Motif Investing Review: Create Your Own ETF for Cheap!
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Motif Investing is one of my favorite online brokers. Motif has been in business for six years and has made a good name for themselves. However, Motif Investing has made quite a number of platform upgrades recently, so I wanted to do a full update of our Motif Investing review for 2017 to give some insight on the new changes to the Motif platform.
If you’re looking for somewhere to start investing, this Motif Investing review will give you another brokerage possibility to consider.
How Does Motif Investing Work – Basic Background
Motif Investing is part traditional discount brokerage and part robo-advisor. The basic premise behind Motif is to give investors more control of how they invest, along with providing theme-based investing for those who want their investing to align with their values.
On top of that, Motif has one of the lowest pricing structures in the industry and has a super low account opening requirement – $250. For those who must start investing in the stock market with little money, Motif makes it simple to begin the path to growing wealth.
With their hybrid approach, Motif can serve a range of clients. If you prefer more of an automated, theme-based approach, Motif offers several options to help you. If you prefer more control over your investing and are a bit more active, Motif can help you – with $4.95 single stock trades, which happens to be the lowest price in the industry.
I mentioned platform upgrades to the Motif site. Motif Investing was named one of the top “disrupters” (a “disrupter” in this sense is one who revolutionizes the industry) in the finance space in the CNBC “Disrupter 50” in 2014 and 2015.
As you will see in this updated review of Motif Investing, they’re seeking to revolutionize the investing industry again.
Legacy Motif, for lack of a better term, are the original offerings from Motif Investing. They are all still very much a part of the platform and I don’t see them ever changing that as it’s their foundation.
That being said, a “motif” is a grouping of up to 30 different stocks or Exchanged-Traded Funds (ETFs). You can either create your own motif, or you can purchase one of their pre-made motifs – there are roughly 150 pre-made motifs.
If that doesn’t work for you, you can also purchase any of the motifs created by other users, so you literally have thousands of options to consider when it comes to buying a motif.
There are two key things I like about this setup. First, it gives you as the investor the ability to trade by theme. You can invest in anything from “Growing Dividends” to “3D Printing” “Biotech Breakthroughs” and more.
Secondly, you can trade a motif for $9.95. Getting up to 30 different stocks and ETFs for under $10 is a great deal and can provide great diversification. In addition, you can buy a motif for as little as $250, so it’s great for beginner investors and those looking to add some additional diversification alike.
There are many other features to keep in mind with legacy Motif, such as:
- $4.95 individual stock pricing. This puts Motif at the same price as TradeKing and the lowest in the industry. If there is a specific stock or ETF you want to trade in or out of your motif, you can also do that for $4.95 per trade.
- Horizon motifs. If you like low-cost ETFs, Motif offers Horizon motifs, which are motifs made up of best in class, low-cost ETFs. These are based on your specific risk tolerance, timeline and the amount you’re investing. There is no additional fee for this service.
- Access to IPOs. IPOs are risky, but they’re commonly not available to most investors. If you have a standard Motif account, you gain access to any IPO made available through JP Morgan.
- Scheduled transfers. Motif Investing allows you to schedule transfers on pretty much any interval – weekly, bi-weekly, monthly, etc. You can also do what’s called an instant deposit of up to $5,000. The instant deposit allows you to trade right away without forcing you to wait on clearing delays.
- Trading alerts. Trading alerts are fairly common in the industry, but these can be made on specific holdings in a Motif in the event you want to sell it or buy more.
- They do not reinvest dividends. This is the one thing I wish Motif would change. Unless the stock gives out a stock dividend, the cash is left in your account, and you can use it to buy more stock once you have enough in your account.
- No hidden fees. Online brokerages love their hidden fees. Motif Investing does not have any hidden fees.
- Multiple account types. You can open the typical account types with Motif – Individual, Joint, Traditional IRA, Roth IRA and Rollover IRA. Motif Investing also offers Trust accounts.
I’ve personally used the Motif Investing platform for three years and think it’s relatively simple. I do most of our investing through Vanguard, but keep a small play account open with Motif. If you want a secondary investing option like that, or simply just need to start investing, Motif Investing is a good platform to use.
If you’d like to open a Motif Investing account, they offer a promotion of up to $150 cash back, as long as you open an account with at least $2,000.
Motif Blue is one of the two newer features added by Motif Investing of late. Motif Blue targets one main client type – more active traders. Whereas the legacy Motif offerings are more for those who want to start investing or who want to invest in a specific theme.
The screenshot below shows what you get with Motif Blue. There are three plans:
- Blue Starter – $4.95 per month, with one free trade per month
- Blue Standard – $9.95 per month, with one free trade per month
- Blue Unlimited – $19.95 per month, with three free trades per month
The free trades do not rollover month to month, so if you don’t use one in a particular month, you lose it. The main draw of Motif Blue is that you get access to auto-investing and rebalancing features, exclusive market reports and real-time quotes through the site.
I like the new feature but do honestly question the value of some of the offerings. If you trade more than three times per month, there is value – you just need to make sure it’s a right fit for your needs.
If you get into Motif Blue and find it’s not for you, you can cancel or switch plans at anytime. You can also get Motif Blue for one month free to try it out to see if it’s for you.
How Does Motif Investing Impact Work?
Impact is the newest platform upgrade by Motif Investing. Impact is similar to what you’ll find with robo-advisors like Betterment and Wealthfront, with a twist. Motif is betting on the assumption that investors are increasingly concerned about investing with their morals, otherwise known as socially responsible investing.
Motif Investing believes it’s possible to align your values with your investing and be successful while doing it. For example, if you care about protecting the environment or corporate behavior you can construct a portfolio that embraces that value.
This sounds a lot like what Motif offers with their legacy motifs and it is, but Impact goes farther than that. This is where the automated, robo-advisor piece of Impact comes into play.
Here’s how Motif Impact works. You open a Motif Impact account and answer several questions – largely consisting of your age, timeline, goal and particular areas in which you to care to invest. The process itself only takes several minutes to complete.
Once you answer the questions, Motif uses the Modern Portfolio Theory (MPT) approach to build your portfolio. They strip out any companies that may not be inline with what you care about.
If there are additional companies you’d like to remove, Impact is fully customizable. They monitor and rebalance the account from there to make sure it’s doing what it needs to hit your specific goal.
Here are some of the additional features of Motif Impact:
- The minimum balance to open a Motif Impact account is $1,000
- Motif Impact is a separate account from the legacy Motif trading account
- Motif Impact is $9.95 per month; once you reach an account balance of $100,000 or more, it becomes a tiered pricing structure
- You can specify your own asset allocation if you don’t like the one they suggest
- Motif will automatically rebalance your Impact account if it drifts more than five percent away from your threshold
- Cash from dividends is not reinvested until you hit $250. Once you hit that amount, the cash is reinvested towards your target allocation
- Motif Impact uses Tax Loss Harvesting (TLH) to make sure your portfolio is making use of tax advantages
- You can use Motif Impact in both non-retirement and retirement accounts
- Motif Impact is fully managed while also giving you the ability to make changes as you see fit
- You can set up recurring deposits into your Motif Impact account but this is not required
- If you cancel your Motif Impact account, the account reverts to a legacy Motif trading account
- The same $150 cash back promotion applies to Motif Impact, as does the $150 IRA promotion that requires a new IRA with a balance of at least $5,000
Given that this is a completely brand new feature by Motif Investing, time will tell what else they add to the offering. Regardless, I do like the new offering, overall, and think it’s a win for investors who want to be purposeful in their investing efforts.
Motif Investing Review – my take
To be honest, I have been pretty impressed with Motif Investing over the years. Motif makes it pretty straightforward to open an account, and the platform is intuitive and simple to use. Having used a variety of broker platforms currently and in the past, I would rate Motif ahead of the curve when it comes to ease of use and navigation through their platform.
I think with the addition of Blue and Impact, Motif Investing is taking strides to be more of a full-service option for investors. In previous years Motif was a great option for those needing to invest with little money, and now they’re aiming to help clients grow their wealth, regardless of what the goal is.
I’m not necessarily sold on the cost of Blue and don’t like the non-reinvestment of dividends, but they have many features that can help investors. Whether you’re looking to start investing or want to grow your wealth inline with your values, Motif Investing is worth a look.
I think for the right person, Motif Investing is a great option, especially as a supplement to what you’re already doing elsewhere in terms of investing as well as for someone new to the stock market.
I also believe Motif provides a great way to supplement your investing with a smaller portion of your portfolio. This is particularly the case if you want 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.
After reading my Motif Investing review, 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?
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