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Does M1 offer DRIP service? M1 Finance dividend reinvestment program fees on stocks, ETFs, and mutual funds.

Dividend Reinvestment Plan at M1 Finance

If you have a brokerage account at M1 Finance, it’s possible to have cash dividends reinvested in existing holdings. However, the brokerage firm does not have a traditional DRIP service.

Auto-Invest

Instead of a Dividend Reinvestment Plan, M1 Finance offers something called auto-invest. With this system, once an account’s cash balance reaches $10, the free cash balance is automatically invested in Pies.


M1 Finance DRIP


A Pie is a basket of investments, either stocks or ETF’s or a combination. M1 creates its own Pies, and customers of the broker can create their own. When cash is invested in a Pie, either from a dividend or a deposit, the funds are allocated to target percentages.

For example, say a Pie had 20% invested in ExxonMobil, 50% in an S&P 500 ETF, and the last 30% invested in Facebook. A $100 cash deposit would be invested at those ratios—$20 in XOM, $50 in SPY, and $30 in FB.

Because M1’s Pies invest in fractional shares of securities, it’s possible to invest whole-dollar amounts in stocks and funds.


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Adjusting Preferences

It’s possible to adjust reinvestment settings inside an M1 Finance account. To find the control panel to do this, click on ‘Invest’ in the top menu inside an M1 account, and then chose ‘Funding’ in the lower menu that appears. Here, you’ll see a section that says ‘Cash balance control.’

The default setup is to auto-invest any cash balance above $10. This threshold includes deposits and dividends. If you get $9 in total dividends and don’t deposit any money (or vice versa), no additional investments will be made. The cash balance must reach $10 before M1’s software program does anything.

Once the $10 threshold is breached, M1’s robot will automatically invest the funds into the account’s portfolio, which is one or more Pies.

The second option is set up auto-investing when the cash balance reaches a certain level. For example, it’s possible to set the level to be $800 and any cash amount above $800 will be automatically invested. If you deposit $1,000, then $200 would be invested.

The third and final option is simply to turn off auto-investing and invest cash balances manually.

Traditional DRIP Service Compared to M1 Finance’s System

Under a traditional DRIP service, cash dividends from a specific stock are reinvested as additional shares of that stock, and that stock only. Under M1’s system, cash dividends from one stock or ETF are used to purchase additional shares of all the securities in an account’s Pie or Pies.

For example, say you own 50 shares ExxonMobil, and it pays a dividend of $1 per share for a total of $50. That $50 will be used to purchase additional shares of ExxonMobil, and the two other securities in your Pie: Facebook and the S&P 500 ETF. Effectively, you’re getting fewer XOM shares and more shares of the other investments. And M1’s algorithm will buy according to target percentages.

Good arguments can be made for either system. The important point is to be aware of how the two systems work and make an informed decision.

Open M1 Finance Account

$100 bonus to transfer a brokerage account with $20,000 or more.

Open M1 Finance Account

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