Motif Investing Review: A Unique Approach to Investing
If you’ve not heard of Motif Investing before, then you’re likely not alone as they’re a newer player in the online brokerage scene – starting nearly three years ago. After doing some background research of what they have to offer I thought a Motif Investing review would be in order. If you would like to check out any of my previous online brokerage reviews, you can do so below:
To be completely transparent, I do not have an account with Motif. I believe it’s important to disclose that, but my experience in the online brokerage industry allows me to dig in a little deeper to see some things that many others may not see.
A brief backstory on Motif Investing, they were started by Hardeep Walia who is a former Microsoft Executive who moved into the investing realm. It was funding from Goldman Sachs and a few others that allowed them to open for business. They started with an approach that is a bit different in the investing world and are geared toward giving investors more of a say over what they’re investing in. With their backstory told, let’s get on to the Motif Investing review.
Motif Investing Features
You Create Your Own Fund: The nuts and bolts behind Motif is that you essentially create your own fund. You can select up to 30 stocks or ETFs of whatever area you want to focus on and buy shares in that motif for a flat $9.95. I will give the disclaimer that you will likely end up with fractional shares, but the point is you control what you want to invest in. I often got asked in my past job if there were options like socially aware funds or funds that focused on a certain niche industry. In many occasions, those presented very limited options and Motif Investing provides a solid way to meet that need.
They Offer Pre-made Ones As Well: What if you don’t have a specific kind of focus you want to create? Simple – Motif Investing has over 100 pre-made motifs to you can choose from. They have a very straightforward interface to use to narrow down ones to choose from if that is your desire. You simply log in to your account and you can search by different sectors and industries to see what pre-made motifs are available. I will note they offer both equity and fixed income motifs to choose from.
Straightforward Pricing: The pricing with Motif Investing is very straightforward, in that you pay a flat $9.95 per motif you choose to invest in. The nice thing about the motif is that if you choose to remove or change up a certain stock in your motif you can do so for $4.95 per trade.
Extensive Social Network: The other nice feature about Motif Investing is they have a fairly extensive social network. They have one in-house that allows you to share investing ideas with others and they also allow you to invite friends of yours from your social media networks. Social media is becoming more of a player in the online brokerage space and Motif Investing has done a great job of taking a unique spin on it.
New Horizon Motifs: Motif Investing has recently launched their new Horizon motifs. What makes these motifs great is that they are no fee motifs that are comprised of low-cost ETFs that are considered best in class for their respective asset class and are completely customizable. The Horizon motifs are based off of your specific risk tolerance, timeline and amount to start investing with. Whereas you would pay a fee for the same basic thing with Betterment, there is no charge for this kind of product with Motif Investing.
Advantages of Motif Investing
Can Be Good for Secondary Investing: The thing that I love about Motif Investing is that they offer a great option if you’re looking for a secondary investing option. As they do not offer mutual funds or options, they lack a full arsenal but I believe you can use that to your advantage if you’re looking for an investment option outside of your main portfolio.
No Hidden Fees: One of the biggest things I like about Motif Investing is they have no hidden fees. Fees can be a drag on investing returns and hidden fees are horrid at best.
They Offer Active Rebalancing: If you select one of the pre-made motifs, they actively monitor it for rebalancing needs. Remember to be careful about rebalancing too often as you should really be looking at a semi-annual or annual internal for rebalancing a portfolio. That said, it’s a nice little feature they offer and if you choose to go with the rebalancing you pay $9.95 for the trading involved.
Great If You Have A Specific Focus: Like I said prior, if you have a specific and specialized theme or niche you’re looking to invest in, Motif Investing allows for that. While this type of investing can and does lead to a certain risk, this is something not many other brokerages are offering.
Disadvantages of Motif Investing
No Dividend Reinvestment is Offered: One of the disadvantages I see with Motif Investing is they do not offer dividend reinvestment. This may not be an issue for all as some investors prefer cash as opposed to a reinvested dividend. With that in mind, Motif Investing actually has launched a class of dividend specific motifs. What I like about this offering is that they have motifs made up of companies that have not cut dividend payouts for the previous ten years, those that have increased dividends each of the past five years or those that are considered high yield dividend payers. If none of those motifs fit the bill and you do want a dividend focused Motif you always have the option of creating your own through Motif. That said, Motif Investing has seen the draw dividends have for many investors and have made a great attempt to meet that need.
It Could Be Easy to Rack Up Fees: I did note that there are no hidden fees, but that doesn’t mean it’s not easy to rack up fees. Like I mentioned earlier, you can change specific stocks in your given motif, but that comes with a $4.95 trading fee. If you decide to change out of four or five stocks, then your fees will start adding up. That is something to be mindful if you’re considering Motif investing.
My Take on Motif Investing
Speaking honestly, I was pretty intrigued when I started doing research on Motif Investing. All of the other brokerages I’ve reviewed I’ve either used personally or have extensive knowledge of and that was not the case with Motif. I think for the right person, Motif Investing could be a great option, especially as a supplement to what you’re already doing elsewhere in terms of investing. The argument would go that much of the same intent could be accomplished by investing in the right low-fee ETFs like you’d see at places like Vanguard. And, you know what, that argument is right to a certain extent. Much of the same thing could be accomplished through that approach and believe that approach is a very solid one to take.
With that said, I believe that you can supplement that style with a small portion (say 5-10%) of your portfolio and Motif provides a good option for those looking for that. This is particularly the case if you’re looking for a way to invest in a certain specialized niche or market that you’re unable to find elsewhere and are comfortable with the risk associated with that.
If you’re considering opening an account with Motif Investing, they do offer promotions – one offers up to $150 for bringing in an account. They also offer low minimums to start, as low as $250 to invest in a motif.
What do you think of this style of investing? Do you have a small portion of your portfolio that you allocate to invest in certain sectors or niches?
*Revised from original posting of December 27, 2013
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