There are plenty of options out there for day traders looking to dive into the thrilling world of short-game investing.
But what if you’re not looking to unleash your inner Gordon Gekko, and just want to start saving for retirement? What options exist for long-term investors?
In this piece, I’ll investigate three brokerage apps for aspiring long-game investors: M1 Finance, Vanguard, and Fidelity. Which is best for beginners? Experienced day traders? Which offers the lowest fees, and which will help you learn the fastest?
Let’s investigate long-term investing platforms.
M1 Finance vs. Vanguard vs. Fidelity summary
M1 Finance and Vanguard are both brokerage platforms designed for long-term investing. Fidelity is a massive brokerage platform in general that offers long-term investment options robust enough to compete with its purpose-built rivals.
Let’s dive into some key differences.
|Trade fee||$0||$0 + $1/contract option||$0 + $0.65/contract option|
|Margin rates||2% for M1 Plus Accounts
3.5% for Basic M1 Accounts (Rates are variable)
|Up to 8.5%
(2.5% interest rate plus 6% base rate)
(Rates are variable)
|Up to 8.325%
(Rates are variable)
|Tradable assets||Stocks, Fractional shares, ETFs||Stocks, ETFs, Mutual funds, Options, CDs||Stocks, Fractional shares, ETFs, Mutual funds, Options, CDs|
|Platforms||iOS, Android, Desktop||iOS, Android, Desktop||iOS, Android, Desktop|
|In-app analytics||None||None||Real-time insights and data visualizations driven by 20 third party providers|
About M1 Finance
M1 Finance is the new kid on the brokerage block, handling “just” $2 billion in total assets (compared to Vanguard’s $6.2 trillion). However, that’s double the assets it held just six months prior, so investors (and competitors) are taking notice of M1’s meteoric growth.
Launched in 2015, M1 Finance is a platform built around a “fire and forget” strategy to long-term investing. Also known as passive investing or “lazy portfolios,” these are investments that you make and simply leave untouched for decades, giving them time to mature.
Features that support this low maintenance strategy include free access to over 80 expert-built portfolio options, fractional shares for precision portfolio mixing, and dynamic rebalancing, which automatically updates your stock/ETF ratio over time to help you hit your investment goals.
Although M1 Finance is short on securities and account options, it more than makes up for it in low margin fees and UI design.
A more experienced player in the long-term broker game, Vanguard currently maintains over $6 trillion in total assets, making it the largest mutual fund company in the world. What that translates to for long-term investors is experience, stability, and options. Lots of options.
Vanguard’s chief advantage over M1 Finance is that it offers more ways to invest and more account types to keep your money in. In addition to stocks and ETFs, Vanguard lets you invest in mutual funds, options, and CDs, all of which are stable ways to support a healthy retirement portfolio. Plus, unlike with M1, you can store your earnings in a wider variety of account types, including 401(k), custodial, SIMPLE IRA, and 529 accounts.
Its margin fees are much higher than M1 Finance’s but Vanguard (reportedly) offers better customer service; in a time of confusion or crisis, having direct access to a human rep at your broker could literally pay off.
There’s a reason you’ve already heard of Fidelity. A stalwart titan in the broker space, Fidelity manages a whopping $8.3 trillion globally and offers both short- and long-term investors an endless suite of tools and options.
If M1 Finance is a Swiss Army Knife and Vanguard is a toolbox, Fidelity is an entire Home Depot. There’s no tool, chart, or forecast you can’t find, but the tradeoff is that it can all feel pretty overwhelming. To flatten the learning curve a bit, Fidelity offers a robust Learning Center for beginners to ease into the world of investing and 24/7 access to customer service via online chat.
Fidelity is the only platform here suited for both short- and long-term investing. M1 Finance and Vanguard offer very little in the way of real-time trends, forecasting, and analytics. Again, those platforms are more designed for “lazy portfolios” and don’t expect their users to keep a trading window open 24/7. Fidelity is the opposite, offering real-time analytics from 20 third party vendors, and will even help match you to a specific forecaster based upon your goals and preferences.
By offering a holistic approach and a limitless toolkit, Fidelity is ideal for the hands-on long-term investor who’d like to keep day trading or begin to learn how.
M1 Finance vs. Vanguard vs. Fidelity investment performance
Where will your investments perform the best: M1 Finance, Vanguard, or Fidelity?
There’s no objective answer. Your money could just as easily grow in a freshly baked M1 Pie as it could in an aging Vanguard mutual fund.
Instead, let’s zero in on the different assets, account options, and more subtle fees each platform charges. Through this lens, we’ll start to see some pretty clear differences emerge.
M1 Finance investment options
Right away, M1 Finance loses a few points for offering such limited securities options: stocks and ETFs only. You can trade fractional shares which helps, but the inability to trade options, mutual funds, or CDs is a bummer considering these types of securities are known for lending stability to long-term portfolios.
M1 Finance does offer over 6,000 exchange-listed securities and 80 expert-built portfolios with free access. But because you only have access to two types of securities, your “M1 Pie” aka portfolio will always feel like a burger without lettuce and tomato; delicious, but incomplete.
That being said, M1 Finance’s lack of management fees greatly ameliorates its lack of tradable assets. M1 Finance is a robo-advisory firm, meaning a well-maintained AI is trading for you, not a human. If that sounds unsettling, consider that virtually all large brokers leverage AI in some capacity. It’s cheaper for them (thus cheaper for you), and AI traders can react instantaneously, making trades 24/7 for maximum returns.
Thanks to low overhead, M1 Finance charges no trading fees, no commissions, and by far the lowest margin rates in this comparison – just 3.5% for a basic account, and 2% for an annual M1 Plus account ($125 per year).
In addition to a basic brokerage account, M1 Finance only offers three types of retirement accounts (but they might be all you need). Through M1 you can open a Traditional IRA, Roth IRA, or Simplified Employee Pension (SEP) IRA.
Vanguard investment options
Calling back to my earlier analogy, if M1 Finance is a Swiss Army Knife, Vanguard is a toolbox: more expensive but more useful.
Vanguard’s chief advantage over M1 Finance is choice. A larger and more experienced broker in the long-term investment space, Vanguard offers a more comprehensive suite of both securities and account types to customers.
First, let’s talk about securities. In addition to stocks and ETFs, Vanguard offers mutual funds, bonds, CDs, and options contracts. Bonds and CDs especially can greatly help stabilize a long-term portfolio, so their availability here represents a big leap over M1 Finance’s slim offerings.
Vanguard also offers more account types. In addition to Traditional, Roth, and SEP IRAs, Vanguard offers the option to open a Solo 401(k) or SIMPLE IRA for self-employed folks or small business owners, and custodial accounts and 529s for minors saving for retirement or college respectively.
That all being said, Vanguard isn’t just M1 Finance with more features (or else the choice would be obvious). Its chief drawbacks are usability and fees.
First, the Vanguard app doesn’t reach the bar of quality set by M1 Finance. It lags behind in usability, intuitiveness, and sheer visual appeal. Plus, Android users especially complain of an apparent lack of optimization, facing crashes, login failures, and missing buttons.
Second, Vanguard charges higher fees and margin rates. Annual fees hover around $20 per account and its margin rates for accounts under $100,000 range from 7.50% to 8.50%. Plus, Vanguard requires a minimum account balance of $3,000 to invest in an actively-managed mutual fund.
Fidelity investment options
Fidelity competes with Vanguard and M1 Finance in the same way Chili’s competes with Five Guys and your local gourmet burger joint. It may not specialize in burgers, but darn if those burgers are good enough to compete.
Fidelity is both a short- and long-term investment platform. Its endless array of tools and analytics is designed to help everyone make money, from professional day traders to beginner high school students. It offers every account type that Vanguard offers plus dozens more, most notably HSAs. Plus, Fidelity offers every conceivable security and absolutely no fees aside from annual account management fees ($0 for accounts <$10,000, $36 for accounts $10,001-$49,999, and 0.35% of balance for accounts $50,000+)
So if Fidelity offers virtually everything Vanguard offers and more, what’s the catch? Well, its selection of low-cost mutual funds lags behind Vanguard’s, but most notably, Fidelity is just massive.
By its very nature, Fidelity is much more complex and intimidating than M1 Finance or even Vanguard. Case in point, Fidelity’s free desktop trading app is called Active Trader Pro and gives you access to analytics, tools, and professional forecasts from 20 different third party vendors. For better or worse, Fidelity piles on information and tools.
Fidelity flattens its learning curve a bit by offering a robust Learning Center, but investors simply looking to open a retirement account and let it mature may find Fidelity to be a bit overkill. On the flip side, if you have faith in your day trading skills and would like to be more hands-on with your retirement accounts, Fidelity is the obvious choice. Of the three brokers here, Fidelity is the only option offering the tools and analytics necessary to effectively day trade.
M1 Finance vs. Vanguard vs. Fidelity investment performance summary
Your choice between M1 Finance, Vanguard, and Fidelity will depend upon how hands-on you’d like to be with your retirement accounts. Each has distinct and deliberate pros and cons designed to attract certain types of investors.
M1 Finance vs. Vanguard vs. Fidelity pros
M1 Finance pros:
- Sleek interface – M1 Finance has by far the simplest and cleanest UI here. It’s easy to use and not at all intimidating.
- Fractional shares – If you’d like to add high-value stock to your portfolio, M1 Finance enables you to buy fractional shares.
- Dynamic rebalancing – M1 Finance is the only competitor here to automatically rebalance your portfolio from, say, 60/40 to 70/30 to keep you on track to your goals.
- Good customer service – Vanguard’s live customer service is available from 8 am to 8 pm on weekdays, and users report high levels of satisfaction with their help.
- Nice variety of account options – Vanguard offers more account options than M1 for long-term investors, including 401(k)s, custodial accounts, SIMPLE IRAs, and 529s.
- Large selection of low-cost mutual funds – Vanguard is a global leader in mutual funds, making it a superb choice for stable, long-term portfolios.
- Enables day trading – Fidelity is the only broker here that fully enables day trading in addition to long-term investing.
- Limitless securities and account options – A titan in the broker space, Fidelity offers dozens of account options including HSAs.
- A better learning platform – With an endless array of tools, functionality, and a robust Learning Center, Fidelity is the best option here for traders looking to hone their craft.
M1 Finance vs. Vanguard vs. Fidelity cons
M1 Finance cons:
- Stocks and ETFs only – M1 Finance does not offer mutual funds, options contracts, CDs, or other common long game securities.
- No day trading support – Designed as a streamlined and hands-off platform, M1 Finance lacks support for instant trades and analytics.
- Limited account options – In addition to basic brokerage accounts, M1 Finance only offers three types of IRAs: no small business accounts, custodial accounts, or HSAs.
- No fractional shares – Vanguard doesn’t support trades of fractional shares, pricing out many users from buying into high-value stocks like TSLA.
- High fund minimums – Vanguard requires a minimum account balance of $3,000 to invest in actively-maintained mutual funds.
- Clunky interface – Vanguard consistently loses points from users for a clunky, outdated, and sometimes dysfunctional trading platform.
- Complex and intimidating interface – Designed to support day trading, Fidelity can overwhelm new users or those simply looking to set up a hands-off retirement account.
- High advisory fees – Fidelity charges a $36 annual fee for accounts with balances over $10,000 and 0.35% for balances over $50,000. It’s not much, but it’s still more than the competitors here, and those fees can quickly add up over decades.
- Mutual funds may not compete – Fidelity offers fewer mutual funds that are higher cost compared to Vanguard: something to consider for long-term investors.
Why choose M1 Finance?
Ideal for low maintenance “lazy portfolios”
Maybe you have no interest in day trading and simply want to set up a retirement account and forget about it. If so, M1 Finance is the platform for you. It’s free, simple, and effortlessly easy to use, plus it rocks two features ideal for hands-off investors: expert portfolios and dynamic rebalancing.
Put this all together and you have a pretty ideal “lazy portfolio” platform!
Simple UI is ideal for beginners
If you’re nervous or intimidated by the prospect of investing and saving for retirement, M1 Finance is a great place to start. Its UI is crisp, simple, and intuitive, taking the frightening guesswork out of setting up an investment account.
Expert-crafted “M1 Pies” take the guesswork out of investing
You can always customize your own “M1 Pie” aka portfolio with your own choices of stocks and ETFs. However, if you’d rather let an expert pick your investments for you, M1 Finance gives you free access to over 80 expert-led M1 Pies where your money can safely multiply in good hands.
Why choose Vanguard?
Access to more types of long-term securities and accounts
Vanguard is a purpose-built long-term investment platform like M1 Finance but with greater access to more securities and account types. If you know your investment options and would like to keep a diverse portfolio of mutual funds, bonds, CDs, and other stable long-term securities, Vanguard is the broker for you.
Plus, if you’re a minor, self-employed, and/or a small business owner, consider that Vanguard offers account types more suited to you, including 401(k)s, custodial accounts, SIMPLE IRAs, and 529s.
Class-leading access to low-cost mutual funds
Many folks like to keep a healthy mix of mutual funds in their long-term investment portfolio because while they’re a bit riskier than CDs, they offer higher potential upside.
If you like the idea of handpicking mutual funds, Vanguard is the clear choice here. A global leader in mutual funds, Vanguard offers the best quality, variety, and value of mutual funds.
Solid reputation for customer service
Vanguard maintains a good reputation for customer service in terms of availability and reliability. Users report quick turnaround time for email queries and good satisfaction with live agents, who are available 60 hours per week.
By comparison, M1 Finance’s live agents are only available from 9 am to 5 pm on weekdays, and users report turnaround times of days, not hours. Fidelity carries an equally solid reputation for customer support, but agents may be less specialized in their knowledge of long-term accounts and securities.
Why choose Fidelity?
A robust platform that supports day trading
Simply put, if you’d like to be hands-on with your retirement accounts and mix in some short-term trades, Fidelity is the platform for you. It’s the only option here that fully supports both short- and long-term investing, allowing you to open all kinds of brokerage and investment accounts and easily move money between them.
If the idea of handling your own retirement account excites and empowers you, choose Fidelity.
Virtually endless learning center empowers new investors
If you think you’d like to become an amateur trader one day, becoming fluent in Fidelity’s tools and the interface is, in itself, a good investment.
You can spend months learning all about short- and long-term trading in its Learning Center, all for free, and you’ll sharpen your trading skills faster with Fidelity than with its two simpler, compartmentalized competitors.
High fees, but you get what you pay for
Fidelity charges a $36 annual fee for accounts with balances between $10,000 and $49,999 and a 0.35% fee for accounts $50,000+. If you value the broker’s endless list of tools and EDU materials, it’s a small price to pay.
However, if you don’t plan to use your broker for anything but a “lazy portfolio,” 0.35% is a high price to pay. $35 coming out of a $10,000 portfolio each year may not sound like much, but as your account matures over decades it can add up to hundreds, even thousands. You’d save this money with a no-fee service like M1 Finance or Vanguard.
If you like the idea of opening a retirement account and letting the experts handle it and forgetting about it for years, M1 Finance is the perfect option.
If you’d like to mix in a few additional types of securities beyond stocks and ETFs, open a specialized retirement account, or even make a handful of trades yourself, Vanguard is the best middle-of-the-road option.
Lastly, if you’d like to keep day trading (or learn how), Fidelity is the best choice of the three. Offering an endless suite of tools, analytics, securities, and account options, Fidelity may overwhelm newbies but delight aspiring traders and hands-on investors.
The only wrong option is to not invest anything at all!