Motif Investing Review: Create Your Own ETF for Cheap!
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This Motif Investing review is an update for 2017 after personally using the platform for several years. Motif Investing is part robo-advisor part DIY broker. The hybrid approach allows Motif to be unique in the online brokerage space and allows them to serve many different client types.
Motif Investing started with the idea of giving investors more control over what they can invest in by offering a theme-based approach to investing. This, along with their low minimum account balance requirement, makes Motif a great option for those who want to invest in the stock market.
I manage most of our investing through Vanguard though like having a small play account on the side to have a little fun. I use the Motif Investing platform for that capacity.
Motif Investing Background
Motif was started by Hardeep Walia who is a former Microsoft Executive who moved into the investing realm. It was funding from Goldman Sachs and others that allowed them to open for business. Many in the finance industry have also taken notice with Motif Investing being named #4 in the CNBC “Disruptor 50” for helping revolutionize the finance industry, as well as being named the most innovative company in the personal finance space by Fast Company.
Motif Investing started with an approach that is a bit different in the investing world. Their aim is to give investors more say over what they invest in – which is great to see. Motif also believes that investors are paying too much for their investing. That’s music to my ears and could not agree more. Below is a short video that goes a little more in depth to see what makes Motif different. With that out of the way, let’s move on to the Motif Investing review.
Motif Investing Features
You Create Your Own Fund: The basic premise with Motif is that you create your own fund based on a specific theme. You 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. You will likely end up with fractional shares though shouldn’t be an issue for many. I often got asked in my past job if there were options for socially responsible investing or funds that focused on a certain niche industry. In most situations those presented very limited options and Motif Investing provides a solid way to take care of that.
They Offer Pre-made Ones As Well: What if you don’t have a specific kind of focus you want to create? Simple – Motif has over 150 pre-made motifs you can choose from. They have a very straightforward interface that allows you to find pre-made motifs. You simply log in to your account and you can search by different sectors and industries to see what pre-made motifs are available. These motifs can be as simple as the “Growing Dividends” motif or ones as exotic as “3D Printing” or “World of Sports.” Some of the motifs are pretty unique, but there are also many mainstream ones to select.
Straightforward Pricing: The pricing at Motif Investing is straightforward and easy to follow. You pay a flat $9.95 per motif. 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 or a flat $9.95 for unlimited changes. Honestly though, I’d just create my own motif without having to pay extra to customize a pre-made one.
Trading Alerts: This isn’t a unique feature, as many other brokerages offer trading alerts. However, the new trading alerts feature at Motif Investing allows you to keep a closer eye on your investments when not logged in to your account. You can set alerts that are tied to a specific holding, or an entire motif. Whenever the selected item reaches your set value you will receive an alert to notify you. On top of this feature, Motif Investing offers single stock trading. For $4.95 per trade, you can trade individual stocks with Motif. This places Motif as the lowest priced broker out there, along with TradeKing and Optionshouse.
Extensive Social Network: The other nice feature about Motif Investing is they have an 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 implementing it. You can also use this to get royalty payments from Motif if someone buys a custom motif you’ve created!
Motif Blue: This is a brand new feature Motif recently added to target more active traders. This feature is still in beta but offers three options: $4.95, $9.95 and $19.95 per month plan. The plans get you access to automated investing and rebalancing as well as real-time market commentary. You also get one and three free trades per month, respectively, with the plans. With it still being in beta, Motif is offering a free one month trial subscription and you can cancel anytime you like – if you do sign up for the feature. I will add there is a fair bit of fine print with this new offer so make sure you read through it to make sure it’s what you want.
Instant Deposits: This is another recently new feature for active traders. Motif allows you to deposit up to $5,000 per day and trade those funds instantly.
New Horizon Motifs: Want low-cost ETFs, but don’t know which to select? Motif Investing solves that problem with their Horizon motifs. What makes these motifs great is 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 on your specific risk tolerance, timeline and amount to start investing with. You would pay a fee to do that with Betterment – there is no charge with Motif.
Advantages of Motif Investing
Can Be Great for Secondary Investing: The thing I love about Motif Investing is they offer a good option if you want or need a secondary investing channel. I believe they can also be a good option for someone new to investing and has little money to start investing with as they allow you to open an account with as little as $250.
No Hidden Fees: One of the biggest things I like about Motif Investing is they have no hidden fees. Fees are a drag on investing returns and hidden fees are horrid at best. This puts Motif in the ranks of Scottrade or Etrade as being able to invest without the fear of getting hit with some sort of random fee. This also includes no maintenance or custodial fees.
Instant Diversification: Diversification is something overlooked by many investors and to their own detriment. Having the ability to put up to 30 stocks or ETFs in a bucket provides a great way to get instant diversification without much work at all.
They Offer Active Rebalancing: If you select one of the pre-made motifs, Motif actively monitors it for rebalancing needs. Remember to be careful about rebalancing too often as you should really be looking at a semi-annual or annual interval for rebalancing a portfolio. That being said, it’s a nice little feature Motif Investing offers 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 is the place to go.
Disadvantages of Motif Investing
No Dividend Reinvestment is Offered: The biggest disadvantage 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 does offer a class of dividend specific motifs. What I like about this offering is 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.
Motif Investing has seen the draw dividends have for many investors and have made a great attempt to meet that need. I will also add that it wouldn’t surprise me to see this feature added in the near future as they know it’s something many investors want. They saw the need to offer single stock trading, and added the feature, so it wouldn’t surprise me to see DRIP offered in the near future.
Motif Investing Review – my take
To be honest, I have been pretty impressed with Motif Investing in my experience 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 as ahead of the curve when it comes to ease of use and navigation through their platform.
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.
If you’re considering opening an account with Motif Investing, make sure to check out my Motif Investing promotion code post to see what they’re currently offering for new accounts. Motif Investing offers very low minimums to start, as low as $250 to invest in a motif.
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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