August update: lured by low margin loan rates and positive recommendations, I transferred my ETFs from Vanguard to Interactive Brokers and my experience has been... truly awful. I give IB an enthusiastic anti-recommendation.September update: investigating Robinhood's 2.5% margin loan rate (note: requires $5/month "Robinhood Gold" subscription). Also considering Fidelity (despite their terrible margin interest rates) because their site and support have worked well for me in the past.I'm FIREd and minimizing income and idle cash. I want an emergency fund that is convenient and can handle a five figure emergency (e.g. new septic system), ideally in short order.
Most loan options are probably out since I have no earned income, but margin loans with low interest payments are readily available, with the two lowest rate providers being Interactive Brokers and M1 Finance. Side note: I did read MMM's article on margin loans, but it's general and doesn't cover the details I'm interested in.
Does anyone have extensive experience with both Interactive Brokers and M1? What made you choose one over the other? Any insight into how they meet my personal needs (enumerated below)?
Ideal qualities (ignoring interest rate and speed, which both seem fine for):
- Simple enough my SO can handle it (in case I'm incapacitated)
- Secure enough that someone else can't easily take out money (e.g. with just my user name and password)
- Straight-forward and rarely changed, so I can be sure I'll never get a margin call (loan to current value of max 15%)
- Able to handle an in-kind transfer in, along with per-lot cost basis info (to simplify tax time)
I'm thinking M1 might have an edge on #1, whereas Interactive Brokers could probably do #4 in their sleep (unclear for M1).
I haven't found information on #2 (e.g. two-factor authentication) for either provider.
For #3, M1 seems more straight-forward for their current terms, but given that it's a Silicon Valley startup in its growth stage, I'm afraid to commit to a low-cost provider that might start ratcheting up fees once venture capital investors start to cash out.
Overall, M1 has a bunch of mainstream convenience features which I may or may not use (automatic rebalancing, a cash-back debit card, probably more to come) vs. Interactive Brokers which supports a ton of investment possibilities I currently don't plan to ever use (options, after-hours trading, and probably many more). M1 also doesn't support limit orders on ETFs which, while probably inconsequential for the big Vanguard ETFs I used, is a bit unnerving for me (even setting aside M1's order flow income--a game I've always been skeptical of).
I'm hoping I won't have to open up accounts at both places to get a better idea of which one works better for me. And I definitely don't want to transfer assets more than once if I can at all avoid it.
Right now, I have a brokerage account at Vanguard and it's clunky but functional, with mediocre customer service when something goes wrong, and noncompetitive margin loan rates.
For what it's worth, I'm leaning towards trying M1 for simplicity, but I could very easily be swayed by e.g. Interactive Brokers' proven track record.
Edit to add: I'm looking at margin loans instead of just selling ETFs as needed to decouple spending from selling investments, for two reasons: a) tax optimization and b) being able to avoid selling deep in a bear market.