I decided to dig into this Motif Investing review because they are offering one of the most interesting investing options of the available online brokerage accounts.
Motif Investing presents what I think is a revolutionary idea in the online investing world and is helping cut costs for thousands of investors. That being said, there is some caution that needs to be taken when using any new investment platform and my hope is that I can answer the most commonly asked questions about Motif Investing and you can use the information as a means to decide whether adding Motif is a good idea for your overall portfolio.
The Short Version of this Motif Investing Review
If you came looking to get the Cliffs Notes version of how Motif works here is what you need to know:
- Service Summary – Motif Investing allows you to take groups of 30 stocks and invest in all of them at one time for a low fee of $9.95. To keep things simple, they call a group of 30 stocks a “Motif”.
- Pros – Very simple interface that allows you to pick stocks and put them into a group of stocks. They have prepackaged Motifs that are themed around a specific area of the stock market and picked by experts in those market segments. Before you invest you can customize a prepackaged Motif or create your own from scratch. Only once you decide to invest you pay the $9.95 fee. The top feature for small investors is that you can purchase fractional share
- Cons – The service can get expensive if you like tweaking things frequently. Each time you make changes there is an additional fee of $9.95. While this is not super high by the standards of financial advisors, if you are a beginner with just a little invested, it can really eat into your earnings (or kill them all together).
- Overall Impression – Motif presents us with a great opportunity to diversify a portfolio for a very low cost. The fee structure is super straight forward and the model Motifs allow new investors to get help with investing in individual stocks for the first time. The service is not the best fit for people who want to get a wide range of stocks from different segments of the market.
This gives you a quick rundown, but there are a lot more details to understand if you are really serious about the service.
What is Motif Investing?
Motif Investing is similar to a combination between the traditional do-it-yourself online brokerages and a robo-advisor like Betterment. To make that more clear, with a traditional DIY brokerage you do all the research and buy the stocks individually. With a robo-advisor you fill out a questionnaire about your preferences and the platform picks and trades the stocks for you.
So Motif comes in between these two by having their themed groups of 30 stocks they call “Motifs”. These prepackaged groups of stocks are picked by expert investors. So you get their say on these themed Motifs, but can choose to swap those stocks out for your own personal choices.
Background of the Company
Hardip Walia was an executive with Microsoft who decided to make a move into investing. With his connections he was able to get funding for his idea for Motif and quickly gained notice from the finance world. Motif was identified as the most innovative company in personal finance by Fast Company and came in the CNBC Disruptor Top 50 at number four.
What are the Features and Costs of Motif Investing?
Motif Investing’s features and pricing make it unique in the marketplace.
The key features of Motif Investing are:
Create Your Own Fund – The core idea behind this brokerage is that you create your group of stocks. This is the same idea behind a mutual fund. So you have the control over which stocks go into your “fund”.
What is even better is, since ETFs exchange just like stocks, you can add ETFs to your Motif and get an even broader diversification.
Pre-Packaged Motifs – There are more than 150 Motifs that are pre-made for you to choose from. What is really nice about this is you can see how these Motifs have performed over time. You can login to your account, and surf the big list of Motifs or search by a sector. The Motifs can be more traditional like energy stocks or follow a less traditional theme like online gaming or companies involved in robotics. With so many to choose from you are sure to find something that is of interest to you.
Horizon Motifs – Instead of having to rebalance your portfolio you can invest in Horizon Motifs. These nifty investments are targeted to your retirement date and risk tolerance. The best part is that there are no fees with these investments because they are investing in top of class ETFs. This is one area where I fell like you get a better deal with Motif Investing than with Betterment (Betterment charges a fee).
Social Networking – One awesome feature that comes with Motif Investing is their extensive social platform. Not only can you connect with other investors, you can also invite your friends from other social networks. On top of that, if you create a custom Motif and someone else buys that Motif you can receive royalty payments. Not a bad way to get rewarded for networking.
For your standard run of the mill motif it is $9.95 to invest in all 30 stocks at one time. If you decide to make changes to the stocks in your Motif after you have already made the investment it will cost you $4.95 or you can pay a flat amount of $9.95 for unlimited changes.
If you are investing in dividend producing stocks, you can balance your portfolio with these dividends for $4.95. The same goes for balancing your Motif any time you want. Most people will recommend balancing your portfolio once a year.
Motif Investing now allows you to trade individual stocks. The cost is only $4.95, which puts them on equal footing for cost with Trade King and Options House.
Types of Investments Available
Motif allows you to invest in Stocks or Exchange Traded Funds (which trade like stocks). Stocks are the smallest piece of a company that you can own. An exchange traded fund (ETF) works just like a mutual fund but you can purchase a very small piece of the fund just like you would buy a stock on the stock exchange. I view ETFs as the real value here because you can diversify greatly into 30 different ETFs which each have hundreds of stocks inside of them.
The great news for small investors is that with either of these options you can purchase fractional shares. This means you don’t have to have the full purchase price of a stock or ETF in order to buy into that stock. So if you want to own Apple stock, you can buy just $25, instead of having to wait until you can afford the full amount for a single share.
What Types of Accounts I Get with Motif Investing?
MI is a full brokerage and offers al the types of investment accounts that we would expect. These accounts include:
- Individual and Joint
- Traditional IRA
- Roth IRA
- Rollover IRA
So whether you are looking for retirement investing, estate planning, or just looking to trade stocks, Motif has an account for you.
How to Use Motif Investing for Your Portfolio
If you made it this far then you have probably already formed some ideas of how to use this brokerage to your advantage. The strategy I like for Motif is two-fold: diversification and low cost ETF investing. If you have started investing in stocks but what to get much more diversified then Motif Investing is a great way to get that done quickly and cheaply.
The Horizon Motifs have no fees at all, so you can invest in a set of ETFs for nothing. That makes my Saving Freak heart go all a twitter.
How Does Motif Investing Compare to Other Brokerages?
Motif falls into the category of discount brokerage accounts. This puts them in competition with brokerages like Trade King and Options House. When you talk about being able to invest in 30 stocks at one time Motif takes the cake on price. This is because you would have to pay the $4.95 fee for each stock with TK and OH.
Motif has two main drawbacks that the others do not. The first is tools. Motif does not offer a lot of tools for doing research into what stocks you want to purchase (Trade King has pretty good tools while Options Hose has some of the best tools in the industry). The second drawback is that they do not allow for automatic reinvestment of dividends. This means that if you want to invest in dividend producing stocks, you will have to pay a fee to reinvest the dividends that are produced by those stocks.
The only other item that could be considered a disadvantage of Motif Investing is that you have to have a minimum of $250 to invest. I do not really consider this a big drawback because that is a pretty low minimum investment, especially when compared to the $3,000 and higher minimums required by most mutual funds.
If you can avoid the extra fees and are not bothered by the tools, then Motif Investing can be a really good option for your needs when compared with the other brokerages.
Motif Investing presents a very interesting and affordable way for us to diversify our portfolios and invest in stocks. The model of grouping 30 stocks together presents a great opportunity to really save money with the low trading fee. Finally, the ability to use their Horizon accounts to invest in ETFs for no cost gives Motif a very competitive way for new investors to get into the market. If you are going to be a buy and hold type investor then Motif Investing is an option that really needs to be explored.