running OS for a Mac M1 studio off an eternal SSD

Applications MUST be placed in the /Applications folder on the boot drive to provide adequate speed and maximum protection from malware. Since the Swap file is also on the boot drive, a common setup in the past has been to use the absolute FASTEST drive as the boot drive, even it its very small, and move User files off to the slower drives.

This is still the optimal setup, and I can't imagine ANY external drive beating the Mac Studio built in internal drive for speed.

But... if you decide to boot off an external, you MUST discuss allowing that with Startup Security Utility. Don't even think of copying MacOS from another drive -- it MUST be installed from a primary source.

Change security settings on the startup disk of a Mac with Apple silicon - Apple Support

I have the same Mac you do. I made a clone of the internal to an external NVME drive in a TB enclosure. It works fine. The speed is about 1/2 of the internal but cannot really see the difference in actual use. If you use an app like Carbon Copy Cloner you want to just copy your user data to the drive then boot into recovery and install the OS on the external drive. Do not use the Legacy boot feature of CCC as it will not boot with Sonoma correctly.

You would gain space but loose speed.

A better solution is to run macOS and Apps from the internal drive and move your Photos, Music or Movie libraries to an external drive.

Move your Photos library to save space on your Mac - Apple Support

Change where your music files are stored on Mac - Apple Support

You could move entire /users folder off to external drives, but it is much more prudent to have at least one admin left on the boot drive.

Thank you so much. Yes I thought so. And yes, made a huge mistake not getting a larger internal SSD

Thank you so much.

What a palaver for no gain. Guess I’ll take applications and content off that I don’t use too much.