M1 Finance and eToro both have great options for investors of all levels in the United States, particularly those looking to copy the moves of other investors. But, when put to the test, which copy trading app do we recommend?
Here are some facts to get you started:
- Founded in Tel Aviv in 2006
- Founders: Yoni Assia, Ronen Assia, and David Ring
- Tradable assets: Cryptocurrency (for U.S. traders)
- Available in over 60 countries around the world, including those in Europe, Africa, South America, Asia, Australia, and most states in the U.S.
- Fees: varies based on where you are, but includes an account minimum, inactivity fees, and a withdrawal fee
- Mobile and web availability
- Founded in 2016 in the United States
- Founder: Brian Barnes
- Tradable assets: stocks and ETFs
- Available in the U.S.
- Fees: low overall, but to access more tools $125 per year for M1 Plus. Inactivity fee.
- Mobile and web availability
*This article focuses on how U.S. traders can use eToro. For investors outside the U.S. who are interested in eToro, read our review of eToro vs. Degiro and eToro vs. Trading 212.
Fees: How low are they really?
M1 finance is a very low cost investing option. There is no fee to open or manage the account. ETFs on the app have low fees and stocks have zero. But, in order to access some of their more advanced features on M1 Plus, you’ll have to pay a yearly sum of $125. If your account is inactive for a long period of time you will also have to pay an inactivity fee.
Some of the features on M1 Plus include:
- Second trading window in the afternoon
- More account options, such as custodial accounts
- Lower interest rate to borrow money (2% versus 3.5% on the free version)
- 1% cashback and 1% APY on your Spend account (they offer a debit card to access it)
- Reimbursement of international fees
- 4 ATM fees a month reimbursed
eToro’s fees depend on where you are. In the United States, where you can only trade crypto, eToro’s fees depend on the coin. There is a low account minimum. You also must pay a withdrawal fee and inactivity fee.
Image: The pie system on M1 Finance is easy to use and intuitive. Image from M1finance.com
The M1 Pie System
One of the shining features of M1 Finance is their pie system. You can view your portfolio in a pie chart to see the exact breakdown of everything you’re investing in. You can also view “sub pies,” or pies of the pie, to see the breakdown of each individual slice.
Expert Portfolios, which are portfolios of verified investors on the app, are easily viewable and can help you determine what kind of pie breakdown you should have.
There are also over 60 pre-made pies you can select to put your money in, kind of like an ETF created by the app. The pies are broken down into different categories, including retirement planning, social responsibility, and general investing based on your risk tolerance.
This system makes seeing the exact breakdown of your investments easy and intuitive. We like how you have the option to copy pre-made pies or to make your own, making it an app for people of all investing skill levels.
Make Money on Your Knowledge with eToro
One of the defining features of eToro is called Copy Trading. With this feature, investors can “copy” savvy, verified Popular Investors. With just one click, investors can sit back and watch their portfolio track the trades of the trader they copied.
Investors don’t have to copy the exact dollar amount of the Popular Investor. Instead, investors set their own parameters so they can copy the trades of the savvy financial guru at just a fraction of the amount the Popular Investor is using.
We like this option for both sides: skilled investors can apply to become a Popular Investor and make money by gaining a following of copiers. On the other side, investors who want to make the moves of a trader who studies the markets constantly but doesn’t have time to do so themselves can see major gains on their portfolio.
Image: The copy trading feature makes it easy for U.S. traders to make the same moves as other top cryptocurrency traders. Image from etoro.com
Tax Minimization on M1
Some robo-advisors, such as Wealthfront (read our full take on Wealthfront), offer tax-loss harvesting. This means that Wealthfront sells your securities at a loss to offset taxable gains.
M1 Finance takes a different, but still advantageous, approach.
They employ a tax minimization strategy, which means M1 helps you sell your assets in a more tax-advantaged way. M1 prioritizes the sale in the following way:
- Losses that offset future gains
- Lots that result in long-term gains
- Lots that result in short-term gains
While it might not be quite as effective as the tax-loss harvesting strategy has proved to be, tax minimization is still a great benefit to an app that offers a wide variety of investing options. Read more about how tax minimization works on M1 Finance here.
Cryptocurrency on eToro
For U.S. traders, you are limited to cryptocurrency on eToro. But nowadays, crypto is not limiting in the slightest!
eToro offers 15 coins to trade, which is more than many other brokerage apps. And being able to copy traders of cryptocurrency on eToro is very advantageous, since crypto is a difficult market to predict and is highly volatile.
For investors who don’t want to spend time researching coins and want to exactly match the moves of another trader, eToro is the way to go.
Image: Socially-responsible investing is easy on M1 with their “community pies.” Image from m1finance.com
Educational Tools
M1 has a fairly extensive blog that outlines basic trading principles and defines complex terms for beginning traders. The pies available to view are educational tools in themselves, since you can learn from what the traders are doing.
eToro has a similarly structured blog to M1. They also have some educational videos, which are very helpful for investors just getting started. Finally, their financial markets guides give more detailed information on cryptocurrency and how it works.
M1 Finance and eToro have a large library of educational tools for getting started. When using M1 Finance and eToro, the educational tools are slightly different but should nonetheless offer the tools from which beginners are likely to benefit.
Cons of M1 Finance
One of the major cons of M1 Finance is that they don’t offer cryptocurrency trading.
Since M1 is only available in the U.S., if you’re a trader from outside of the United States, you cannot use M1.
Cons of eToro
Within the 41 states where eToro is allowed, you can only trade cryptocurrency. However, with crypto being a growing, dynamic market, being able to copy the trades of investors solely investing in crypto can be highly advantageous.
Which copy trading option is better?
Both apps have the option to copy or mimic expert portfolios so busy investors who don’t have time to extensively study the markets can make great investing choices. But which app does it better?
To start off, if you want to invest in cryptocurrency while copying the moves of other traders, eToro is the option for you. But if you want a wide range of assets that you can manage yourself or select pre-made pies for, and are doing your crypto investments elsewhere, M1 Finance is the way to go.
A great thing about eToro is that you can determine how much money you want to trade, click one button, and watch your trades map the investor you chose. This makes it incredibly easy to become an investor, but it also incentivizes taking the easy way out. We like apps that give a lot of choices, but we also advocate for studying the markets, learning the ins and outs of investing yourself, and then making measured decisions based on what you’ve learned.
M1 Finance, on the other hand, is a robo-advisor that gives you control. You select the pies you want to invest in, whether pre-made by the app or made by yourself, and then M1 automatically rebalances your portfolio for you.
Picking a pie used by experts is similar to the CopyTrader feature on eToro, but we like that M1 gives you more control. Instead of copying one entire portfolio, you can mix and match, taking the pieces that best suit your investing goals. By mixing your own investing knowledge with that of experienced traders, you’re learning while you’re getting the benefits of seeing what the pros do.
Image: eToro started serving the U.S. market with cryptocurrency trading in 2017. Image from etoro.com
Our View
For traders in the United States, we believe M1 Finance is a better fit than eToro.
We like that M1 Finance has the advantages of a robo advisor while still giving you the freedom to choose what suits you best. eToro has a great copy trading feature as well, but it’s more hands-off and doesn’t give you as much control over your money.
M1 also has the visually-pleasing, easy to use feature of the pies. We like that you can quickly see the breakdown of all your finances in an intuitive pie format.
We also like the tax minimization feature on M1. This makes it easier to keep more of the money you earn.
Finally, because M1 Finance is a U.S-only app, it is made for investors in the United States and has all the features they need. eToro has great international appeal, but there are more restrictions in the U.S. and you have to make sure your state allows you to use it.
One of the great things about these two apps is that you can use both of them together. With eToro, you can make your crypto trades, and with M1, you can trade nearly everything else you’re looking for. Diversify your portfolio even more by using a variety of tools and then seeing which one works better for you.
Overall, we recommend M1 Finance as the best copy trading app for U.S. investors. For investors outside the U.S. who are interested in eToro, read our review of eToro vs. Degiro and eToro vs. Trading 212.
Q&A
Who can become a Popular Investor on eToro?
Essentially, anyone! But you have to follow a few basic standards, such as a maximum risk score of 7 and recent activity on the app.
When I copy a trader on eToro, do I have to invest the same amount of money as they do?
No, you do not have to directly copy the dollar amounts of the trader you’ve selected to copy on eToro. Exact dollar amounts are hidden from portfolios, so you wouldn’t be able to make that choice, anyway. Just put in the amount of money you want to invest, and the app calculates it out for you.
Is M1 Finance in the U.S.?
Yes, M1 Finance is available in the United States.
Is eToro in the U.S.?
Depending on which state you live in, you can use eToro to trade cryptocurrency. Here’s a list of states where the app is available.
Does M1 Finance have crypto?
No, M1 Finance does not offer cryptocurrency.
Does eToro have crypto?
Yes! eToro offers cryptocurrency trading in 41 states in the U.S. They have 15 popular coins.
Is M1 Finance safe?
Yes, you can be sure your money is safe on M1 Finance. It is SIPC insured up to $500,000 per account.
Is eToro safe?
Yes, eToro is a safe, secure app to use for your trading. They are licensed and insured.
Is M1 Finance a robo-advisor?
Yes, M1 Finance has a robo-advisor option, where the funds in your “pies” automatically rebalance. M1 is not an all-encompassing robo-advisor like Wealthfront or Betterment. Instead, you get more control over your money.
Can I day trade on M1 Finance?
No, M1 Finance only trades once a day and is not a good option for day traders. M1 Plus gives two trading windows a day.
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