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What does the inactivity fee mean for an M1 finance brokage account

My sister is investing $100 in the stock market but she wants to know if she will get fined if she has $19 or less in her M1 brokage account and has not bought or traded stocks in 90 + days. (This is after the $100 has been spent). #marketing #finance #business #accounting #financial-accounting #stocks

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Jason’s Answer

The inactivity fee means that your account will be zeroed out (they'll empty it, basically) if its anywhere from 0.01 to 19.99 for over 90 days with no trading activity. This applies to any account, not the total sum of all your accounts. So you could have an account with 5k in it and an account with 19.87 in it, and they would take your 19.87 because that account didn't reach the minimum threshold. The fee is just a way for them to discourage people from opening accounts and leaving them with no funds in it or not trading with it. They don't make any money from inactive or underfunded accounts.

I personally would recommend against using M1 finance as there are a lot of miscellaneous fees involved and there are other platforms out there that can do what they're doing without the fees. I would recommend Robinhood or TOS (Think or Swim), they don't have fees involved. If your sister is looking to invest in individual stocks, these platforms have commission-free trading like M1 finance without the fees and the hassle. However investing in individual stocks or a bundle of stocks has some risk involved. If she wants to invest in the long term for a safer investment (not risk-free obviously, no stock is risk free), I would also recommend investing in mutual funds or ETFs with low expense ratios (I highly recommend Fidelity and Vanguard, look for stock tickers like VTSAX).
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Jeff’s Answer

Unless you want to take the time to really research companies, you may want to consider investing in equity mutual funds or ETFs to gain stock exposure versus investing directly in stocks. Investing in mutual funds or ETFs gives you the benefit of diversification, which should help lower the risk of your investment. If you invest directly in a stock or two, your investment performance relies solely on how well those one or two companies do. Equity mutual funds have a portfolio of typically at least 30 company stocks, so if some of your stocks perform poorly you have a chance that some of the others have performed well during the same period, hence lowering your investment risk. While not impossible, it is less likely that all 30 company stocks in the mutual fund's portfolio performed poorly during a period while it would be easier for that to happen if you were only directly invested in a few stocks. Mutual funds are professionally managed and are available in different portfolio concentrations. There are mutual funds that cover the general equity market and some that are more targeted to a particular industry (health care, financial services, etc.) or size of company (small, mid-size or large). You can search Yahoo Finance and other finance sites to find information on the various mutual funds or ETFs available for investment.
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Zhajeid’s Answer

I would agree here on a fidelity IRA and in addition is the best place to diversify the amount you hold with out the high risk and fees. The platform is not as sleek and cool, but has excellent platform for deeper education.

Also take a look at this stock VTI it's a buy and hold option with a 20% incremental increase since may 2020 $143 per share now @ $170.
( Best dollar cost average.)

Zhajeid recommends the following next steps:

Download fidelity app
Set up IRA
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