M1 Pies: Level Up Your Dividend Strategy and Optimize Your Portfolio Like a Pro

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Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.

M1 Pies, M1 Finance’s flagship portfolio tool, allows you to follow in the footsteps of some of the heaviest hitters in finance today. It is a completely human hands-off fund manager. Not only does this give you the tools necessary to step up your market game, it gives you a nuanced advantage to specialized investing.

With M1 Pies, M1 Finance team has taken decades of market evaluation, combined the past with the present, to help give you the future you desire from your portfolio with M1 Pies.

What Are M1 Pies

M1 Pie-based investing allows investors to create an investing portfolio made up of “pies”, where each asset is one slice. Those slices can be stocks, bonds, or ETFs. If you wanted to, you could even make another pie a slice of a bigger pie, nesting one within the other like Russian nesting dolls.

Each time you invest, M1 will automatically balance each slice to match your investing strategy and allocation.

M1 Finance pies allow you to maintain your M1 Finance portfolios in pie form. You simply add slices to your investment pie, allowing for easy management.

Plus, you can see a visual representation of your pie, and slices shrink and grow based on whether you are underweight or overweight against your target allocation.

You can either build your own pie or use one of M1’s Expert pies. We get to these later.

Why Use a Portfolio or M1 Pie-Based Approach To Investing

We think the M1 Finance’s pie-based approach to investing is a great hybrid for those of us in the FI community. Here’s why:

  1. You get the ease of use, with great dashboards and visual representations, but you also get the algorithms that are built into every M1 Pie to make sure your investment strategy is automatically adjusted. The charts and graphs make it easy to have a clean overview of the portfolio. At the same time, the bot part of the pie is there to keep the portfolio in line with your investment objectives. Every time you add more funds to the pie (such as with a direct deposit or reinvesting dividends), it automatically allocates the fresh funds in a way that would adjust the equities within that pie to bring them back into the allocation that you have decided on. This is one effective way of rebalancing your portfolio, unlike the traditional (and potentially rarely used) way of actually selling your winners to buy the losers.
  2. You get the set-it-and-forget-it feature that is the hallmark of long-term investors. We should be spending most of our time mapping out our investment strategies, then let the automation do its thing over time. Viewed with the Pareto Principle in mind, we should be spending 80% of our investing time making sure we have a plan that will help boost our path to FI, and 20% of our time executing and maintaining that plan.
  3. You can get as granular as you want to be, or you can take the ideas of others who have been on the podcast, like JL Collins and Paul Merriman and put them together as a M1 Pie portfolio. Then we can take a hybrid approach to decide the right fit for each of us.

Friends of ChooseFI M1 Pies

M1 Finance offers expert pies, which make investing with M1 easy. Some examples of Expert pies include:

  • General investing
  • Plan for retirement
  • Responsible investing
  • Income earners
  • Stocks & bonds

To access these, you would have to create a free account with M1 Finance.

But we thought it would be interesting to create a few M1 investment pies that would mirror the investing philosophies of some of our friends, including:

Let’s have look at these M1 pies.

JL Collins’ Simple Path to Wealth:

JL Collins is best known to the FI community for his Stock Series and as the author of The Simple Path To Wealth. In the spirit of simplicity, the pies that we created using his approach comprises mainly the Vanguard Total Stock Market Index Fund ETF and the Vanguard Total Bond Market Index Fund ETF in various proportions.


JL Collins Wealth Accumulation


JL Collins Wealth Preservation


Paul Merriman’s Ultimate Buy and Hold Strategy:

Like JL, Paul Merriman believes in the power of consistent investing and time in the market. Unlike JL, Paul prefers some degree of complexity and in addition to total stock market indices, he also likes small cap and value stocks, real estate investment trusts, as well as equities from across the world.

Merriman Ultimate Buy And Hold Worldwide 100% Equity  in a Taxable Account

Merriman Ultimate Buy And Hold Worldwide 100% Equity  in a Tax-Deferred Account

Paula Pant’s Afford Anything Portfolio

Paula is the host of the Afford Anything Podcast and a frequent guest of the show. Equally expert at all things FI and real estate investing, we thought it would be interesting to get a sense of how she invests the parts of her savings that aren’t directly invested in individual stocks, crypto, or real estate. As of February 2021, Paula says she has about a third of her investments in her Afford Anything Portfolio.

The Afford Anything Portfolio


Jillian Johnsrud’s Hands Off Approach:

Jillian is the host of the Everyday Courage podcast and progress coach. She has a busy work and home life, so she keeps her investing simple by using Vanguard Target Date Funds. The general idea of target date funds is that the funds are automatically rebalanced into more conservative holdings as the target date gets closer:

  • Vanguard Target Retirement 2035 Fund (VTTHX)
  • Vanguard Target Retirement 2040 Fund (VFORX)
  • Vanguard Target Retirement 2045 Fund (VTIVX)

Because the Target Date Funds that Jillian prefers are not available within M1 as standalone pies, we will lean on Paul Merriman again, this time for his “Years to Retirement” pies.

These pies are not designed to replicate the Vanguard Target Date Funds that Jillian uses, but to give you alternatives within the M1 eco-system that have similar timelines.

As you get closer to your target date, you should switch from pies that have more time on the clock, to the next pie with the shorter time horizon. Unlike the Vanguard funds, Paul’s pies include other sectors of the equity market such as small cap, emerging markets, and real estate.

Alternative: Paul Merriman’s “Years to Retirement” M1 Pies (alternative to Vanguard Target Date Funds)

25 Years to Retirement Aggressive Target Date Tax-Deferred

Note: Data available only from Sep 2019.

20 Years to Retirement Aggressive Target Date Tax-Deferred

Note: Data available only from Sep 2019.

15 Years to Retirement Aggressive Target Date Tax-Deferred

Note: Data available only from Sep 2019.

Frank Vasquez Diversification Play

Frank is a retired lawyer and veteran investor who values diversification in one’s investing approach. He has managed his own dynamic risk-parity style portfolio since 2016 based on the Golden Ratio and Risk Parity Ultimate portfolios. His pies are:

Basic Accumulation

Golden Ratio

Note: Data available only from June 2018.

Experimental Risk Parity Lever

Note: Data available only from June 2018.

Dividends and Market Allocation

Because your portfolio is like a large pie, an asset (say a stock) can be one slice, or you can bundle multiple assets together and make them its own slice. These slices can be stocks, bonds, dividends, or ETFs. 

This works the other way around as well. Say you want to make one bundle of securities its own pie. You can do that too. M1 Pies makes it incredibly easy and intuitive to utilize dividend allocation.

You can also set these slices to bulk-up automatically as you add funds (like ACH deposits) to your investment account. An M1 Pie does all the work for you: you set the thresholds by dollar amount, percentages, etc. M1 covers the rest. A similar option is when you are paid dividends in cash. You can have M1 “sweep” up these pay-outs when dispersed. They’ll take these allocation of funds and reinvest them into any M1 Pie you wish.

The ease-of-use and the bang-for-your-buck with no fees and market expertise is incredible. An M1 Pie a compelling visual representation of your investment pies. This allows you to make educated decisions on where you are strong and need to invest additional funds, or where you are weak and perhaps need to reallocate.

A Hybrid Approach to Dividend Investing

Individuals with a dividend-growth strategy are often faced with the problem of how to manage the incoming dividends. Most brokerages offer a dividend reinvestment feature, but this means a dividend gets reinvested into the security that generated the dividend.

This can cause one’s portfolio to diverge from the defined asset allocation, as new money doesn’t build up the portfolio uniformly. Things like one time special dividends can exacerbate this problem, leading to an undesired concentration in particular funds or securities.

The other common option is collect dividends as cash until you either hit some threshold which triggers a reinvestment of the cash across the various securities that represent the portfolio or the cash is just accumulated until a scheduled rebalancing event occurs where the cash is added to whichever parts of the portfolio most under represented according to the plan.

Neither is ideal, which is why M1 Finance offers a third option that represents an hybrid improvement that integrates the best of both of these classic strategies. It offers the ability to automatically put incoming dividends immediately back to work buying new shares to speed the compounding effects, but breaking out of the mold that a dividend can only be reallocated to the security that generated it.

M1 allows your incoming dividend stream to be applied to whatever portion of your portfolio is most under-represented according to your asset allocation. It’s similar to the periodic manual rebalancing effort, where your cash on hand is used to buy the securities that might be in a temporary low cycle regardless of which security generated the cash dividend. M1 Finance eases the headache of managing a portfolio of dividend payers by making sure your cash dividends are reinvested quickly and according to your defined asset allocation. This effectively puts your portfolio into a state of constant cashflow rebalancing.

A Starter Dividend Pie to Consider

Now that we’ve discussed the way M1 Finance manages the reinvestment of paid dividends, lets look at a Starter Dividend Pie that we’ve put together. The companies in this list were selected for having paid out 4% or more in dividends over the last 5 years.

Note: Annual Dividend Yield is not reflected in the 5-year performance of the Starter Dividend Pie.

This is not meant to be an ideal basket of companies because market conditions WILL change. Rather, the intention is for you to add it to your own M1 account, then pick and choose which companies you like from the following sectors:

  • Technology
  • Finance
  • Healthcare
  • Pharmaceuticals
  • Real estate
  • Oil & Gas
  • Tobacco

If you don’t like some of the stocks in the Starter Dividend Pie – say, tobacco for instance, you can easily remove that specific company from your own M1 pie.

Taxable, Traditional, or Roth IRA: Which Investing Vehicle To Choose?

It all depends on the investment objectives and income levels of the investor. Higher-income earners who still qualify for a Traditional IRA, and who are more focused on capital appreciation, might want to use that investment vehicle rather than a Roth IRA. That way, they shelter as much of their earned income today, and potentially, take the tax hit upon decumulation with an expectation that their earned income in the future would be significantly lower.

Conversely, if they are having a year where their earned income is going to be fairly low and want to focus on pies that earn them dividends or interest payments, they should go for a Roth IRA instead so that the gains accumulate free of taxes.

In essence, a Traditional IRA is a good option for those closer to retirement age AND have a tax liability that can be significantly lowered by contributing to the fund, since funds are pre-tax and lower your tax liability. If you are younger and have a relatively small tax liability (especially compared to later in life) then a post-tax funded Roth IRA is for you.  

When the IRA options are maxed out, it’s time to open a regular taxable investing account.

Advanced Investing Strategies With M1 Pies

You have several options in determining how you’d like to fund your M1 Pie investment. From interval dollar-cost averaging to taking out a low percentage loan funded by M1, we’ve got you covered. Also, be creative in how you want to use your excess funds sitting stagnant in stray accounts. M1 makes it easier than ever to invest $100 or $1,000,000.

Dollar-Cost Averaging

M1 Finance creates a perfect example of how dollar-cost averaging and M1 Pies live in a happy marriage:

“If you’re a fan of movies, music, or TV, you probably subscribe to a streaming service. Every month, you pay a set amount of money to subscribe. Now imagine your investments as a service. Have you considered subscribing? This idea is called dollar-cost averaging, and it’s a popular investment strategy among long-term investors. Much like a subscription, you invest the same amount of money on a regular schedule, no matter the stock price or market conditions. And [with M1 Pies] fractional shares, you can purchase fractional shares to keep your portfolio balanced.”

M1 Finance Blog

So, what M1 has stated is that you can take a set interval of money each week, month, etc…and invest that into your M1 Pie (or Pies – depending on your decision-making process). This way you don’t need to time the market. You can take your emotional bias out of the equation of investing and combine human-automation with machine automation. Ensure you always make the “correct” decisions based on data, not your heart or mind.

For more information regarding dollar-cost averaging, be sure to check out our Investing 101 Ultimate Guide here

Smart Transfers – Investing With M1 Spend

Do you want to create an automated rule set that regulates how each dollar of your money is allocated? Thresholds that trigger a sweep of funds between investment accounts? M1 has you covered here as well with Smart Transfers with M1 Spend.

First off, what is M1 Spend? M1 Spend is your checking account for M1. These funds are the ones that you’ll use to debit your account when making purchases and house where you’ll receive ACH deposits. So, how can we use M1 Spend to our advantage in making smart investing moves regarding our M1 Pies?

M1 Spend Overbalance

Say that you want to max-out your M1 Spend account at $20,000. Any excess (overbalance) funds (e.g. direct deposits, dividend payouts) will be “swept” into a M1 Pie that you’ve set-up. This way you know you have funds on-hand in case you need to access them, but you never have any excess funds dragging your potential earnings down.

The great thing about M1 Spend Overbalancing is that you control the maximum limitations to your M1 Spend account and where the excess funds flow to. It is intuitive, takes minutes to set-up, and is a healthy disciplined tool to get your investing pies in order.

This may sound tricky at first, but you’ll certainly get the hang of it. 

The Bottom Line

M1 Pies meets the gold standard here at Choose FI for not only its fee-free model, but because it gives the end-user so many power tools to use. It is powerful enough for the savviest of investors, but accessible for entry level dabbler.

Have an extra $100 and think that investing that money in the market than your pocket?  Want a retirement vehicle that has numerous options to help it grow? Have a million-dollar portfolio, but want to diversify outside of what your current brick and mortar brokerage firm can provide? M1 Pies solves all these issues and millions more.

We encourage you to take the next step and take a look at M1 Finance and experience for yourself the ease-of-use and the endless possibilities you can have on the platform. It doesn’t take very long at all to set up and it is an excellent way to “get your feet wet” trading securities in the market.

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Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.
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