If you are just starting out with investing and trading, I’m sure that you will be thinking about opening up an investment account with a third party broker. The services that these brokers offer can vary wildly, and there are pros and cons to each.
Let’s look at two of these brokers – M1 Finance and TD Ameritrade. They operate in very different ways and excel in different areas. I have personally been using both – TD Ameritrade for four years and M1 Finance for over one year now, so I’m going to dig in and show you which I think is best!
Remember, this review is being given in September 2020. As both these platforms evolve, they may add some features and take away others. Always be sure to check the company’s current features before making a decision.
This post contains affiliate links. If you click on the link and purchase the item, I will receive a commission. All opinions remain my own.
First, let’s look at referral links. Both M1 Finance and TD Ameritrade have referral programs; so if you want to earn a bit of money back when your friends or community join with the broker, the most effective referral program is a crucial thing for you to consider.
M1 Finance’s referral bonus is incredible. They have just reached the impressive milestone of two billion dollars in assets – and decided to celebrate by raising their referral bonus to $20 for the month of September 2020! This means that if you register with M1 Finance using my referral link this month, we both get $20 back!
To qualify for this referral bonus, you will need to deposit $100 into a taxable account, or $500 into an M1 Finance IRA. If you choose to use the IRA, you do still need a taxable account, as the $20 referral bonus will be put into that account. After September the compensation will go down to $10 at the same terms, which is still an excellent way to enjoy a bit of extra cashback!
TD Ameritrade also has a referral bonus. At the time of this writing, if you recommend someone and they invest $3000 or more, you will earn a $50 bonus. Additionally, any TD Ameritrade users who deposit $50,000 or more will earn a $150 bonus – this increases on a scale depending on how much they put in. Be sure to check out the current referral details on TD Ameritrade’s website.
Despite TD Ameritrade having a referral bonus where customers can earn more, there is always a strong chance that customers will not put in the necessary $3000. M1 Finance has a more accessible referral program, meaning that it is probably the better option in this regard.
Fractional Share Investing
Now, let’s talk about fractional share investing. Fractional share investing is the main feature of M1 Finance. Using the platform, you can purchase fractional shares of Amazon, Google, Apple, Tesla, and thousands more stocks and ETFs. These start at just $1, so you could say that M1 Finance truly democratizes investing.
Today, TD Ameritrade does not support fractional share investing. Instead, they support DRIPS: Dividend Reinvestment Plans. These mean that if you have a stock that pays a dividend, you can choose to have that dividend buy a fractional share in lieu of getting paid in cash.
M1 Finance certainly comes out tops when it comes to fractional share investing.
Trading and Long-Term Investing
Ameritrade and M1 Finance were both built for different things when it comes to trading and long-term investing. M1 Finance was built for long-term investing, and you can only make market orders on the platform (this means no limit orders).
When you create an order, it gets executed in the next trading window – this is just the next trading day (you may also pay for M1 Plus to have two trading windows per day). You can customize your portfolio with up to 100 stocks, and then set your target percentages, making it really easy to see where you are on your long-term investments.
TD Ameritrade has quite a few different investment choices. Here are some of the things that you can do on the platform:
- Thinkorswim platform for day traders, swing traders, and options traders.
- Limit Orders
- Contingent Orders
- Conditional Orders
- Bonds and CDs
- Mutual funds
And much more! When it comes to trading, TD Ameritrade is without a doubt, the best platform. For long-term investing, M1 Finance has the edge because this is its specialty.
Another thing to consider when choosing a finance broker is automated investing. On M1 Finance, you can set up automated investing weekly, bi-weekly, or monthly. You can even select a day of the week to automatically invest.
TD Ameritrade, on the other hand, has an alternative option for automated investing. This is a professionally managed portfolio that needs to be signed up for separately. Due to the ease of M1 Finance’s services when it comes to automated investing, it is the clear winner in this area.
When using any external platforms and apps, it’s crucial to have visually appealing software. The portfolio visualization of M1 Finance is excellent. You’ll be able to see each of your holdings and what weight they all have when it comes to your portfolio – you can quickly see if any of your stocks are overweight or underweight your set targets. The portfolio is spread out nicely and is easy to understand, and a couple of graphs make the stats more interesting for visual learners.
TD Ameritrade’s feature is called X-ray. With this tool, you can see your holdings in detail, including a plethora of stats from this screen. You can see everything you need with X-ray. Both M1 Finance and TD Ameritrade look great and have layouts that make it easy to manage your portfolio. They both look excellent, and it’s impossible to say which is better!
Next up, let’s look at stock analysis. There isn’t a tremendous amount of information into stocks on M1 Finance. You’ll be able to see a bit of high-level information and some news, but that is pretty much it. On the other hand, TD Ameritrade has plenty of opportunities to analyze your stocks. For example, the CFRA report gives up to 10 years of data on stocks. You can do all of your stock research just on TD Ameritrade; it’s that good!
It is unsurprising that I think TD Ameritrade is far superior when it comes to stock analysis.
Every client-focused company should have excellent customer service. If something goes wrong with your stocks, you’ll want to have the best system possible to resolve it. M1 Finance doesn’t have a physical location to visit, and it is difficult to find a phone number on their website.
This means that the primary way to get in touch with them is via email. They do not have a live chat feature on their website, but they do reply to emails during weekdays from 9:30 in the morning until 4:00 in the afternoon Eastern Standard Time. They are not available on weekends or evenings.
TD Ameritrade, on the other hand, is very present when it comes to customer service. Whenever I’ve called them, I have been able to speak to someone within just a couple of minutes; their phone lines are also open 24/7. They also offer support via Facebook Messenger, Twitter Direct Message, and text message. This can be beneficial for people who cannot ring the office but would like quick support.
Customer service representatives are always friendly and have an incredible depth of knowledge about all of their services. TD Ameritrade also owns physical offices in plenty of locations, so it’s certainly possible to walk in and speak to someone instantly.
Both services have a mobile app that can be downloaded onto Android phones, iPhones, or tablets. This means that you don’t need a desktop to do any of your trading. It can be done quickly on the go! Both apps are high-quality and function well. So there is no clear winner in this category. It’s a tie!
Commission-free trading is something else that is worth considering. While this is not offered across the board with brokers, both M1 Finance and TD Ameritrade do provide this benefit.
M1 Finance vs TD Ameritrade – what is best?
The perfect program for you depends on what you need and want from your broker software. If you think you will be making lots of referrals, you will probably want to go for M1 Finance. M1 Finance is also the program to choose if you are interested in fractional share investing, long-term investing, and automated investing.
However, if you are more interested in trading and require a lot of information for stock analysis, TD Ameritrade might be the better option for you. You’ll benefit from superior customer service as well!
Both programs are commission-free, have an excellent mobile app, and wonderful portfolio visualization, and on the whole, they are both amazing tools that can give your trading and investing a boost.
It’s also important to consider where you are on your trading journey. M1 Finance might be better suited for beginners due to its focus on long-term investing. TD Ameritrade is, however, an excellent platform for advanced traders.
So, M1 Finance or TD Ameritrade? They both have their good and not-so-good features, and it all comes down to personal preference. Hopefully, this article has helped you decide which one would work best for you. Alternatively, if you are a trader and long-term investor, you could always try both!
If you’re signing up for M1 Finance, please consider using my referral link. We’ll both get rewarded!
I/we own shares of Amazon (NASDAQ: AMZN)
Except for Wolves of Investing, I/we are not receiving any compensation from and do not have any business dealings with any companies whose stocks are discussed in this article.
DISCLAIMER: I'm not a financial advisor. These are my opinions and provided "as-is". It is not an offer to buy or sell securities. Read the Terms and Conditions.
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Donnie Nguyen is the founder and CEO of Wolves of Investing. He started investing in the stock market in the early 2000s. He follows the teachings of Peter Lynch, Warren Buffett, and other investing legends. When he's not investing or blogging, he loves spending time with his family traveling and experiencing the world.
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