Motif Investing was founded in 2010 as a way for retail investors to invest in ideas at a low cost. For only $9.95, an investor can build a basked of 30 individual securities (stocks, bonds, ETFs) in order to invest in a trend. That's a great value proposition compared to having to individually spend $7.95 per trade, or $238.50 to buy the same 30 position basket.
After spending 13 years working in finance, and 25 years investing in stocks and bonds, the biggest error I see investors making is not managing their risk. They'll concentrate their portfolio by going “all-in” on just a handful of names. More often than not, they'll end up hurting their returns in the process. Motif Investing helps save investors from themselves by allowing investors to more appropriately manage their portfolio.
Here's a company snapshot followed by a detailed review for 2018. They have been relatively quite on the PR and fundraising front, which has me wondering.
Motif Investing Company Snapshot
Headquarters: 400 S El Camino Real, San Mateo, CA 94402
Description: Motif allows individuals and investment advisors to invest in stock and bond portfolios built around everyday ideas and economic trends.
Founders: Tariq Hilaly, Hardeep Walia (current CEO)
Founded: June 1, 2010
Number of employees: ~100
Contact info: info@motifinvesting.com | +1 855-856-6843
Categories: Internet, Financial Services, Finance
Motif Investing Management Team
Motif Investing Funding Rounds History
Motif Investing Detailed Review
Lower Investing Cost
Let's say you've got $50,000 to invest. You could buy a bunch of low cost ETFs for $7.95/trade via E*TRADE to create your ideal portfolio. Or you could buy an expensive target date retirement fund that might cost over 1% in fees if you're not buying from a low-cost shop like Vanguard. Or you could buy individual stocks at $7.95/trade to create your own portfolio.
Instead, what you could do is buy a motif of up to 30 stocks for a one-time fee of $9.95, instead of spending $238.50 in commissions to buy 30 individual stocks. Obviously if you have a larger portfolio, the commissions matter less. But most retail investors have less than $100,000 in their after-tax investment portfolios and should be cognizant of their trading fees.
Now let's say you want to buy or sell an individual stock within a motif that you've purchased. You can do that by paying $4.95 in commission for the trade. So again, the transaction cost is lower, and I'm sure the transaction cost will continuously adjust to the market rate, as low cost is one of Motif's value propositions.
Further customization within a motif is also possible and affordable if you want to buy or sell multiple stocks. That's no problem too. Motif Investing gives you 2 cost-efficient options. You can add, delete or change the weightings as you like, then buy the entire customized motif for a commission of just $9.95, regardless of how many stocks you've changed. Alternatively, you can buy or sell each individual stock in a motif you own for just $4.95 in commission per stock.
As your investment performance changes over time, rebalancing can occur to ensure the motif stays true to a specific idea or trend. The creator of the motif will adjust stocks, segments, and weights accordingly. If you decide you want to participate in those rebalance changes, it costs $9.95 to follow suit with one click of a button. In an ideal world, you hope to never pay any fees after purchase ever again. But let's say your Apple stock is up 100% and has gone from 25% to 50% of your entire Silicon Valley motif, and your Netflix stock is down 40% and only has a 6% weighting from a 10% weighting; you might want to rebalance for your own good as one never knows.
Asset Allocation Ease
Motif Investing also offers Strategic Asset Allocation Models through their motifs for those of you who don't want to select stocks and pick ideas. There are no monthly fees once you buy the motif. The idea is just like buying a target date fund based on the age you wish to retire.
Below are three examples of asset allocation motifs for those who plan to retire in 1-2 years, 5-10 years, and 10-20 years.
Endless Variety Of Ideas
What's probably the most exciting about Motif Investing is the endless amount of ideas you can invest in. There are so many ideas to choose from, which can be sorted by popularity, performance, industry, brands you know, megatrends, current events, cultural, fixed income, target date, dividends, and asset allocation. It's incredible. The risk is that the investor gets overwhelmed and wants to buy everything.
Here is a snapshot.
Comparison Chart Between Motifs, ETFs, Mutual Funds, Stocks
Building Your Own Motif
If you have a great idea and can identify a long-term trend, you can easily build your own motif. By buying a basket of stocks to associate around an idea, you de-risk. Concentration risk is the #1 reason why retail investors underperform.
Users have currently built over 100,000 motifs already, more than all the mutual funds and ETFs combined plus the 150+ built motifs by the Motif Investing investment professionals.
Here's my 30 stock, ETF motif that consists of familiar stocks that have corrected by more than 20% from their highs and are beneficiaries in a low interest rate and low oil environment. I invested $10,000 to take advantage of the market volatility starting on 1/30/2015 and have seen a 10% total performance as of 1Q2018.
Motif Investing also recently launched their automated Motif Impact Portfolio where investors can invest in responsible companies based on their values for only $9.95/month rather than paying a percentage of assets under management. I'm not sure how Motif Investing will be able to generate enough revenue from this new product, but it's great for retail investors.
Be Your Own Fund Manager
Motif Investing will never fully supplant the enormous ETF and index fund industry. But I do believe Motif Investing can create its own asset class that will become popular with the DIY investing crowd. The combination of low cost, flexibility, social, and idea generation is attractive. The Motif Investing platform is incredibly simple to use as well. There's no need to pay expensive recurring active management fees when you can build your own 30 stock portfolio for only $9.95.
As more and more savvy and experienced investors go on the Motif platform, one can theoretically just piggy back off of the most successful investors who you can follow in real-time as well. There's definitely a place for investors to carve out a slice of their investment allocation pie to Motif.
I recommend everybody first sign up for a free financial tool from Personal Capital to stay on top of their finances first.
About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.
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