All About the Pies - M1 Finance
The best platform for dollar cost averaging and disciplined investing
When I first started on my investing journey, I created a TD Ameritrade account and started reading different publications and blogs about what to buy - there’s no shortage of people willing to tell you. Pretty soon, I’d spent my $1,000 on a mining stock, a mall REIT, a small biotech company, and a few Vanguard ETFs. When I took a step back, it made absolutely no sense as a portfolio! (Thanks SeekingAlpha…)
I was still learning. But I was also undisciplined.
Eventually, I listened to Brian Barnes, CEO of M1 Finance, on a podcast and something clicked for me. He shared his vision for simplifying the investing experience, allowing fractional shares of securities, educating users, and more. It was exactly the pitch I needed to hear.
A Quick Overview
From the start, M1 Finance guides investors towards designing a “pie”. You pick one or more securities (individual stocks, ETFs, etc.) and then set the percentage allocation for each security you selected. For example:
Alternatively, you can pick from a range of pre-designed “pies” depending on your goals. If you're a fan of Warren Buffet's investing style/portfolio, there's a pie which seeks to replicate Berkshire Hathaway. Under "General Investing" portfolios, the "Aggressive" pie contains eight different Vanguard ETFs, mostly weighted towards equity exposure.
With a traditional brokerage account like TD Ameritrade, you place the buy/sell orders for each transaction and must manage your portfolio allocation manually. M1 Finance simplifies this - when you deposit money into your account, you are buying your “pie”. Your dollars are split up according to your defined allocation percentages.
Why I Love M1 Finance
M1 Finance has simplified my investing and saved me lots of wasted time. Here are four reasons why I recommend it.
Dollar cost averaging on autopilot
I’m a firm believer in the power of dollar cost averaging. And with M1 Finance, you can set your purchases on autopilot to achieve perfect dollar cost averaging, at whatever level of granularity you want. Each week in my account, I have a small purchase order set for Tuesday and Friday. Simple as that.
M1 Finance automatically allocates your deposits to help rebalance your portfolio over time, but if your allocations get drastically out of line you can manually initiate a rebalancing in which M1 Finance buys/sells assets to get you back to your original allocation percentages.
With my TD Ameritrade account, I would have a hard time maintaining a consistent portfolio - I’d likely overthink my strategy or chase a new shiny object when it was time to buy. When I designed my “pie” in M1 Finance, it forced me to spend time thinking through my long-term goals and investing approach. Once my “pie“ was complete, I didn’t need to think much of it anymore. I was no longer wasting time tinkering with my portfolio!
This is central to M1 Finance’s platform. With fractional shares, you don’t have to worry about the actual price of the security. If you put in $100, each 1% of your “pie” is equal to $1 in that security. For example, M1 Finance will buy $1 of Tesla stock even though Tesla is listed at ~$1,000 (Note: Tesla might be $100 or $4000 by the time you read this. Depends on who Elon Musk insults on Twitter next.)
M1 Finance uses time-weighted returns to display your performance. I love this, because it shows my all-time performance without regard to the size of my account. My first year investing with M1 Finance and a few hundred dollars (2017) is weighted the same as my 2021 account. It also splits out your “Market Gain” (price appreciation) and “Earned Dividends” (dividends and interest).
The Right Platform For Me
These features have made M1 Finance a great fit for me and have kept me focused through the markets ups and downs. The simplicity comes with tradeoffs compared to traditional brokerages. But I’m a better investor as a result.
Think M1 Finance might be a good fit for you? If you plan to deposit less than $5,000, use this Referral Link where we both get $50. If you plan to deposit more than $5,000, you’ll get a larger bonus skipping my Referral link and using this one instead: Sign Up Bonus.
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