Motif Investing Review – Be Your Own Fund Portfolio Manager, Even Get Paid By Others

Updated. Ever wanted to manage your own mutual or ETF? A new brokerage company called Motif Investing will let you do just that. One of their pitches is that you can invest in a group of up to 30 individual stocks that fit into a motif or theme like “Housing Recovery” or “Lots of Likes” (companies that have the most Likes on Facebook). You can buy the entire basket of stocks with just one $9.95 commission, with no ongoing management fees. The minimum motif investment amount is $250.

My initial impression was that it felt a bit too trendy and gimmicky to recommend as a long-term investment. Indeed, I don’t really care how many Facebook Likes a company has, and I doubt I would buy stocks based on my love of pets or my political views. It’s just not my style.

Since they let you customize the basket, anyone could essentially make their own ETF or mutual fund with ZERO expense ratio. You can’t track a broad index like the S&P 500, but if you do have a basket of stocks that you buy regularly, this would be a very cost-efficient way of doing it. You can add or remove stocks, and adjust the relative weighting of each stock in the motif. Here’s a screenshot (click to enlarge):

Horizon Motifs are preset “target date” motifs which are commision-free and with zero management fee. There are 9 different Horizon Motifs – you pick one of three time horizons (1 year, 5 year, or 15 year) and one of three risk levels (conservative, moderate, or aggressive). Kind of like a Target Date 20XX mutual fund, kind of like a roboadvisor. If you buy these specific portfolios, they waive their $9.95 commission. More information at this post: Horizon Motif Review: Commission-Free, No Advisory Fee, Index ETF Portfolios.

You can even make money when others use your Motif Portfolio with the Creator Royalty Program. Every time a client makes a $9.95 trade using your Motif, you’ll get a $1 royalty fee. For example, after reading an article about the Voya Corporate Leaders Trust Fund which bought 30 stocks in 1935 and then never sold them (but still charges a 0.52% management fee every year), I created the Depression Survivors Motif which does basically the same thing except it has zero management fees.

So far, I’ve made one entire dollar! 🙂 Recent performance has been abysmal due to recent oil price drops, as Chevron and ExxonMobil are significant holdings.

My plan is to someday create a custom basket of dividend-oriented stocks that hopefully will provide a long-term stream of growing income. For example, look at the SPDR S&P Dividend ETF (SDY) that holds 60 highest-yielding stocks of the S&P 1500 that have raised their dividends every year for the past 25 years. It’s a nice idea, but it leaves out some good companies and the 0.35% expense ratio eats up 10% of the original yield of the underlying companies. Why not hold most of these directly, remove some of the ones you don’t like, and keep the 0.35% as extra return for yourself?

Motif also uses dollar-based trades, which means every penny is invested, while they keep track of any fractional shares for you. No maintenance fees, no inactivity fees. In many ways, this is similar to the unlimited plan at Folio Investing, but Motif Investing has the potential to be a lot cheaper ($10 per motif trade with no minimum trade requirement vs. $29 every month for Folio) and is closer to a ETF in that they do real-time market trades. You can still do regular real-time trades of individual stocks for $4.95 per trade. Currently there is no automatic dividend reinvestment, the dividends go to cash and you reinvest yourself as desired.

Update: As of 8/13/15, Motif is adding the following features:

  • Dollar-based, real-time purchases of single stocks and ETFs (in addition to whole shares).
  • Stop loss orders by whole or fractional shares.
  • Create your own stock or ETF watch list.

New customer bonus. Right now, Motif Investing is offering new customers up to a $150 cash bonus when you open with $2,000+ and make 5 trades. If you make 1 trade, you’ll get $50. 3 trades will get $75.

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