This Motif Investing review is intended to help you decide whether Motif is the right online broker for your needs. Motif Investing lets you use your own investment strategies to create funds or ETFs, each with a theme or “motif”. If you’re looking for a unique approach to investing and diversification, Motif Investing might be the best brokerage firm for your investment portfolio.
Compared to other discount brokers such as Betterment, Wealthfront, and Scottrade, Motif Investing is unique in the field because it approaches investing with a hybrid strategy. With Motif, you can invest in either your own personally-designed themes or in ones designed by the company. Both options offer instant diversification without buying a mutual fund or paying the trading fees for a basket of stocks.
For customers who insist on effective diversification of strategies, this approach is inspired, making Motif Investing an essential online broker for investors looking to have more than one investment account or type of portfolio.
Motif Investing Background and History
Founded by Hardeep Walia in 2010, Motif Investing has experienced remarkable growth in its brief tenure. Prior to his work at Motif, Walia was a senior executive at Microsoft and now serves on several FINRA boards.
When he started Motif, Walia had a clear mandate: to transform the way Americans invest by expanding investment opportunities available to retail investors. Walia’s aim was to provide access to everyone, eliminating the barriers of high fees and overly complicated processes. The end result was an investment platform for beginners and experienced investors alike.
The approach proved to be a winning strategy, backed by Renren, J.P. Morgan, and Goldman Sachs, among others. CNBC has praised Motif Investing for “revolutionizing the investment industry,” and more recently, Fast Company called Motif the top most innovative company in the personal finance industry for “creating low-cost, themed-based investments that are easy to understand.”
How Does Motif Investing Work?
There are many different online brokerage firms, each hoping to distinguish itself in some way. Some brokers offer rich investment research and plentiful trading tools, while others charge low fees to undercut their competition.
While Motif Investing is a low-cost online broker, the company has mastered the art of creating and accommodating investment themes and passing on the control of these themes to clients. With Motif, you don’t trade in single stocks, but in themes or ideas that fit your needs, ethos and investment philosophy. The end result is elegant in its simplicity: clients create their motifs, which contain exchange traded funds (ETFs) and stocks that are on point for a given theme.
And for those who don’t wish to shape their own motifs, there are over 150 pre-made motifs to choose from or use for inspiration. Some examples of existing motifs include “Drug-Patent Cliffs”, “Biotech Breakthroughs”, “Chinese Energy”, “Climate Change”, “Battling Cancer”, “Recent IPOs”, “China Internet”, “Couch Commerce”, “Too Big To Fail”, “Smart Grid”, “Precious Metals”, etc.
The minimum deposit to open a Motif Investing account is $0, but investors do need a minimum of $250 to make a trade. However, if you want to buy on margin, you will need to maintain a minimum account balance of $2,000. Motif accepts Rollover, Roth, and traditional IRA accounts, along with both individual and joint brokerage accounts.
Finally, Motif Investing is a member of FINRA and SIPC insured.
Motif Investing Fees
Motif Investing’s fees are extremely low given the flexibility and options offered. Each motif costs only $9.95. This means that you avoid the commission and fees of buying dozens of different securities to achieve diversification; instead you can access up to 30 stocks for the single $9.95 price.
However, if you choose a pre-made motif and want to customize the basket of stocks and their respective allocations, you will be charged $4.95 per security or a flat $9.95 to change as many of the motif’s holdings as you like.
Motif Investing’s promotion is currently one of the best in the industry – get up to $150 cash back when you open a new account with $2,000.
Motif Investing Features
The obvious advantages of opening an account with Motif Investing involve the control over your investments as well as the simplified, cost-effective fee structure. The other features to consider are:
- Pre-made motifs. The approximately 150 pre-made motifs make investing and researching simple. You can also assess them based on industry, return, volatility, valuation, dividend yield, performance, type of idea, and other factors.
- Horizon motifs. The company offers Horizon motifs, which are investment opportunities free of charge. Horizon motifs are essentially target date funds which balance stock-to-bond ratios per your investment time horizon while taking into consideration your risk tolerance and principal investment. Customization does incur a charge, but is hardly necessary in most cases.
- Variety in motifs. The company offers enough variety in themes to satisfy most investors, and with the added enhancement of customization at hand, the possibilities are limitless.
- Community. In addition to the over 150 pre-made investment themes provided by the company, account holders can see, analyze, and copy the over 9,000 motifs created by community members. This can be a great source for investment ideas. Moreover, every time another investor purchases or rebalances a motif you’ve built from scratch, you earn a $1 royalty. While you may not get rich like this, the system does reward savvy investors by drawing attention to their investments of choice.
- Social media savvy. Motif Investing appreciates the use of social media and allows you to sync your Motif profile with your social media accounts. This allows users to interact and consult with other investors.
Motif Investing Benefits
Motif’s investing platform carriers with it great benefits, and this is no doubt the secret to their success. Some of the most notable advantages are as follows:
- Cost. Motif Investing is, overall, priced very low in comparison to other discount brokers. There is almost no other way to access up to 30 stocks or ETFs for $9.95, and if you choose the Horizon Motif, you don’t even incur a fee at all. Furthermore, unlike traditional mutual funds, there are no loads or expense ratios.
- Diversification. Especially for those with little background in investing, diversifying a portfolio can be tricky. Motif effectively gives investors instant diversification within industries, as well as an easy way to diversify an entire portfolio by buying different motifs.
- No hidden fees. Fees can have a major impact on investment returns. This is one of the main reasons Warren Buffett recommends investors buy a passively-managed, low-cost index fund. With Motif Investing, there are no hidden fees, including no custodial or maintenance fees.
- Simplicity and accessibility. Motif makes the investing process easy, and since there are no minimum deposits or account balances, Motif can be a great way to start investing in the stock market with very little money.
- Rebalancing. Rebalancing a portfolio is important, but it’s not that simple, especially for new investors. If you select a pre-made motif, the company will actively rebalance your stock allocations.
Motif Investing Drawbacks
As good as Motif Investing is in most cases, it does have a drawback:
- No Dividend Reinvestment Program or Plan (DRIP). Currently, Motif Investing does not automatically reinvest dividends. Instead, you are paid out cash dividends into your investment account. Nonetheless, the company does have a dividend motif focused on investing in companies that have not cut their dividend in the last 10 years, who have increased them every year for the past 5, and ones that are considered high yield.
Summary – Motif Investing Review
Ultimately, Motif Investing’s themed approach allows you to shape your portfolio based on your investment philosophy, interests, and financial goals. The best part is that, if you have an idea, you don’t have to research an entire industry to find the specific companies and stocks to invest in. Just pick the corresponding investment motif, tweak a few allocations, decide how much to invest, and purchase your very own “fund” for $9.95.
If you’re looking for one of the best discount brokers online, excellent customer service, instant diversification and new investment strategies to improve your portfolio’s returns, open an account with Motif Investing today.