I came across an interesting company called Motif Investing as I was doing some research last week. Motif Investing is a new online brokerage firm that offers a pretty unique way to invest. Their model for investing is extremely unique and worth looking into. Personally I use OptionsHouse and eTrade for my accounts, but Motif Investing truly does have a unique model and is worth taking a look at. If you prefer not to read about Motif Investing, you can watch my video review below. In it I take a quick look around the Motif trading platform and dig a little deeper into what type of services they offer.
How Motif Investing Works
Motif Investment differentiates itself from competitors by helping you invest in a group (called motifs) of top performing companies all at one time. When you buy a motif, you pay a one time transaction fee of $9.95 and you get fractional shares of all the companies (usually around 10-25) within the motif. This is a pretty interesting concept since it allows you to quickly diversify your portfolio. Typically, these motifs are created with the intent of covering the entire range or scope of an industry or investing strategy. For instance, you can buy a ‘soft drink motif ‘ which may contain KO, PEP, etc or you could go with a ‘high dividend motif’, which could contain companies like JNJ, AFL, etc. This way, you can follow macro investing trends rather than assuming the higher inherent risk that comes with investing in companies one at a time.
To be honest, the entire concept closely resembles the concept of Exchange-Traded Funds (ETFs). However, Motif Investing has created an interface and a high level of customization that allows you to properly research and buy only the companies you want. You can even opt out of buying individual stocks within a motif if you already own shares of that company. For example, if you already owned PG, you could set PG to zero when purchasing their ‘Consumer Products Motif’ which comes standard with a small percentage of the purchase going towards PG.
One good thing is that Motif Investing makes it fairly easy to sign up and check out their interface. If you do want to check it out, sign up through this link (or click the image below) and get $150 for just signing up. It is an affiliate link, so I do make a few bucks for telling you about them 🙂
After signing up and creating your login, you’ll have access to all their motifs and be able to check them out. For such a young company they do have quite a few Motifs to choose from. In fact, I use their platform for a lot of my research. Even if I plan to purchase a stock in my Roth IRA (which is on eTrade), I’ll still go and research it on Motif to see what it says. As with many things in investing, using multiple resources is always better than one.
My favorite aspect of the Motif Investing model, is that you can focus on macro economic trends rather than investing in one company at a time. For instance, lets say you notice a trend such as rental rates rising and foreclosures rising. Well, you might believe that we are moving towards a renter’s society. With that knowledge you may decide to create a motif containing 10-20 real estate holding companies that will benefit as a result of this economic shift in coming quarters. This is in stark contrast with the traditional model where you would invest in only one real estate holding company and hope you picked right.
Alright, lets go ahead and take a deeper look at some of the pro’s and con’s of using Motif Investing. Here’s a quick list, but you really should sign up (it’s free!) and check it out for yourself. That’s the only real way to see if it would be a good fit for your needs.
The Benefits of Motif Investing
1. Great for Secondary Investing
Motif Investing is recommended for any investor seeking a secondary investing channel. The company does not offer mutual funds or options, which many investors actively participate in. Since they don’t offer a full range of financial services, Motif Investing becomes a great option if you’re seeking to diversify your portfolio outside of your primary retirement or investment accounts.
2. Offers Active Rebalancing
The pre-determined motifs are monitored for rebalancing constantly. They have a staff of their own financial analysts that review the motifs each quarter to see what changes can be made to maximize returns. This is pretty awesome if you don’t want to actively participate in the management of your portfolio. However, if you want to rebalance youself, they do charge $9.95 for the trade that occurs during the process.
3. Recommended If You Have a Specific Focus
Motif helps you specialize in a particular area. This is great if you already know the industry or market niche you want to invest in. This is particularly helpful for new investors when your getting started.
Disadvantages of Motif Investing
1. No Dividend Reinvestment Offered
This is probably my biggest qualm with Motif Investing. Not having a DRIP plan does put limitations on what you can do. However, this isn;t necessarily a problem if you are consistently making trades each month. Receiving you quarterly dividends in cash can always be lumped in with this purchases.
2. Easy to Accumulate Fees
While there are no hidden fees, it may be easy to accumulate fees if you re-balance frequently or trade often. At $4.95 per trade, you can easily spend $25 with five trades. However, it’s not a problem if you follow a buy and hold strategy or investing with large amounts of money where the transaction fee’s become a marginal cost.
Overall, i would highly recommend you check out Motif Investing. It’s a unique way to invest that minimizes the inherent risk that comes with picking individual stocks. Using Motif Investing also allows you to quickly diversify your portfolio if you’re new to investing. Either way, I recommend you check it out. If you do, don’t forget to use this link or click the image below to get $150 for free if you do end up using them. Hope you like their service and good luck with all your future investments!