Taking Investment Beyond ETFs and Making it Social, the Case of Motif Investing

Updated in 2018 – I won’t advise or suggest readers invest through Motif. There are a lot of customer complaints about their investing practices and lack of proper customer support. The scariest of complaints is that getting your investment out of motif is not easy. I’d rather want you to stay away from Motif!

Original article

Investing is one of the most celebrated theme here at One Cent at a Time. Where we discuss everything about investing, including where to invest my money, real estate investment, Gold and silver investment, etc.

Its time now to talk about a new investment choice called Motif. Motif is perhaps named after “Motives”, the reason behind doing things. A Motif is an investment vehicle where you accumulate stocks as per a particular motive or idea, the set is called a “Motif”.

What is a Motif

Motif Investing is a special idea based stock group. If you see the list of current motifs you will have an idea of what they are. Let us take an example of a motif called “Home Improvement” In market term so far an investor had the choice of selecting REIT’s when they wanted to invest in the sector. Investors also had choices to invest in ETF like, SPDR S&P Homebuilders ETF.

If you see the Home Improvement motif constituents, you find stocks that include housewares and appliances, home improvement stores, furniture and tool makers. A total suit of stocks that indulge in home improvement.

I am impressed with the idea of customizing a motif as well. If I do not foresee a value in a particular constituent of a motif I can simply remove the stock.

Why Motif was launched?

“Motif symbolizes investor empowerment and represents a major step forward in personal investing. Since the Great Recession, investors have been demanding more control of their money and better performance. Now more than ever, they need a simple and intuitive way to act on their own investment ideas and create diversified portfolios they can understand.” – As per Motif’s co-founder and CEO, Hardeep Walia.

Investing was never social. A company can’t remain profitable based on its Twitter follower numbers. A company can only remain profitable if people buy their products. Also, a motif can never be more profitable based on up or down votes it gets. Still, when you are in a community where you discuss trends and analysts reports with each other, you get a wider array of information you otherwise wouldn’t have gotten.

As I had written in an earlier post on social investing, “The opinion of analysts has always been pivotal in determining whether an asset should be deemed a good buy or sell. Opinions can dictate both positive and negative outcomes. You can find information to support both sides in most cases. Combining financial option with social networking allows the user to use a broad range of date and take on a more consistent and objective view as opposed to idly accepting news from company press releases or one-sided views.”

How much customizable a motif is?

A motif typically has 30 stocks, you can remove individual stocks and add a few other in your motif. You can reshuffle to an extent where your Home Improvement media may resemble a housing construction ETF. Basically, you have the power to create your own mutual fund.

Now, you can buy individual stocks and always create your own mutual fund but, at $9.95 per motif investing, this is a great value for your money.

Why should you still carefully think before investing in stocks through Motif?

1. After all, a motif contains stocks, and, stocks are risk prone. Still, if you are comfortable investing in Mutual funds or ETFs, you should be comfortable in investing in stocks through motifs.
2. A commission of $9.95 per Motif investment, with the lowest possible investment of $250, this is stiff when you invest a low sum at a time. Discount brokers offer $4.99 per trade these days with no limit on the amount of investment.
3. A relatively new concept so you need to watch out for the fallout.
4. The stock market is still being manipulated (my best guess) by market players and big clearing houses. Even if you follow social signals for investing, you will still get it all wrong. And when you see 100s of people buying a particular motif, you all may get burned because someone else out there with a bigger chunk of money decided to go against you.

Let me explain the last point with an example, if you see a great social trend in biotechnology investment. You feel more attracted towards buying a biotech motif, seeing others buying it. Now someone at Goldman Sachs or JP Morgan decided to dump Biotech for IT stocks. You and your motif group, then, may feel the pressure of declining stock value in biotechnology. You may tend to sell earlier than you would have thought, to cut your losses.

Let us know your opinion on Motif? Your information and experience would be very valuable for other readers.