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Motif Investing Review: A Unique Approach to Investing

Motif 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.

 

Open an account with Motif Investing today and get up to $150 cash back!

 

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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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally

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13 Comments

  • I like the concept here, but since we are looking specifically at dividend investing, I don’t think this would work for us. Great review, John – nice and thorough!
    Laurie @thefrugalfarmer recently posted…Will the Real God Please Stand Up?My Profile

  • I first heard about Motif investing a little over a year ago as Peter at Bible Money Matters was telling me about it. I think it can be a good way to invest because many times people are looking to invest in a specific market or area.
    DC @ Young Adult Money recently posted…The Weekly Quick Hits RoundupMy Profile

    • John says:

      I agree DC, I think it could be a good way for some – especially if you’re wanting something very specialized and are comfortable with the associated risk.

  • This is a really interesting approach. I think it could be good for people who want to experiment a bit with where they invest. Sadly, I’m not yet at that point.
    Michael | The Student Loan Sherpa recently posted…In Depth: cuStudent Loan Consolidation Review (Credit Union Student Loans)My Profile

  • Jason says:

    Great review! My wife and I are expecting our first, and I’m looking for a place to create a “newborn savings ETF”. An account where the grandparents can make a donation to every Christmas (instead of useless gifts). The challenge though is some of the stocks that I’d like included (like AAPL) would prohibit them from ever being able to purchase a single share within a year. That said, this seems like a great option for them to take a $100 gift to the baby, and spread it across 10-12 stocks (with partial shares). Or am I mis-reading the capabilities of Motif?

    • John says:

      Thanks Jason! That sounds like a great idea and way to get started early! You’re dead on, the money is put in and it allows you to create your own fund essentially by selecting the stocks you want to be a part of it – and ending up, initially, with fractional shares of each. Thanks for stopping by!

  • Todd Smith says:

    Good review, as a Motif investor I can affirm that everything you say in your review is accurate. The only negative I have experienced is that currently, when you re-balance a motif, it will result in the sale of some stocks in the motif, which may result in a taxable event. It would be great if Motif offered an option to re-balance using only stock purchases and no stock sales (and so no taxable events).

  • Rahul says:

    Thanks John. The thing about investing is, all my life I’ve heard how you want to diversify. What Motif offers seems counterintuitive to all of that programming. Am I missing something?

    • John Schmoll says:

      That’s a great question Rahul. You’re correct in that you do want to diversify. Motif actually allows you to do that in that each motif you set up can essentially be an index fund – one either you’ve created or one they’ve created. They can hold up to 30 stocks, so you should be able (generally speaking of course) to diversify. Thanks for stopping by!
      John Schmoll recently posted…The Lemonade Stand Review & GiveawayMy Profile

  • cynna says:

    I am currently using the Motif Investing (MI) site, and I agree with your review. The route I took with MI was to open an account with $8K and just sort of play a bit – with the intention of both having some fun and leaning a little.

    Before I executed my first trades, and even before I opened my account, I created a login on MI and then reviewed literally all of the motifs that the pre-built. I watched them for a couple of months and decided which I wanted to purchase.

    With 8K in the account I started customizing and buying motifs. I created one on my own, but I did not publish it for public viewing. After 6 months my total account value has increased about 8% percent but the dollar value of my account has not increased. That may seem odd but you pointed out that fees for modifying the motifs can eat into profits.

    So if you have a compulsive need to rebalance, buy and sell and play too much fees will add up.

    With that said, I have been having a blast with MI and I am happy that I can create my own investment motifs and customize others and see how them perform.

    I will mention that I have other investment accounts that are seriously and vigorously managed. MI is where I get to act like an investment manager on my own behalf and I love it!

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