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Motif Investing Review: Create Your Own ETF for Cheap!

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This Motif Investing review covers my experience using the theme based broker. Open a new account with Motif Investing today and get up to $150 cash back!

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

 

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

 

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.

This Motif Investing review covers my experience using the theme based broker. Open a new account with Motif Investing today and get up to $150 cash back!

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.

Open a Motif Investing account and start investing today!


 

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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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. I'm also a freelance writer, and regularly contribute to GoBankingRates, Investopedia, Lending Tree and more.

49 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!

    • John says:

      Totally agreed Laurie. If dividends are your main thing then there are generally better options out there for you.

    • Jack says:

      You can always withdraw dividends from Motif. They have several Motifs with emphasis on dividends. The $9.95 in and out and $4.95 rebalancing are an attraction. They have loads of my money.

  • 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.

    • 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.

  • 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).

    • John Schmoll says:

      That’s a great point Todd! That is certainly something to consider and could lead to a surprise if not done in a retirement account. Thanks for stopping by!

  • 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!

  • 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!

    • John Schmoll says:

      Thanks for all the insight to your experience Cynna, I appreciate it as it’s great to hear from those using the platform.

      Glad to hear that things are going well overall for you with MI and sounds like you’re using them pretty much like I’d recommend most use them for.

    • gibbs says:

      I am one of those with a constant need to rebalance. As soon as I get a notification on my phone that a rebalance is available, I can’t stop thinking about it until that little notification flag is gone. What I have done is turn notifications off on my phone for this app and instead, I set a reminder on my calendar for every six months to take a look at the available rebalances. Works much better for someone like me…

  • Julie says:

    Can you explain how dividends/earnings would be directed if I chose to set up a Roth IRA with Motif? Wouldn’t they have to have some sort of reinvestment structure, based solely on the nature of the Roth? I would not want to set up an IRA if I were going to be taxed and penalized on cash payouts. I’m interested in the Horizon ETF line where I can do a small direct Roth IRA rollover and “set it and forget about it” for the long run. Thanks for your helpful post.

    • John Schmoll says:

      Great question Julie! How that would work with MI, and every other brokerage as well, is that any cash payout would go into a money market account that’s tied to your account. In an IRA, those payouts are sheltered from taxes so you wouldn’t need to worry with that. The cash would sit there and earn a little bit of interest until you were decide to use it to purchase another holding. Glad to be of help and thanks for stopping by. 🙂

      • Jack says:

        When you use the MI rebalance, you can reinvest your dividends or any other money in your account for no more than the usual $4.95 for an ordinary rebalance. One slight negative is that if you have $10,000 to invest, they only buy something like $9,000 of stock, and leave $1,000 in cash, apparently to allow for price fluctuation during the transaction. The cost saving is still worth it to me. If you are buying several Motifs, the same unused $1,000 can be used as backup toward the next purchase.

  • ninan says:

    Good summary of MOTIF. However, one issue that needs to be addressed is about how good their execution is, especially if the spreads are wide. If you are trading 10 stocks per month you could save $149 per month(10*8*2 – 2*9.95) on MOTIF. However, if their execution is bad and your trades lose, let us say, .2% on trades worth 100,000 you would lose $200.

    • John Schmoll says:

      Great question Ninan. As with any other broker, Motif is audited by their regulators to verify best execution. The other main thing to consider is they’re trading only in stocks/ETFs that are NYSE/NASDAQ listed so there really shouldn’t be any issue with bid/ask spreads. You would also be investing in the singular or multiple Motifs and not trading individual stocks. Hope that helps. Thanks for stopping by!

  • I really like Motif. I’ve built a couple of portfolios and can’t complain. Although there isn’t a DRIP, I think that consistent saving and reinvesting the cash from dividend portfolios can help mitigate this.

  • Pinky R. says:

    Thank you for a great article. I have read up on Motif and am interested in opening an account very soon. My question is: If I stick with the pre-planned portfolios and do not deviate or switch out stocks, can I simply sell the entire portfolio for another one as my personal investing needs change? If so, what sell/re-buy fee’s will I incur?

    • John Schmoll says:

      Not a problem Pinky, glad to help! To answer your question, yes you can sell out of the entire motif as your needs change and would just incur the $9.95 trading fee by switching out entirely.

  • madden says:

    Great article. I see no mention of TAX implications. Are gains/losses reported to the IRS.
    Are TAX software companies on board with how these returns are compiled in your TAX preparations

    • John Schmoll says:

      Thanks Madden! Yea, another commenter mentioned that above and need to add it to the review. 🙂 If it’s in an IRA, of course, there would be no tax implications. However, if you’re in a non-IRA the rebalancing will cause a taxable event that would be reported.

      Yes, you should not run into a problem implementing that with TurboTax, H&R Block, etc.

  • Jonathan frouman says:

    What is minimum trade amount allowed? What is the minimum of the motif size for the small investor?

    • John Schmoll says:

      Great question Jonathan! The minimum with Motif is $250. Motif isn’t tiered, so you should be able to get into any of their motifs at that $250 level. Thanks for stopping by!

  • James says:

    I would think this type of investing is a tax nightmare. Make sales of 4 motifs with 25 stocks each and you have to report 100 stocks!

    • John Schmoll says:

      Sorry for just catching this now James. That is a good point, especially if you’re an active trader. If you (generally speaking) are able to open a Roth I’d go that route with Motif Investing to help mitigate the tax headaches.

  • Alexis M. says:

    I’m a college student looking into Motif as a way to begin my investment career so that I have some experience once I get out in the “real world.” Would you have any tips about using Motif for someone without much in the bank account in my situation? For example, a suggested minimum investment amount?

    • John Schmoll says:

      Great question Alexis. Motif is a great way to get started with little money to begin with as well as to get your feet wet with investing. Their minimum opening balance requirement is $250. That’ll allow you to open an account and either create your own motif or select one of their pre-made ones for that minimum amount. You can add more to it from there, of course, but just need that minimum amount to begin with.

  • Len says:

    I don’t want fractional shares. I dealt with that at Loyal3.They don’t appeal to me. Can’t that be avoided? Currently there are seven stocks I can start with. With so few to begin with, should I even bother? They are all dividend stocks.

    • John Schmoll says:

      I understand that concern Len, I’m not a fan of them myself but there is no real way around it with Motif. If you’re going to do dividend reinvestment, you’ll see that at most brokerages though if you sell out of a holding they should liquidate the partial share at the same price the whole shares sold out. That being said, I would definitely say it’s still worth it in the long run.

  • Luis says:

    Hey there John… I am a teacher struggling to save money. I have been interested in stocks for some time, but after reading a few books and becoming so overwhelmed with stock terminology and how it works, I’ve convinced myself it isn’t for me. Can you help me understand the process and how I can get started. Thanks John!

  • Adam says:

    Please comment on how they execute a Motif trade. Ex: If I have 25 stocks in a motif and want to invest $2500.

    1) Will it be a market order always (buy or sell side) for all underlying stock/ETFs based on weightage ratio. I guess limit order won’t work to satisfy all the limits of underlying stocks in a motif (All or none will be tough).

    2) If market order is answer then how precise is their order execution (compare to reputed online broker like eTrade or TD). A delayed execution can cost investor heavily on volatile day.

    3) Looks like to keep accounting simple better to open IRA/Roth IRA account if somebody wants to do any rebalancing involving multiple securities.

    Thanks for answering

    • John Schmoll says:

      Thanks for stopping by Adam – great questions. I’ve spoken with reps from Motif in the past about some of these.

      That being said, to my knowledge, it would always be a market order. You’re correct in that a AON would be virtually impossible to get through if you have 10 or 20+ holdings in a motif.

      I’ve spoken with them about that second question fairly in-depth. They’re under the same premise that someone like Etrade or TD is and are required to have best execution possible. Given that they now offer individual stock trading it should be expected that they’re even more on top of this. They’re wanting to become more of a broader scope brokerage, similar to the traditional brokerage model, so it stands to reason they’d need to be on top of this in order to have any measurable success.

      Excellent point. Yes, an IRA would keep accounting significantly simpler. I’ve not done a lot of rebalancing in my non-IRA with them, but can only imagine the headache it’d cause if I did.

      Hope that helps – let me know if there are any other questions I can help with.

      • Craig says:

        Thanks, this is a great article. I’ve been thinking about getting into investing via Motif or Wealthfront or other similar service.

        Regarding point 3: Is it really that much of a headache to do your taxes if you invest in stocks (or motifs in this case)? Don’t they just send you a 1099 and you plug that into your tax prep software? (for someone with a relatively simple financial life — job, savings accounts, maybe stocks, not really anything else).

        • John Schmoll says:

          Sorry for just catching this now Craig. Yep, you’ve got it right – Motif Investing still sends out 1099s (any broker is required to) and you can simply plug it into your software. It’s pretty painless to be honest.

  • Seth says:

    I find it really interesting (haven’t used it yet) as a way to reduce fees. If I wanted to have 7 stocks or ETFs in my portfolio all at different weights doing that in a traditional sense would cost me 7 trades. Here I can set it up with the percentages I want for each one and invest paying only $9.95 in fees. At least that’s how I understand it.

    • John Schmoll says:

      You hit the nail on the head Seth. Motif allows you to set up your “motif” by percentage. So, for example, if you want the top 2 stocks/ETFs to take up 50% of your overall investment you can do that.

  • Barry says:

    Hi John – thank you for your review. Two questions:
    – Does Motif support downloads of trading activity, holdings, realized Gain/Loss via online reports (to Excel preferably).
    – Does Motif support downloads to Quicken or other financial software for managing portfolios?

    These functions might all come from Pershing, their trading back-end. Do users have a direct login to Pershing when using Motif’s services?

    • John Schmoll says:

      Hi Barry,

      Not a problem at all. Those are great questions. Yes, you can download statements, activity, etc. I’ve never tried saving it as an Excel file but normally save them as a pdf file.

      From what I’ve researched, they do not allow for downloads to Quicken though oddly enough they do through Mint.

      I’m not terribly certain on that, to be honest, though would imagine it would be a direct log in.

  • Preston Pelkey says:

    Are checking accounts (or ATM debit cards) offered as a means of withdrawing cash accumulated in the account from sales or dividends received?

  • Latrice says:

    Hello ,

    I really enjoyed your review of Motif Investing and it’s lining up with the opinion I formed after doing additional research . I think i would like to use Motif as a secondary investment account but was wondering if you had any recommendations for a primary account (knowing that I will have Motif as a secondary ).

    I am a young investor and have some basic investment knowledge but this will be my first foray into actually investing .Now that I have paid off student loans and have an emergency fund , I would like to start my investing with about 5,000 and was wondering if you had any recommendations? My investment strategy will start of more conservative while using Motif to play a little bit . No day trading for me .

    Thanks I’m advance for your help !

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