I was sorely disappointed when the Loyal3 investing platform was absorbed into FolioFirst last year. Sure it had disadvantages and limitations (limited number of stocks, only batch trade) but as in life, you get what you pay for. A transaction fee of $0 for a buy, $0 for a sale was nothing to sneeze at. With the monthly service fee FolioFirst wanted I figured I’d be ahead in the game by just transferring my shares to my regular broker and paying their $4.95 fee as needed (which isn’t monthly purchases with this group of stocks). I did look at other alternatives (RobinHood, Stockpile, WiseBanyan) but each had their own drawbacks to my way of thinking.
Loyal3 served no purpose other than to be a personal store of value. My personal piggy bank. My monthly surplus went into the account. $10 here, $20 there. Rarely a deposit greater than $50. The point being made (to a handful of observers) was that spare change adds up. From December 2014 to April 2017 this amounted to the tidy sum of about $5,000. No pain, no strain and didn’t miss it. The result – and step by step process map – of this experiment were shared with the subjects and all were impressed. However, not one felt they could afford to part with their spare change though each grasped the concept of compounding. Not one even attempted to replicate the experiment. As Loyal3 closed so did the experiment albeit with an interesting observation regarding human nature.
Recently, my web travels introduced me to a platform similar to the old Loyal3. At least similar in that there are no transaction fees. As a robo-advisor, they do provide portfolios created by ‘experts’ as well as the latitude to build your own. As the consummate do-it-yourself type of guy, I chose the latter. The portfolio structure requires a little bit of a mindset adjustment in that portfolios are referred to as ‘pies’. I created two pies and combined them together into one big pie representing my total portfolio on this platform. My ‘pies’ are called ETFs and Stocks with a current allocation of 50% towards each. These allocations can be changed at any time. Yes, I wandered over to the dark side with my first ETFs ever. Fractional shares are also standard fare with M1.
Generally, if a stock or ETF is traded on the NYSE, BATS or Nasdaq markets it is available on M1 Finance. Prior to funding my account I provided customer service with three potential additions to their company listing. One was a semi-obscure ETF, a stock listed on the NASDAQ-CM and a stock listed on the NASDAQ-GM. Within two days, the NASDAQ-CM listing was added to their group. I have to admit they are at least responsive. The only visible downsides I see are their outbound $100 ACATS transfer fee (but this would likely not apply to most) and US investors only.
Each deposit made is allocated based on the target allocations with an emphasis on bringing the targets back in line. Sales (triggering a possible tax event) will not be performed on this type of rebalance. Purchases are made once per day starting at market open and ending around noon (Central time). Since a purchase price can not be dictated (market orders only), I set my account auto-invest flag to off. On May 1st the futures indicated a down open so I set the flag to on at 4am. At open, my request began processing. After processing I reset the flag to off. Orders are automatically executed once the cash balance in the account is greater than $10 unless the auto-invest flag is off.
As always, I have an underlying strategy – at least with the ETF portion of the pie. On the stock side, not so much. Most stocks I care to own I do already. But if one catches my eye, I may add it as equal weight within the stock pie. The two added as a trial were Greene County Bancorp (GCBC-recent conversion) and Principal Financial Group (PFG). The ETF pie is different in that I identified all the foreign stocks on my watch list and determined which ETFs held the security and weighted based on quantity. As I generally buy foreign stocks in larger quantities and with limit orders, I may sell a respective ETF as I buy the security that interests me. As such, these weightings will probably be modified going forward. At least I now have additional exposure to select foreign markets as a hedge against further weakening in the US dollar.
MY ETF SELECTIONS
||WATCH LIST STOCKS
|iShares Edg MSCI Japan||JPMV||42%||KNBWY, CCOJY, STBFY, NTDOY, ASBRF
|Vanguard FTSE Europe||VGK||25%||CCHGY, CS, EQN.L|
|iShares MSCI-Australia||EWA||17%||BOALY, LLESY, CSLLY
|PowerShares Gl Timber||CUT||8%||ORRAF|
|iShares MSCI Mexico||EWW||8%||EMBVF|
The beauty of this platform is as a low cost entry for no-frills or starter investors. For a $100 minimum there’s little downside. Particularly when using the referral link which nets both of us $10. My intention is to use M1 as my ‘spare change’ piggy bank. Newer investors could conceivably use it this as a primary vehicle. The only cautionary note I would provide would be to start small. If it goes the same way as Loyal3, (and I’m not intimating it would), only full shares would be transferable to another broker. Many newer Loyal3 investors had portfolios so broad they had minimal full shares and many fractionals – which were ultimately liquidated (becoming a taxable event). My recommendation would be to acquire full shares in a few companies prior to expanding into more issues.
Note: Using the referral link embedded in the M1 logo above nets both of us $10 if you choose to open an account.
Do you use M1 or other low cost firms?