Motif Investing Review: 5 Stars: Buy Baskets Of Stocks For The Price Of One Trade

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I give Motif 5 stars, see the full review: http://jbmarwood.com/motif-investing-review/

Usually, if you want to invest in a portfolio of stocks, you only really have two basic options. First, you can buy each stock individually from your broker – this gives you complete control of your portfolio but it can make diversification costly, as you need to buy positions in a wide range of sectors.

On the other hand, you can invest in mutual funds or ETFs. These gives you built-in diversification, but you don’t have as much control.

Motif Investing is looking to change all of this. by offering what they call motifs.

Now a motif is basically a weighted baskets of up to 30 different stocks or ETFs. So rather than buying a single stock, you can buy a ready-made motif.

At first glance, this sounds a lot like an ETF, but here’s the difference – each motif reflects a single investment idea. For example, there is a motif designed to exploit biotech breakthroughs, another that is focused on sporting goods manufacturers, another that is aligned with higher interest rates etc.

Overall, the brokerage offers around 150 different motifs that they manage, But the cool part is you can also create your own motif, for the ultimate in control.

By creating your own motifs you can include any stocks and ETFs you like, up to a maximum of 30 positions. In effect, you can create your very own mutual fund.

Not only can you invest in it yourself, but other investors on the site can invest in the motif that you’ve created. And you can get paid for each one that buys into your motif.

The Motif royalty program, pays you $1 for every time someone invests in the Motif you created. So if you created a motif of 30 small cap stocks or 30 Internet companies, you can offer it to other investors and get paid for every time they invest.

According to these five tips for building a motif, it’s a good idea to start with a theme or trading strategy, something you are familiar with, then diversify it, and give it a snappy title. That will make your motif the most appealing to other investors.

Low upfront investment

The main advantages with Motif Investing is cost.

If you were to buy a basket of 30 different stocks on the open market, your broker could charge $300 in fees, sometimes more. And in many instances you’ll need at least $10,000 just to get started.

However, with Motif Investing, it costs the same to buy a basket of 30 stocks as it does to just buy one stock – $9.95. And you can start investing with as little as $300 in capital.

All in all, this means that you end up paying around 3% to 4% of what you normally would pay in commissions.

Not only that, but the motif can be weighted, so some stocks carry more weight than others. And you can adjust the weighting to your own requirements.


Investment security

Of course, with this type of investment approach, an obvious concern is how secure your money is. Because you are buying motifs rather than actual stocks, are you exposed? The good news is that Motif Investing is a member of the Securities Investor Protection Corporation (SIPC), which means that your securities are protected up to $500,000. In addition, the brokerage carries additional insurance with Lloyds and was originally backed by Goldman Sachs.

Are there any downsides?
In truth, there isn’t much to complain about. The only potential issue is that they do not reinvest dividends, and another problem is that Motif Investing is only available to US investors at the moment.

Summing it up & a final word of caution
The concept behind Motif Investing is excellent and it’s a concept that I am truly excited about. Creating diversified baskets of stocks for such a low cost should be useful for all types of investors. However, there should also be a word of caution attached.

While Motif Investing is ideal for diversification purposes, many of the motifs offered on the site are anything but diversified. Buying a basket of stocks tied to a certain idea or theme (such as deflation, 3D printing, biotech, clean energy) may sound seductive but it’s also potentially dangerous. In short, there’s more to investing than just latching on to the next exciting trend – doing so can be a risky path, especially for beginner investors who don’t know what they are doing.

That being said Motif Investing offers a unique model that makes it easy to invest in specific niche markets – making it a great secondary investing platform. The combination of low investment minimums, low commissions and no management fees make it easy to get strong diversification within the niche you choose – without having to risk large amounts or have your profits eaten up by brokerage charges.

Motif Investing is a great way to build your very own mutual fund so long as you construct a well-diversified and managed motif in the first place.
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