • Free trading
  • Graphs that show the 1Y, 3Y, 5Y performance of your entire portfolio averaged
  • Able to distribute your money in ‘slices’ so you don’t have to worry about the price of each share when you make investment choices
  • Able to rebalance on next trade
  • Diverse portfolios are made easy

Cons

  • Funding and trades are not instant, but this is necessary to ensure free trading because trades are done in batches
  • I do wish there was a way to see other users’ pies or at least the pies that they make public. Some sort of social aspect where users can make pies and other users can rate and comment on them.
  • Still unsure if this company will even be around 20 years from now, or even 10 years from now, but time will tell

Caution

  • There are fees associated with selling securities:
    • SEC Fee = total price of transaction * 23.10 / 1,000,000
    • TAF = shares sold * 0.0001119 with a maximum of $5.95
  • Their algorithm prevents you from buying and selling the same security within the same day, so if you are a day trader, this app isn’t for you

What I’ve Learned

The market is volatile, this is normal. 2017’s growth was abnormal. The 700 point dip in the Dow Jones on Thursday although bad, will barely be noticeable two years from now. It’s important for investors to be patient and not let emotions get the better of them if they want to see any returns on their investment.

Losing $21.01 overall isn’t bad, but a 5.43% dip in my portfolio’s overall value drove home a point that beginners hear over and over: diversify.  I could have had a more resistant portfolio if I had invested in other sectors, types of funds, etc. Even though I believed in the companies that I invested in, they were all in the technology sector.

So next week, I will be organizing my portfolio differently. I will be making three different sub-pies: Stocks, Bonds, REITs / Dividend Yielding Funds. Each of these sub-pies will have a variety of funds that will help me meet my goals. In bonds, I’ve chosen 15 different funds and in Stocks and REITs, I’ve chosen 25. The benefit of doing this with M1 is that I can limit how much I invest and not worry about not diversifying enough due to a lack of funds.

Conclusion

Weather the storm, the market is volatile and if you pick sound securities and balance your portfolio with safer funds such bonds, you will see a return on investment. Take advantage of the ability to diversify easily with M1 Finance!

M1 is catered towards people who intend to be “long on a position” meaning that they will keep that security for a long time (no Day Traders!). It’s not as beginner friendly as Stash, but it also doesn’t charge you a $1 a month like stash does. This $1 a month can easily eat into your gains especially if you don’t have a lot of funds to begin with. If you are a new investor or even somewhat knowledgeable on the stock market, I recommend using M1 Finance to start investing and setting yourself up for the future. It’s ability to let me play with the market as if I had more initial capital also drove home the importance of diversification, a lesson that would have been more costly with other brokers.

If you want to give M1 Finance a try, click here. This is my personal referral link, which gets us both $10 when you sign up!

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