M1 Finance, a personal finance platform with more than $5 billion in assets, announced last week that clients would soon be able to allocate funds toward crypto portfolios. Investors will be able to choose the percentage of recurring deposits they want to be allocated and choose from 10 cryptocurrency coins to put funds toward in crypto portfolios designed by investors or by M1 experts, the company said.
Crypto investing isn’t currently up yet on M1’s platform, but M1’s investors can sign up on a waitlist to begin crypto trading on its new interactive portfolio dashboard called Pies. M1, however, didn’t provide a date when investors will be able to start crypto trading other than to keep an eye out for it in the coming months.
Available cryptocurrency includes Bitcoin, Ethereum, and, according to the company’s blog post, “other large-cap liquid crypto assets.”
M1 looks to remove some of the barriers to investing by automating certain aspects of investing like fund allocation, risk management, and recurring investments. With M1, it’s less about trading and more about long-term investments through portfolio management.
“In our investing vertical, it’s automated investing, so it’s somewhat like a robo advisor, but you’re able to customize your portfolio to your heart’s content,” Brian Barnes, M1 CEO and founder, told ZDNet. “So, you can choose the individual stocks and [exchange-traded funds (ETFs)] that comprise your investment portfolio. It’s almost a blend between an online trading brokerage and a robo advisor. We think it combines the best of both worlds into something that’s better than either,” Barnes added.
Investors can choose what percentage of funds they want to allocate to stocks — and soon-to-be crypto — and set up recurring deposits on a weekly, biweekly, or monthly basis. The minimum investment amount is $100, but no other fees are associated with the platform. Clients can sell and take money from the platform whenever they like, without incurring any fees.
Users can design their own portfolios when setting up their investments based on their own risk tolerance and investment philosophy and then choose to allocate funds to the portfolios of their choice continually.
“This gets into M1’s difference versus a robo advisor,” Barnes said. “[With robo advisors,] you tell them you have a 7-out-of-10 risk score, and they give you a portfolio based on that. With M1, you design your portfolio with whatever you want, but it’s on a percentage basis. So [investors] say, ‘I want 10% of my money in this investment and 10% of my money in this investment.'”
Beyond recurring investments, investors can also set up investing rules they’d like their account to follow. For example, if your M1 checking account reaches a certain balance, you can set it so that M1 moves the excess cash into the portfolios of your choice.
“There’s a lot of ways to set up automatic rules, to say, ‘until I tell you differently M1, just run these rules’ and money just goes to work where you want it to,” Barnes said.
M1’s investing platform also has a feature called “dynamic rebalancing” as a way to automate the buy low, sell high investment strategy, add some protection against volatility, and avoid taxable events.
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“Let’s say you want half of your money in one investment and half of your money in another,” Barnes said. “Investment A and Investment B. If ‘B’ goes up a lot, it becomes more than 50% of your portfolio, and so as new money comes into the platform, we’re going to direct it to ‘A’ until it matches 50%, and then we’re going to split it up 50/50.”
Investors choose a target allocation of how much they want to invest and in which portfolios and dynamic rebalancing always makes sure that target is hit.
“With dynamic rebalancing, we are doing as much as we possibly can without having to sell securities to push you toward that allocation,” Barnes said. “You’re staying very tight on that allocation without having to have taxable events. So the process is put more money into underweight securities, it minimizes the need to have taxable events, it maintains the risk weighting of what you want, it maintains diversification, and it automates buy low, sell high.”
In addition to its automated portfolio investing platform, M1 features a checking account, a borrowing product, and a credit card and a debit card.
M1’s checking account features an annual percentage yield (APY) of 1.70%, which — according to the FDIC — is well above the national average of 0.10%. The debit card links to the account and earns 1% cash back on purchases.
M1’s Owner’s Rewards Card has the unique reward structure of offering higher cashback rates when making purchases with retailers that the cardholder owns stock in. Cardholders can earn up to 10% cash back with eligible merchants. According to Barnes, M1 has about 70 brands across industries such as retail, airlines, online shops, and gas stations.
At a time when inflation was measured at 9.1% in June, having passive income from automated investing, a high-yield checking account, and a credit card that could earn 10% for gas purchases would go a long way for customers struggling with the rising cost of goods.
“I think we have a different mindset [compared to traditional banks] where we try to push as much as we feasibly can back to the customer,” Barnes said. “We definitely don’t have a silver bullet [for inflation], but earning more on cash and making it easier to invest are the two easiest ways to protect against a higher cost of living.”