Which Broker is better for you: M1 Finance or Robinhood?
I’ve used both of these brokers for many years now and while they’re both pretty good generally most folks will be suited better for one of the two brokers.
I’ll give an overview of both brokers, my experience with them both, why I primarily use M1 Finance, and provide some recommendations depending on your investing style on which broker would be better for you.
Is M1 Finance for You?
M1 Finance is for long-term oriented individuals who aren’t interested in day-trading or trading options. It’s especially good for people who want to buy “dividend” stocks as it allows you to buy fractional shares and reinvest dividends automatically if you so choose. You can disable auto-reinvestment though if you don’t want them to auto-buy stocks for you.
The only real downside to M1 Finance is you cannot sell covered calls in stocks you own like you can on Robinhood. If this isn’t an issue to you, I’m confident M1 Finance would be the better choice for you. Their platform simply has more flexibility and is in every way superior if you don’t care to sell covered calls.
But you can’t trade on M1 Finance, can you?
The only other potential downside is you cannot day-trade on their platform due to how they need to fulfill orders (in-aggregate) to allow for fractional share purchases and sells. I do not consider this a real downside as in my opinion, as a trader and options seller, everyone should have a long-term portfolio as well as their trading account. If you’re a trader get yourself a Robinhood account, but I’d also recommend an M1 Finance account for long-term Investing.
Bottom-line: Should I use M1 Finance?
The only case I would say someone shouldn’t use M1 Finance is if they have a very large portfolio in the five to six figure range and they want to buy 100-shares of stock in each of their investments to write covered calls against. If that’s you, then don’t open an M1 Finance account.
If however you’re a long-term investor (especially with a smaller account), daytrader, or options-trader, I’d recommend opening an M1 Finance account. It’s simply the best platform for non-covered call long-term investing, and I believe every trader should also have a longer term portfolio, especially as their account size grows.
If you sign up with the above link you’ll get a free $10-25 after you make your first deposit of $100 or more. It’s a promotional thingy for new M1 Finance users.
Is Robinhood for You?
Robinhood markets it’s self as a broad-based no-fee platform, which means it’s not really oriented at anyone in particular. Due to the the reasons I went over in the M1 Finance portion of this article, it’s my belief Robinhood falls short in most metrics outside of two narrow investing niches: Covered-call investing and Day trading stocks.
In other words, if you’re interested in day-trading you should probably open an account with Robinhood if you want to avoid paying commissions on your trades.
If your account size is large enough for you to properly diversify while selling covered calls against your long stock positions, then Robinhood would also be a great fit for you so long as you don’t mind being a little more hands-on.
Bottom-Line: Should I use Robinhood?
If you fit into one of the above two target groups, I’d recommend using Robinhood primarily over M1 Finance, although I’d still recommend daytraders to have a long-term portfolio with M1 Finance.
A warning though to daytraders is you cannot sell uncovered options on Robinhood either, and if you’re interested in more advanced trading like with Options or Futures I’d recommend a low-commission broker like Tastyworks instead of either of these free brokers. I use tastyworks for my trading and options/futures, while I use M1 Finance for my long-term investing. That’s because I like trading options more than trading shares of stock outright.
If you sign up with the above link you’ll get a free stock worth up to $500, but generally only worth around $5-10 on average. It’s a promotional thingy Robinhood offers currently to new signups.