I’ve written a review on the free investment tracker Personal Capital, as well as automated investment services like Betterment. Today I’ll share my thoughts on a new investment service offering low-cost trades and excellent value. I hope you enjoy this Motif Investing review.
Motif Investing Review Background
Motif Investing has seen great success in the last 3 years. Motif ranked #4 in CNBC’s recent “Disruptor 50” against other incredible firms that are currently changing the investing landscape.
They found a great niche in the investing scene, offering a combination of stock picking and index investing. This positions Motif to take advantage of both markets.
The company and individual investors create portfolios called Motifs with up to thirty stocks or ETFs that represent specific investment ideas. Investors can buy whole portfolios comprised of up to 30 stocks or ETFs in one trade for only $9.95. Or, individuals can buy single stocks for $4.95 per trade.
Here is a little visual overview of their service and a video from the founder:
Each motif can contain up to 30 stocks or ETF’s and is fully customizable.
The company creates and sells preset Motif bundles in a wide variety of flavors that share similar characteristics. Anything from “Biotech Breakthroughs.” to “Chinese Energy” to “Battling Cancer”. There is even a preset Motif that invests in “Recent IPOs” if you would like to invest in newly launched public companies.
Each of these preset motifs holds 20-30 related stocks, which makes for an interested twist on asset allocation when creating your ideal portfolio. You can find almost anything imaginable.
It’s important to note that you don’t have to keep the preset options. You can remove a few of the individual holdings or change the weighting if you want to own more or less of an individual company. The preset motifs are a sort of template that you can customize and make your own.
If you don’t like the preset options, you can make your own. Pick up to 30 stocks or ETFs, then decide what percentage of each you want to own in the motif. It’s all very easy to do with little sliders and easy to read numbers.
Introducing Horizon Motifs – Free to Trade
Motif Investing recently introduced commission-free Horizon Motifs. These are free to trade and free to rebalance, if you keep the preset recommended asset allocation. These motifs are comprised of index ETFs, and behave similar to retirement target date funds. Investors select their time horizon and risk tolerance level, and Motif Investing decides on asset allocation and rebalancing parameters.
If you change the options or preset asset allocation, they charge you the normal $9.95.
Designing, Sharing, and Profiting
They are continually improving the option to share a motif with other investors. This means that you can interact with, evaluate, and choose to purchase other motifs that have been created by other investors.
You can also choose to design your own motif and share it with the community of other investors. And wouldn’t it be great to get paid for sharing your motif? Here is how you can:
Open a Motif Investing account and build a motif.
Join the Creator Royalty Program and select the option to add your motifs to the program.
When another customer buys or rebalances your motif, you are eligible for compensation through a royalty payment.
Track the popularity of your motif through an easy-to-use dynamic dashboard, which displays performance, number of watches, and number of people who purchased or rebalanced the custom motif.
There is no obligation to participate, but all investors are eligible to create their own Motif and participate in the Royalty program.
The Investing Social Network
Motif Investing also offers a unique social network that enables investors to comment and share opinions about specific Motifs or investing ideas. You can decide to invite your friends from Facebook or meet other people who invest like you. There is also a privacy section filter which limits who can see your investment activity or commentary. There are three levels of sharing; with the entire Motif community, with your friends, or with smaller circles of people you select.
This is actually a really cool idea. If you’re into the community aspect, it could be entertaining and potentially educational. For stocks and ETFs, you can find individuals making arguments for why a security will continue rising or falling in price . Here is an example of how the community feature looks in action:
Multiple Account Options
Investors have a multitude of account options available. You can choose from:
Individual/Joint Taxable Accounts – You are able to easily transfer an existing outside brokerage account. Motif can accept the transfer of cash and U.S. listed securities, but not mutual funds.
Traditional, Roth, and Rollover IRA options – You can start an IRA from scratch, or you can rollover existing retirement plans (401k, etc.) into a Motif IRA.
Motif Investing Fees
The pricing of Motif Investing may be the most attractive part. Being able to buy 30 stocks for under $10 is unheard of. Almost all other brokerage firms charge more than $6 per individual trade. So buying 30 individual stocks or ETFs would cost $150-$200 at many other brokerage firms.
Here are the costs associated with trading motifs:
$9.95 per trade (buy or sell) to design your own custom Motif
$300 minimum investment per motif (up to 30 stocks/ETFs)
$4.95 to trade an individual stock in an existing motif OR $9.95 to swap out as many as you want.
No maintenance fees
No inactivity fees
Things To Consider
It is possible that you’ll lack proper diversification with some Motifs. This is not a problem with the company or service, it’s a problem with stock picking in general.
If your Motif is concentrated in one sector, and the sector experiences problems, you’re Motif (and portfolio) is going to be hurting. Owning just a few stocks results in additional investor risk when compared to owning the entire stock market in the form of an ETF.
That being said, you can choose to own almost any stock or ETF inside of a Motif. This allows investors a way to get proper diversification. In offering this, they have ultimately allowed each investor to choose between stock picking and index investing.
Dividends cannot be reinvested as of now. This means you must receive cash dividends in the current year.
Motif Investing Review Summary
Overall, I think Motif Investing is a good company that offers a number of innovative investing ideas. For those looking to purchase specific stocks and ETFs in one place, Motif Investing offers a very good, low cost solution.