I recently had the opportunity to meet with a couple of representatives from Motif Investing. Though the company has been around for years, I hadn’t really looked too much at them.
Why? I feel like they aren’t marketing their product to its potential. I had missed one of the MAJOR benefits that I’m going to share with you.
Motif Investing’s big marketing message revolves around investing in ideas not stocks. An example they gave me is that instead of investing in Apple and putting all your hope on the iPad, you can invest in the companies that make the chips and screens. These companies make them for other tablets too, so if everyone bought Android tablets instead of an iPad, your investment would (presumably) still do well.
By investing in a Motif, you hold all the underlying stocks the same way you would as if you made a bunch of small trades.
The iPad example makes sense. However, there are some Motifs that don’t make sense. For example, there is a Motif of stocks that consists of companies that sponsor sport stadiums. Maybe it would be good to give to a kid, but there’s no common sound investing strategy there… except for maybe having a market budget that lends itself to that. The existence of those meaningless Motifs ruined the whole idea for me.
However, when I talked with them, they explained that you can create your own Motif and buy and sell it for $9.99. That means you can buy up to 30 stocks (including ETFs) for a single $9.99 fee. Of course typical spreads and ETF fees (where applicable) of the underlying stocks apply. Think about it for a minute though… you can buy a whole portfolio at once.
As I went through their website, I saw that Motif does market this benefit after all. There’s a whole page showing how you can spend $300 buying 30 stocks elsewhere or under $10 at Motif. That’s powerful stuff.
And if you act soon with that link they’ll even give you up to $150 in free money just for investing through them.
I have to think that somewhere their marketing department has dropped the ball. I simply don’t see how other brokerages compete with that.
The biggest question I had was: How do I rebalance this? The answer is that the owner of the Motif can rebalance the Motif for $9.99. The interesting side effect to this is that if I create a Motif and you invest in it, you are at my mercy. Imagine how you will feel when I rebalance the portfolio to be 99% invested in a Russian ETF. Cue the:
I got word from Motif that my understanding there was completely wrong. Everyone gets an email and has the option whether or not to rebalance with the owner of the Motif. That’s a much better solution. Unfortunately, this makes the maniacal laugh a little anti-climatic. It’s still fun though:
My suggestion would be to be very careful of investing in someone else’s Motif unless you really trust them. Even then it may be better to just copy yourself, so you can be the owner.
Tomorrow we’ll explore how we can use Motif’s tool for fun and profit. In fact, it just might be the solution to a question I asked about a month ago.
One negative is the don’t reinvest diveidends. Thats fine if your trying to live off your investment, but for a professional in the middle of my career, what am I supposed to do when get I 3$ dividends every week or so?
I asked the company and there are two things you can do.
1. You could just leave the cash to sit and wait for the next investment. I’m not a huge of fan of that unless you plan to continuously put money in. To make it worthwhile (with the commission), you’ll need to put significant money in at regular intervals.
2. Set up an ACH relationship with your bank and withdraw the money. There are no costs and no minimums. You could set up a reminder in Google Calendar every couple of months to clear out your ~$25 or so. Use this in your daily life (or emergency fund), while you are building up money for the next big deposit.