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M1 Finance Smart Transfers – How do they Work?

Disclosure: Please note that this article may contain affiliate links

If you’re an M1 Plus Member, you get many great benefits that standard M1 investors don’t get and now this includes the exciting benefit of using M1’s latest feature – Smart Transfers.

* This article is about M1s Smart Transfers. If you’re new to investing and are here because you are thinking about signing up with M1 Finance, make sure to check out our in-depth review first.

Up until now, M1 relied on scheduled or manual transfers. For example, you could set up a transfer from checking to your Invest account weekly, bi-weekly, or monthly.

Many investors set up transfers to coincide with their pay dates. You could also manually transfer funds if you found yourself with extra funds or just wanted to invest a little more. This was always a ‘one-time’ deal, though and it took a lot of effort.

You had to manually make the transfer happen. Not that it was the end of the world, but with all the busyness going on today, many investors overlooked perfectly good money they could be investing or transferring to their M1 Spend Plus checking, earning 1% APY rather than sitting idle. Money sitting doing nothing is like throwing earnings out the window.

M1 Smart Transfers changes all of this and more. Now you don’t have to rely on remembering to transfer funds or waiting for the ‘scheduled transfers’ to occur.

Smart Transfers sets up rules that make it easy to automatically transfer your funds.

You don’t have to worry about forgetting, overlooking the opportunity, or not knowing how to handle the transfer.

Here’s how it works.

What are Smart Transfers?

Smart Transfers, otherwise known as cash sweeps, are rules you set up to sweep cash either into your investment account or back into your Spend account based on your rules.

The sweeps focus on ‘overbalances’ and refers to money in your investment account that’s sitting idle (dividend payments or sell payment proceeds) or money sitting in your checking account (Spend) that you don’t need there.

You set the rules and M1 does the rest, putting an end to idle money.

Set up the Rule

First, you set up the ‘rule.’ Choose an account, either your M1 Spend Plus account or Invest account to start. Now set a cash balance that you need in the account.

Example

Let’s look at the Spend account. Let’s say it’s your emergency fund and you need at least $1,000 in there at all times to bail you out of a sudden emergency. $1,000 is then your ‘trigger.’ You set the rule that any money above $1,000 is transferred to your Invest account.

Now anytime you are even $1 over $1,000 in your Spend account, the money immediately gets invested. You don’t have to do anything either.

There’s no more ‘I forgot’ or ‘I didn’t have time’ excuses. The transfer happens without you lifting a finger.

You can set up the rule the other way around too.

Using your Invest account, you can say, any excess money sitting in your Invest account that’s not invested, should transfer to your M1 Spend account to earn the 1% APY offered on this account.

The rule you set up is ongoing – not a one-time deal. If you have the $1,000 threshold in your Spend account, every time your account has more than $1,000, M1 will transfer the funds automatically. It’s a no-brainer.

Rules for the Invest Account

It’s important to clear a few things up about transfers from the Invest account to your Spend account.

First, M1 will only transfer cash. If you don’t have idle cash, no transfer will take place. In other words, M1 won’t sell securities to transfer cash over. The rule only applies to the uninvested money you may have sitting around, which commonly occurs from dividend payments if you don’t have them automatically reinvested or when you sell securities and don’t reinvest the cash.

How to Set up M1 Transfers

Setting up M1 transfers is incredibly easy.

Start by going to the transfers tab and click ‘Move Money.’ You’ll be presented with a list of options – choose ‘Smart Transfers.’ Now choose ‘Spend Overbalance’ or ‘Invest Cash Overbalance.’

You then choose the ‘trigger balance’ and the account to send it to. If you’re setting a rule for your Spend account, you’d enter $1,000 and Invest account. This sets up the rule to send Spend overbalances to your Invest account.

Click ‘Create Smart Transfer’ and you’re done. You don’t have to set the rule up again unless you want to change the parameters.

You can edit Smart Transfers at any time. Just click on the Smart Transfer you want to edit and click ‘edit.’ Make any changes on the screen that you want – just like you did when you set it up, and click ‘Update.’

Pausing Smart Transfers

You can pause Smart Transfers at any time. Go into the transfer you want to pause and toggle off the button for ‘Enable Smart Transfer.’ This pauses it indefinitely until you toggle it back on.

If you decide you don’t want the rule any longer, click on ‘edit’ like you would to change it, but rather than changing the information, click ‘delete.’

The Perks of M1 Plus

If you haven’t jumped at the chance to be an M1 Plus member yet, check out the amazing benefits in addition to Smart Transfers:

  • Afternoon trade window – Standard M1 customers may only trade during the morning trade window. M1 Plus members, however, may conduct afternoon trades, which occur at 3 PM ET.
  • Earn cash back – M1 Plus members receive 1% cashback on all debit card purchases. You’ll receive the cashback on the 10th of the month following the month you made the purchases.
  • Earn interest – M1 Plus members earn interest (1.0% APY) on the final day of each month on their balances in M1 Spend.
  • Lower loan interest rates – M1 Plus members receive a 1.5% lower rate from the standard M1 Borrow rate.

M1 Finance is a Great Option for Traders

Whether you’re a new or experienced investor, M1 Finance offers incredible benefits for traders. With commission-free trades and a hands-on approach, M1 is great for the trader learning the ropes to handle his/her investments without a robo-advisor.

Speaking of trading, check out our comparison of Robinhood and M1 Finance to find out which app we recommend for trading.

M1 offers pre-built portfolios making it easy to choose your investments or you can build your own portfolio, which they call pies. You decide how you want to invest and M1 does the rest. It’s a great tool for any investor who doesn’t rely on heavy research or tools but just wants the ability to invest with a hands-on approach.

Why you Should Use Smart Transfers

It may seem unnecessary to use Smart Transfers, especially if you already have automated transfers set up, but there are benefits.

You set up automated transfers based on your pay dates. But what if something changes? Maybe you get a bonus or receive a monetary gift or a large tax refund. Suddenly you have more cash in your Spend account. Chances are if you leave it there, you’ll spend it, right?

If you set up a rule to automatically transfer the funds beyond a specific dollar amount, though, the temptation to spend isn’t there anymore because M1 will invest the money as you set up in the rule.

Even if you would have transferred the funds eventually, every day costs you money. If you have the rule set up to transfer the money right away, you may invest a few days, weeks, or even months sooner because who knows when you would have gotten around to it.

The more time your money is in the market, the better your chances of greater returns. It may not sound like much, especially if it’s only a few days, but it all adds up – sometimes to thousands of dollars when you look at the big picture.

Smart Transfers, as the name suggests, are also smart. If your balance dips below your threshold, you don’t have to do anything. It won’t transfer funds until you reach and go beyond your threshold again.

Let’s say you had an emergency and you dipped into your Spend account. You now have $500 rather than $1,000. M1 won’t transfer any funds to your Invest account until you replenish the account back to $1,000 and then it will only invest the excess.

There’s More to Come

M1 Finance has also said ‘they aren’t done yet.’ Smart Transfers aren’t fully complete, which means there are more surprises coming your way.

Their hint was this – ‘imagine stringing together a chain of Smart Transfers.’ While we aren’t sure what they’re up to yet, it’s intriguing to know they still have more goodies up their sleeve to make investing with M1 even more enticing.

Conclusion

If you haven’t tried M1 Smart Transfers yet, now is the time! With its new release, more investors are bound to check out M1 and how it works. Smart Transfers is something most brokers don’t have, giving M1 the leg up on the competition.

If you’re tired of forgetting to make transfers or not knowing when it’s okay to transfer funds to your Invest account or the other way around, take advantage of technology and Smart Transfers.

Best for DIY
Account Minimum
$100
Management Fee
0.00%
Portfolio
The user can create portfolios which consist of low-cost ETFs or individual stocks
Account Types
Individual and joint taxable accounts; traditional, Roth and rollover IRAs, trusts and even business accounts.
Rebalancing
Tax Loss Harvesting
Fractional Shares
Automatic Deposits
SRI
Human Advice
Best for
DIY Investors. If you are enthusiastic about getting your feet wet in the investing world, M1 Finance is the robo advisor of your choice
Summary
M1 Finance is the best choice for self-directed investors that want to pick from existing portfolios or customize their own.
Best for DIY
Account Minimum
$100
Management Fee
0.00%
Portfolio
The user can create portfolios which consist of low-cost ETFs or individual stocks
Account Types
Individual and joint taxable accounts; traditional, Roth and rollover IRAs, trusts and even business accounts.
Rebalancing
Tax Loss Harvesting
Fractional Shares
Automatic Deposits
SRI
Human Advice
Best for
DIY Investors. If you are enthusiastic about getting your feet wet in the investing world, M1 Finance is the robo advisor of your choice
Summary
M1 Finance is the best choice for self-directed investors that want to pick from existing portfolios or customize their own.

 

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