What is M1 Finance?
M1 Finance (“M1”) is an investment brokerage that is known primarily for helping investors implement asset allocation strategies through investment “pies”. Like brokerages such as Webull and Robinhood, M1 offers free trading which seems to capture the attention of many traders, including myself. Feel free to find out more details on http://www.m1finance.com/.
My Trading History
In 2016, I started trading with Robinhood and Motif — these were great starting apps. I would day trade when I’m free, swing trade, play earnings, etc. Soon after, I realized the dangers of trading with emotions and started transitioning towards more systematic methods of investing. After about a year of trading, I realized I had to become educated (and almost emotionless) if wanted to do well. I’ve also tried out Stash, Acorn, Prosper, Betterment, High Yield Savings Accounts, M1, and many more investments tools. At this point, to control my emotions and not loose thousands of dollars per second (anymore), I’ve found that M1 Finance has worked best. They say that the proof is in the pudding – so I often reflect on my trades, mistakes, and overall results to determine how to move forward.
In terms of education, as part of my masters I’ve taken a Financial Engineering course and I spend every hour absorbing investment knowledge and skills. In the past two years allow, I’ve read the following books:
- The Intelligent Investor by Ben Graham
- Common Stocks and Uncommon Profits by Philip Fisher
- Irrational Exuberance by Robert Shiller
- Principles, by Ray Dalio
- The Little Book of Common Sense Investing
- Stock Investing for Dummies
- The Richest Man in Babylon
- One Up On Wall Street
These books are only a subset of the knowledge sources I’ve passionately pursued. Now my shelf is filled with financial books and my portfolio is overcrowded with investment vehicles.
My Current Portfolio
I am not a financial advisor and my own portfolio changes frequently. Changes to the portfolio are triggered by various factors such as:
- Sector and international market rotations
- The stage of the current business cycle
- Sheller PE ratio
- Interest Rates (i.e. bond holdings and real estate holdings)
- if Trump is on vacation, and many other reasons
My current portfolio is broken down into two strategies: overall funds and specific stocks, as seen below.
Most people, including myself would say that I have too many holdings and I do envision having a future portfolio that is more focused – more to come on that.
You can follow my journey at my Youtube channel (“Engineered Investments”): https://www.youtube.com/channel/UCi6nC6-c9xubzjj9KjeCiGA
Significant effort and time has been dedicated towards selecting both the etfs and stocks in my portfolio. The main tools used for the selection of each investment instrument, ranked by order of importance, are listed.
- https://finviz.com – mainly for filtering (dividend, operating margin, free cash flow, ROI, ROE, PE, Growth Rate, P/B, Debt/Equity, etc.)
- http://www.personalcapital.com/ – to analysis the overall portfolio exposure to different markets and sectors
- https://www.morningstar.com/ and www.webull.com/ – analyze specific investments relative to their peers.
- https://www.finance.yahoo.com/
- Google Finance Spreadsheets and Codes
- I also use other tools such R-Studio to perform some data science techniques I’ve learned in Financial Engineering (using the stock and options chain data to derive statistical probabilities)
Below represents the detailed holdings of each ETFs as well as my current sector allocation.
- “ETFs – Stock And Bonds”
The goal is to get the following exposures:
| Asset | Allocation | Rationale (if needed) | Ticker |
| International Equities | 30% | undervalued | 15% VXUS, 15% IEFA |
| US Equities | 25% | VTI | |
| US Bonds | 10% | protection | BND, AGG? |
| International Bonds | 10% | protection | BNDx |
| Emerging Markets | 5% | undervalued | VWO |
| Small Cap | 5% | +alpha | VB |
| Value | 5% | +alpha | VTV |
| REIT | 5% | diversification | 3% VNQI, 2% VNQ |
| Dividend | 5% | income | 3% VYM, 2% SCHD |
Overtime, the current allocation will be adjusted accordingly as cash is added to the account. Certain changes will be made to match the table above.
The description for each of the above holdings…
| Ticker | Description | Expense Ratio | Number of Holdings |
| VTI | The investable US equities market, encompassing the entire market-cap spectrum. | ||
| VXUS | Global stocks covering 99% of the world’s global market capitalization outside the US. | ||
| BNDX | An investment-grade, non-USD denominated bond index, hedged against currency fluctuations for US investors. | ||
| BND | US dollar-denominated, investment-grade, taxable, fixed-income securities with maturities of at least one year. | ||
| IEFA | Developed-market stocks in Europe, Australasia and the Far East, and excludes the US and Canada. It covers about 98% of investable markets. | ||
| VYM | High-dividend-paying US companies, excluding REITS, and weights them by market cap. | ||
| SCHD | Includes firms with a 10-year history of paying dividends. Within that universe, SCHD uses fundamental screens (cash-flow to debt ratio, ROE, dividend yield, and dividend growth rate) to build its portfolio. | ||
| VWO | |||
| VNQ | |||
| VNQI | |||
| VB | |||
| VTV |
- “Stock Picks by Sector”
Performing sector allocation of my stock picks have proven to be very effective. Beyond stock/bond and etf/individual stocks, sector shifting allows for further control of my investments.
At the end of the day, my goal is to earn $6000/month (in today’s purchasing power) in dividend by March 15, 2027. At ~15% tax and 4.5% yield, $7060 monthly yield with at least $1.9M in principle is needed. Stick around for this journey!
BONUS!
The specific holdings in my portfolio (as it stands 9/12/2019) can be found here: https://m1.finance/a7YAL7S15
One day, this will all pay off.
