There are some online brokers out there that provide you with the chance to invest on your own at a reasonable price. One of the more novel brokerages is Motif Investing, a discount brokerage that helps you invest based on themes. It’s like building a mini-ETF.
Motif has ranked for two years in a row as a CNBC Disruptor 50. This review has been updated for 2015.
What Exactly is a Motif?
CEO Hardeep Walia states Motif Investing is like combining the investment experience of Peter Lynch with the diversification of Jack Bogle. You invest in groups of investments that share similar characteristics. Each motif features between 20 to 30 stocks or ETFs that can be said to follow particular themes. Examples include “Healthy and Tasty,” “Utility Bills,” “Recession Resistant,” and “Biotech Breakthroughs.”
There is even a “Lots of Likes” motif that focuses on companies with the most Likes on Facebook. It’s an interesting twist on the theme of “asset allocation,” since you can choose from a number of different “asset classes” to create a one-of-a-kind portfolio.
You can look for motifs using different criteria, such as exploring by industry or looking for themes based on current events. It’s also possible to screen motifs by looking at daily change, one year return, and popularity. The screener allows you the chance to find just what you’re looking for in an investment.
Motif Investing is quite cost-efficient as well. You get access to each of the stocks in the motif for one flat fee of $9.95 per transaction. No matter how much you customize a motif. There are no management fees, and no activity requirements. However, the fact that you can get 30 stocks or ETFs at once, for less than $10, is a big deal. Anytime you trade a motif; you just pay the flat transaction fee.
If you want to buy more of a particular stock or ETF in one motif, without purchasing another entire theme, you will pay $4.95 for each. The same applies if you decide to sell shares of an individual stock or ETF inside a Motif. The cost is $4.95 per stock/ETF.
There’s no deposit amount required to open an account with Motif Investing, but you need to deposit $250 to make a trade. If you want to buy on margin, you will need to maintain a minimum balance of $2,000. Motif Investing is a member of FINRA and SIPC insured.
- Available Accounts – Traditional IRA, Roth IRA, Rollover IRA, Trusts, Individual, and Joint.
- Flat Rate Pricing – Pay $9.95 per trade regardless of how many stocks or ETFs are in the motif.
- Single Stock Trading (New) – Single stock commissions are $4.95 per trade.
- Many Pre-built Motifs – There are over 9,000 motifs by the company and community. If you like one you see, you can customize the motif to your liking.
- Create Your Own Motif – Add up to 30 stocks and/or ETFs to create your own custom theme.
- Horizon Motifs – Similar to a target-date fund these motifs allow you to create a stock/bond ratio per your time horizon.
- Trading Alerts – Get notified of price changes in the motifs you own.
- Mobile App – Android, iPhone, iPad, and Apple Watch support.
- IPO Stocks (New) – Gain access to J.P. Morgan IPO stocks.
Customizing Your Motif
What if you don’t like all of the stocks/ETFs in the theme you’ve selected? Motif Investing allows you to customize it. You customize your motif before you buy. After you purchase a motif, you can add more stocks/ETFs, or sell the shares you don’t want.
For example, the “Recession Resistant” motif offers some solid dividend-paying stocks. You can switch some of the stocks that you don’t like with a dividend aristocrat. Unfortunately, dividends aren’t reinvested automatically, so you will have do it manually.
You can also customize the weighting in your motif. You can switch up how your money is distributed within the motif. This feature gives you a little more control over how your overall portfolio looks.
The service is a bit clunky when trying to customize, but it still works reasonably well. And, of course, one of the big selling points is the cost. You can essentially create a personalized ETF, but you don’t have a management fee to pay (even a small one); you just pay your flat rate for trades.
Another unique feature of Motif Investing is the ability to create a custom motif, and can share with others. If individuals use your theme, you will get a royalty commission. So not only can you show off your investing expertise with others, but can make money doing so. Every time someone purchases or rebalances a motif you’ve built from scratch, you will get $1. Granted you won’t make bank from doing this but still a neat feature of their service.
Motif Investing recently introduced commission-free Horizon Motifs. So with these motifs you do not pay the $9.95 commission. These motifs are similar to retirement target date funds.
All you do is select the time horizon, and Motif Investing does the rest. If anything they are now more like the robo-advisors Betterment, Wealthfront and FutureAdvisor where you are letting a service create your asset allocation. Target-date funds have their issues but do open up Motif to a much wider audience of investors.
Grow Your Dough Challenge
For 2015 I have joined in with nineteen others for the Motif Investing Grow Your Dough Challenge. This contest not only is to compete against other personal finance bloggers, but also kick the tires more with Motif Investing. The contest is until Thursday December 31, 2015. Each competitor is required to construct and maintain a motif with a maximum of 30 positions. The motif can be constructed using any tradable security supported by the motif platform. Each competitor may place up to six rebalance trades throughout the contest. At the time of this updated review, my motif is fifth place.
- Easy Way to Diversify - Great service to diversify into specific sectors and investment ideas with small amounts of to invest.
- Low Cost Trades - It's $9.95 per initial trade. After that it's $4.95 when modifying the motif.
- Custom Motifs - Use the pre-made motifs, or roll your own. You can get paid for each person who uses your publicly created motif.
- Cheap Single Stock Trades - Buying or selling a single stock/ETF is one of the lowest in the industry at $4.95 per trade.
- No Automatic Dividend Reinvestment - Currently Motif Investing cannot automatically reinvest dividends.
- Lacking Social Features - Features are missing in the social section like the ability to search.
- No Complex Orders Available - Cannot perform a limit order on a motif or single stock trade.
Overall, Motif is great way to invest, and a unique service in the traditional brokerage firm space.
Motif Investing is especially helpful for those who are looking to invest in trends, or who want to exposure to a particular sector.
The pricing is very competitive, and tax efficient (if you don’t trade stocks in and out of your motif). It’s a great way to diversify with small amounts of money to invest. It’s nice that you can customize your motif, so you aren’t limited to only the pre-created motifs.
Currently the only disadvantage of Motif’s service is the lack of automatic dividend reinvestment, so I would not recommend the service for any dividend stocks.
Disclosure: I have an account with Motif Investing for reviewing purposes, and have $2,600 invested.
Readers: What do you think of Motif Investing theme concept?