Motif Investing: A different kind of broker
Introductory video provided by the company
What is a motif? – A Motif is a basket of stocks or ETFs that you can trade as a unit. The company offers predefined motifs that you can trade or you can make your own. You can select up to 30 securities for you motif and trade the whole basket for a flat fee of $9.95. You can always tweak an existing motif before buying it if you like.
Rebalancing – Motifs can be rebalanced with just a click of the mouse. This is a real timesaver as it can be tedious to calculate percentages and trades manually. Rebalances cost $4.95
Fractional Shares – The system allows your motif to hold fractional shares, something you will not see at other brokerages.
Social Network – The company has an extensive social network. Each motif has an area where you can discuss ideas with other investors. Investors can provide a bullish or bearish opinion on the motif. You can optionally connect your Facebook account to the site and notify your friends when you buy or sell a motif. The site tells you how many followers, watchers and trades were done against each motif.
New Horizon Motifs – New Horizon Motifs are created by the company and have the advantage of being free to trade and rebalance. There are Motifs for every conceivable strategy. Rebalancing these Motifs is done automatically on a schedule.
Creator Royalty Program – Every time someone purchases or rebalances a motif you've built, you will get $1. You do not receive royalties when people sell the motif or trade single stocks in/out of it.
Low Cost – Compared to paying a commission for each stock, buying up to 30 for $9.95 is a steal.
Initial Investment – Start with as little as $250 to open an account.
Chart of Past Performance – All motifs have a chart of recent performance. I like to use this feature to do a quick backtest of my ETF concoctions. You can plot your returns against the S&P 500 to see if you would have beaten it. I have not seen that feature on any other brokerage site.
Motif Search Engine
The site has a built in search page that allows you to search for motifs by a variety of criteria such as industry, popularity, volatility, Asset class. You can also search by volatility, valuation and dividend yield. A glaring but understandable limitation is that the search only extends back one year. In my opinion, track records less than 20 years are useless. This is not the most sophisticated search feature I have found for stock selection.
There are some disadvantages for the seasoned investor. One thing that annoyed me is that you cannot delete or edit a motif once you make it. Yes, you can make a new copy and tweak the copy, but I could not seem delete one I created but no longer want.
You won’t find limit or stop orders here. Market orders on the basket appear to be the only option. However, it is nice that you can buy fractional shares, although it makes me wonder how good the execution prices will be with that scheme. Changing your motif will cost you an additional $4.95 per individual security you add or remove. A big drawback is there are no mutual funds or options. You can only buy ETFs and stocks here.
I plan to avoid the community generated motifs, unless they are composed of ETFs only. The reason is I have no way to know how savvy the creator is and how attentive he will be in the future. I look at community motifs as a way to buy unprofessionally managed (or unmanaged, who knows!) funds that will probably NOT beat the index.
Motif Investing seems like a good fit for the investor who wants to buy a basket of stocks or ETFs cheaply. If you want to buy options, futures, forex or do order types other than limit orders, I would go elsewhere. If you want all the bells and whistles AND low commissions, I would rather go with Interactive Brokers. The commissions here are per stock, but I typically pay $1 a trade. If you want fancy technical analysis, go elsewhere. There is none of that.