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The Best M1 Finance Dividend Pie for FIRE & Income Investors

Last Updated: February 27, 2021 20 Comments – 5 min. read

Financially reviewed by Patrick Flood, CFA.

M1 Finance is extremely popular among dividend investors. Here I’m sharing what I believe to be the best high-dividend pie for M1 Finance dividend income investors.

Prefer video? Watch it here.

Disclosure:  Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here.

I would definitely suggest you read my preliminary discussion before blindly investing in this pie to make sure it matches your strategy. That said, I hate when recipe websites tell a long story before putting the actual recipe at the very bottom. So if you’re in a hurry, you can click here to skip to the pie.

Contents

  • Introduction
  • Methodology and Discussion
  • Why Not M1’s Dividend Expert Pies?
  • My M1 Finance Dividend Pie

Introduction

M1 Finance is extremely popular among dividend income investors, and rightfully so, with its intuitive interface, sleek mobile app, stock and fund screeners, zero fees, fractional shares, cheap margin rates, and automatic rebalancing. To be clear, I’m not a dividend investor, but I recognize that many investors, especially those in the FIRE movement (Financial Independence Retire Early), use dividends as regular income and thus attempt to ratchet up their portfolio’s dividend yield.

Unfortunately, for beginner investors interested in dividends, oftentimes this entails simply screening for the highest-yield stocks and ETF’s and throwing them in a pie, ignoring things like fees, AUM, liquidity, and most importantly, what that fund’s selection methodology or underlying index is. I always encourage people to focus more on asset selection and asset allocation than on chasing high yield per se. I would suggest assembling a dividend focus that still employs diversification across geographies and asset types to decrease portfolio risk; that’s what I tried to do here.

Methodology and Discussion

In constructing the best dividend pie for M1 Finance, I specifically focused on the following:

  • Global diversification.
  • Low fees.
  • Sufficient AUM and liquidity.
  • Exposure to multiple equity factors and styles.
  • Diversification across asset types.
  • 80/20 ratio of stocks to fixed income.
  • Inflation protection.
  • No individual stock picking.
  • Potential for healthy dividend payments and simultaneous capital appreciation.

Note that with this dividend pie, you’ll have little to no exposure to Growth stocks. This could be good or bad going forward in regards to capital appreciation. If the Value premium still exists (I believe it does), Value is currently the “cheapest” it’s ever been, making it potentially poised for a comeback. Value has beaten Growth historically, though Growth has crushed Value over the past decade largely due to Big Tech’s stellar performance. For that reason, you may opt to use this pie as a smaller piece inside your portfolio rather than as your entire portfolio, or incorporate it into a “lazy portfolio.”

In terms of equity factors, we know that dividend investing on the whole is largely rooted in Value, and that the dividend payment itself is not responsible for a stock’s performance. Specifically, high-yield funds like VYM and VYMI, for example, have more factor loading on Value, while dividend growth funds like VIG and VIGI have more loading on Quality. I’ve included all 4 of those funds, and more, to diversify the pie’s factor exposure. The pie has consistent, positive loading on all 5 of the Fama-French factors in the 5-Factor Model (Beta, Size, Value, Profitability, and Investment), as well as both fixed income risk premia – term and credit.

Several of these funds employ some form of earnings screen to weed out potentially volatile, unstable companies. Because of that, the yield of the pie as a whole may indeed be lower than your target yield or the yield of your current high-dividend strategy. For example, a pure yield chaser usually might not include VIG or VIGI in their high-dividend pie since they have a comparatively lower yield. I would argue their inclusion should bode better for stability, lower volatility, and greater capital appreciation and risk-adjusted return over the long term than chasing the highest yield per se, which has historically been an indicator of potentially unstable companies.

Why Not M1’s Dividend Expert Pies?

M1 Finance already has some Expert Pies focused on dividends, so why use mine instead?

Their “Bank Balance Sheet” pie is comprised of 70% mortgage-backed securities, 17% intermediate-term treasury bonds, and 13% municipal bonds. I don’t want a bond portfolio weighted so heavily to MBS, we already have some treasury bonds (of which long-term will offer more protection), and municipal bonds primarily only provide a tax savings for high income earners. MBS and munis are also more correlated to the market than the treasury bonds that I’m proposing. In short, no thanks.

M1’s “Domestic Dividend” Expert Pie is almost entirely VIG, which I’ve included in mine. The other 2 ETF’s are high-expense-ratio small- and mid-cap funds from WisdomTree. I’m proposing some small- and mid-cap dividend exposure via DGRO from iShares. We also get a little bit from VIG.

Moreover, the Domestic Dividend pie is also just a dividend-oriented pie and is not necessarily a high-yield pie. Their “Global Dividend” Expert Pie simply adds some very-high-expense-ratio international dividend funds. I’m advocating for IDLV below as a low-ER international ETF, as well as Vanguard’s low-cost offerings of VYMI, VIGI, and VNQI.

My M1 Finance Dividend Pie

I constructed this dividend pie for M1 Finance with the following ETF’s:

  • SCHD – Schwab US Dividend Equity ETF – Tracks the Dow Jones U.S. Dividend 100 Index.
  • HDV – iShares Core High Dividend ETF – Tracks the Morningstar Dividend Yield Focus Index.
  • SPYD – SPDR® S&P 500 High Dividend ETF – Tracks the S&P 500 High Dividend Index.
  • VYM – Vanguard High Dividend Yield ETF – Tracks the performance of the FTSE® High Dividend Yield Index. Excludes REITs.
  • VYMI – Vanguard International High Dividend Yield ETF – Tracks the FTSE® All-World ex US High Dividend Yield Index. Excludes REITs.
  • VNQ – Vanguard Real Estate ETF – diversification benefit from the low correlation of REITs to the stock market.
  • VNQI – diversification benefit from the low correlation of international REITs to both the US and ex-US stock markets.
  • IDLV – Invesco S&P International Developed Low Volatility ETF – International exposure to low volatility dividend payers at a lower expense ratio than most international equity ETF’s.
  • VIG – Vanguard Dividend Appreciation ETF – companies with at least 10 consecutive years of an increasing dividend payment.
  • DGRO – iShares Core Dividend Growth ETF – companies with at least 5 consecutive years of an increasing dividend payment. More inclusive than VIG; able to capture some small- and mid-cap exposure.
  • VIGI – Vanguard International Dividend Appreciation ETF – international companies with at least 10 consecutive years of an increasing dividend payment.
  • SCHP – Schwab U.S. TIPS ETF – Tracks the Bloomberg Barclays U.S. Treasury Inflation-Linked Bond Index. Offers inflation protection. Average maturity of 8 years.
  • USHY – iShares Broad USD High Yield Corporate Bond ETF – broad exposure to high yield corporate bonds. Average maturity of 5.5 years.
  • EDV – Vanguard Extended Duration Treasury ETF – Tracks the Bloomberg Barclays U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index – Offers protection for stock crashes. Average maturity of 25 years. Interest from treasury bonds is tax-free at state and local levels.

Allocations are as follows:

  • 15% SCHD
  • 5% HDV
  • 5% SPYD
  • 10% VYM
  • 10% VYMI
  • 10% VNQ
  • 5% VNQI
  • 5% IDLV
  • 5% VIG
  • 5% DGRO
  • 5% VIGI
  • 10% SCHP
  • 5% USHY
  • 5% EDV

You can add this dividend pie to your M1 Finance portfolio by clicking this link. Enjoy.

M1 Finance is actually currently running a promotion offering a $30 bonus for a taxable account funded with $1,000+ within 2 weeks of opening. Details are here.

They also have a transfer bonus promotion for up to $2,500 when transferring an existing account from another brokerage, as outlined below:

m1 transfer bonus 2021
Sign Up for M1 Finance

What drives your dividend strategy? Do you use any of these funds in your portfolio? Let me know in the comments.


Disclaimer:  While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.

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  • Ray Dalio All Weather Portfolio Review, ETF’s, & Leverage
  • Riding the HEDGEFUNDIE Adventure (UPRO/TMF) on M1 Finance
  • Golden Butterfly Portfolio Review and M1 Finance ETF Pie
  • The David Swensen Portfolio Review and ETF Pie for M1 Finance

About John Williamson

Analytical and entrepreneurial-minded data nerd, usability enthusiast, Boglehead, and Oxford comma advocate. I lead the Paid Search marketing efforts at Gild Group. I'm not a big fan of social media, but you can find me on LinkedIn and Reddit.

Reader Interactions

Comments

  1. Gretchen Marchesani says

    February 16, 2021 at 10:36 am

    This is great! Sorry if I missed it but what was the return for this portfolio in 2020 and for Q4 2020?

    Reply
    • John Williamson says

      February 16, 2021 at 10:59 am

      Hey Gretchen. Clicking on the pie link will show you the historical returns.

      Reply
  2. Mark says

    February 2, 2021 at 6:35 pm

    Awesome pie, Already started using and investing into it. Thank you so much!

    Reply
    • John Williamson says

      February 2, 2021 at 6:41 pm

      Thanks! Glad you like it!

      Reply
  3. Drew says

    December 25, 2020 at 10:32 pm

    Hey John – just found your website, it’s AMAZING!

    Quick question – do you have an ultra low risk pie made for someone to invest their rainy day funds in?

    I understand the safety net / rainy day funds should really be in a savings account, but curious maybe if you’ve come across or have made a pie essentially with the same amount of risk as a high yield savings account (~0% risk), but with marginally better returns, ~ >3% or so?

    Reply
    • John Williamson says

      December 25, 2020 at 10:40 pm

      Drew, thanks for the kind words and happy holidays! Really glad you’re finding the content useful.

      I’m actually a fan of investing one’s emergency fund, in the right circumstances. This should be exactly what you’re looking for: Why, Where, & How To Invest Your Emergency Fund To Beat Inflation

      Reply
      • Drew says

        December 27, 2020 at 11:29 pm

        You’re the BEST, thank you sir!

        Reply
        • John Williamson says

          December 28, 2020 at 12:02 am

          Anytime!

          Reply
  4. JR says

    December 17, 2020 at 12:43 pm

    How much percentage growth do you expect from this pie?

    Reply
    • John Williamson says

      December 17, 2020 at 2:00 pm

      Impossible to know the future, but I’d guess roughly market returns.

      Reply
  5. Keith says

    October 19, 2020 at 3:04 pm

    Do you generally leave this Dividend Pie alone or do you find yourself adding different funds and taking some out every now and again?

    Reply
    • John Williamson says

      October 19, 2020 at 3:17 pm

      Hey Keith. I generally leave it alone but I try to be on the lookout for any changes in expense ratios or changes in the underlying index being tracked that might make one fund objectively superior to another, in which case I’d probably make that swap.

      Reply
  6. Jb says

    August 30, 2020 at 3:22 pm

    A little PFFD ( 5 percent) would round this out.

    Reply
    • John Williamson says

      August 30, 2020 at 6:54 pm

      Never really seen the point of preferreds, especially at fees higher than that of “normal” security funds. They’re sort of in between stocks and bonds, and I’ve seen no compelling evidence that holding them provides any advantage over a mix of regular stocks and regular bonds.

      Reply
  7. javon says

    June 20, 2020 at 10:42 pm

    Would adding this dividend portfolio to the all weather portfolio ruin it’s purpose or would it still be all weather safe ?

    Reply
    • John Williamson says

      June 21, 2020 at 1:18 pm

      Probably depends on the allocations. But you’d be diluting each, so the strategy for each sort of goes out the window. This dividend pie is already well-diversified with healthy allocations to REITs, bonds, and TIPS, so it could be considered “all weather” in that sense.

      Reply
  8. javon says

    June 20, 2020 at 10:37 pm

    bro you’re the truth ! … literlly been searching for this type of content all day ! all weather blog was great too !

    Reply
    • John Williamson says

      June 21, 2020 at 1:17 pm

      Thanks! Glad you liked it!

      Reply
  9. Alex says

    May 30, 2020 at 7:25 pm

    Great post love it. very educational..
    I currently have VYM and VIG in my Dividend Portfolio Roth Ira.
    Where would you keep the REITs on a Taxable account or a retirement account if want to have access of the dividends payment?

    Reply
    • John Williamson says

      May 31, 2020 at 11:56 am

      Thanks Alex!

      If you’re looking to use the REIT dividends as current income, obviously you’d want to have it in your taxable account if you’re younger than 60. If not, put them in a tax-advantaged retirement account since they’re relatively tax-inefficient.

      Reply

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